Critical Assessments of The General Theory
Edited by L. Randall Wray and Matthew Forstater
Colin Richardson and Jerry Courvisanos* INTRODUCTION The starting-point for neoclassical interpretations of Keynes’s system is ‘Modeling Keynes with Hicks’. Students are thereby misled into believing that Keynes analysed a general equilibrium exchange economy (summarized by the IS curve, with production merely an ‘exchange with nature’) in which the underlying barter transactions were obscured by a ‘veil of money’ (summarized by the LM curve). However, Keynes himself strongly emphasized that his analysis applied to a monetary production economy, one in which both aspects were well integrated. By contrast, the starting-point for Post Keynesian interpretations of Keynes’s system should be ‘Modeling Keynes with Kalecki’. It is true that Keynes’s quaesitum can be understood by a close reading of both volumes of his Treatise on Money and then the General Theory, but his analysis was lengthy and complex, with hardly any mathematics or graphs deployed. Keynes, in fact, criticized the use of mathematical models to understand complex reality: ‘[I]n ordinary discourse . . . we can keep “at the back of our heads” the necessary reserves and qualiﬁcations and the adjustments which we shall have to make later on, in a way in which we cannot keep complicated partial diﬀerentials “at the back” of several pages of algebra which assume they all vanish’ (Keynes, 1936, pp. 297–8).1 However, modern economics teaching practice demands mathematical models that track rigorous arguments in an erudite manner. Post Keynesian instructors need a mathematical modeling tool of comparable simplicity to Hicks’s IS–LM framework to help...
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