Critical Assessments of The General Theory
Edited by L. Randall Wray and Matthew Forstater
Chapter 6: Asimakopulos’s Criticism of Keynes’s Short-period Equilibrium: A Reformulation
Abdelkader Sliﬁ* INTRODUCTION In The General Theory of Employment, Interest and Money (1936), it seems that Keynes’s method is ‘only half in time and half in equilibrium’. On the one hand, he rejects the classical method, which consists of establishing long-term tendencies of economic variables towards long-period equilibrium. By taking into account uncertainty, he seems to favour a method with a historical treatment of time. In this way, he justiﬁes the instability of the long-period equilibrium by the volatility of long-term expectations: Keynes was looking at the actual situation and trying to understand how an actual economy operates; he brought the argument down from timeless stationary states into the present, here and now, when the past cannot be changed and the future cannot be known. (Robinson, 1971: ix) On the other hand, in order to demonstrate the principle of eﬀective demand on the basis of the existence of an equilibrium level of unemployment, Keynes deﬁnes the concept of short-period equilibrium and uses it within the framework of a comparative static method in order to study the determination of the volume of employment. In this way, he obtains the identity between saving and investment by overlooking the time required for the multiplier eﬀect to be worked out and by assuming a stable position of the short-period equilibrium volume of employment. According to Asimakopulos, ‘there is a constant tension in Keynes’s theory between his desire to deal with a capitalist economy moving through historical time and the use...
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