Review of Keynesian Economics

Keynes's attack on the citadel: proportionality, the two-price theory, and monetary circulation

Mark Lautzenheiser * * and Yavuz Yaşar * *

Keywords: Marx, Keynes, proportionality, monetary circulation

Abstract

In the Treatise, Keynes claimed that the price levels of consumption and investment goods would not necessarily move in opposite directions. He further argued that the first claim had nothing to do with monetary circulation. If these two claims could be established, they would have constituted a direct attack on Ricardian economics and the economics of Marx, both of which are identified as self-adjustment mechanisms as in Say's law by Keynes. This paper seeks to evaluate these claims through the lenses of sector balance, the two-price theory, and monetary circulation.

Author Notes

The authors wish to thank Korkut A. Ertürk, Edward J. Nell, Fred Moseley, Riccardo Bellofiore, Claudio Sardoni, Steve Keen, Tracy Mott, Mario Seccareccia, and Heinz D. Kurz, for their helpful comments on the earlier versions of this paper that were presented at national and international conferences. The current paper was much improved from suggestions by participants of these conferences and anonymous referees. All remaining errors rest with the authors.

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