Table of Contents

Is There Progress in Economics?

Is There Progress in Economics?

Knowledge, Truth and the History of Economic Thought

Edited by Stephan Boehm, Christian Gehrke, Heinz D. Kurz and Richard Sturn

This thought-provoking book discusses the concept of progress in economics and investigates whether any advance has been made in its different spheres of research. The authors look back at the history, successes and failures of their respective fields and thoroughly examine the notion of progress from an epistemological and methodological perspective.

Chapter 19: Walras' law and the IS–LM model: a tale of progress and regress

Hansjörg Klausinger

Subjects: economics and finance, economic psychology, history of economic thought, methodology of economics


19. WalrasÕ law and the ISÐLM model: a tale of progress and regress Hansjšrg Klausinger* INTRODUCTION The integration of macroeconomics into the framework of general equilibrium analysis marked a vital step from the Ôeconomics of KeynesÕs to the neoclassical synthesis version of ÔKeynesian economicsÕ. Two crucial elements in this process were the translation of the General Theory into the terms of the ISÐLM model and the application of WalrasÕ law. It is not merely by accident that Hicks Ð whose approach towards the General Theory was shaped by Value and Capital Ð was the most influential protagonist in the early development of both these ideas. Thereby the neoclassical synthesis provided the unifying framework for analysing and discussing Keynesian topics, as for example the controversy between the liquidity preference and the loanable funds approach to the determination of the rate of interest. However, in the course of this development a host of subtle analytical problems emerged Ð for example with respect to the time structure of period analysis and the proper handling of stocks and flows. Starting with the early attempts by Hicks and Patinkin and culminating in the final accomplishment of a consistent stockÐflow version of ISÐLM by Foley and Buiter, most of these problems could be resolved within the general equilibrium framework. In this sense one may consider the steady refinement of the analytical tools used in ISÐLM analysis as an example of Ôtheoretical progressÕ.1 Yet curiously enough, side by side with this increasing...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information