One important question in the DSGE literature is whether we should detrend data when estimating the parameters of a DSGE model using the moment method. It has been common in the literature to detrend data in the same way the model is detrended. Doing so works relatively well with linear models, in part because in such cases the information that disappears from the data is usually related to the parameters that also disappear from the detrended model. Unfortunately, in heavy non-linear DSGE models, parameters rarely disappear from detrended models, but information does disappear from the detrended data. Using a simple real business cycle model, we show that both the moment method estimators of parameters and the estimated responses of endogenous variables to a technological shock can be seriously inaccurate when detrended data are used in the estimation process. Using a dynamic stochastic general equilibrium model and U.S. data, we show that detrending the data before estimating the parameters may result in a seriously misleading response of endogenous variables to monetary shocks. We suggest building the moment conditions using raw data, irrespective of the trend observed in the data.
{"title":"DSGE Models, Detrending, and the Method of Moments","authors":"Charles Olivier Mao Takongmo","doi":"10.2139/ssrn.3322026","DOIUrl":"https://doi.org/10.2139/ssrn.3322026","url":null,"abstract":"One important question in the DSGE literature is whether we should detrend data when estimating the parameters of a DSGE model using the moment method. It has been common in the literature to detrend data in the same way the model is detrended. Doing so works relatively well with linear models, in part because in such cases the information that disappears from the data is usually related to the parameters that also disappear from the detrended model. Unfortunately, in heavy non-linear DSGE models, parameters rarely disappear from detrended models, but information does disappear from the detrended data. Using a simple real business cycle model, we show that both the moment method estimators of parameters and the estimated responses of endogenous variables to a technological shock can be seriously inaccurate when detrended data are used in the estimation process. Using a dynamic stochastic general equilibrium model and U.S. data, we show that detrending the data before estimating the parameters may result in a seriously misleading response of endogenous variables to monetary shocks. We suggest building the moment conditions using raw data, irrespective of the trend observed in the data.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-01-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127990963","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes the evolution of Keynesianism making use of concepts offered by Imre Lakatos. The Keynesian "hard core" lies in its views regarding the instability of the market economy, its "protective belt" in the policy strategy for macroeconomic stabilization using fiscal policy and monetary policy. Keynesianism developed as a policy program to counter classical liberalism, which attributes priority to the autonomy of the market economy and tries to limit the role of government. In general, the core of every policy program consists in an unfalsifiable worldview and a value judgment that remain unchanged. On the other hand, a policy strategy with a protective belt inevitably evolves owing to changes in reality and advances in scientific knowledge. This is why the Keynesian policy strategy has shifted from being fiscal-led to one that is monetary-led because of the influence of monetarism; further, the Great Recession has even led to their integration.
{"title":"Shifting Policy Strategy in Keynesianism","authors":"A. Noguchi","doi":"10.2139/ssrn.3635940","DOIUrl":"https://doi.org/10.2139/ssrn.3635940","url":null,"abstract":"This paper analyzes the evolution of Keynesianism making use of concepts offered by Imre Lakatos. The Keynesian \"hard core\" lies in its views regarding the instability of the market economy, its \"protective belt\" in the policy strategy for macroeconomic stabilization using fiscal policy and monetary policy. Keynesianism developed as a policy program to counter classical liberalism, which attributes priority to the autonomy of the market economy and tries to limit the role of government. In general, the core of every policy program consists in an unfalsifiable worldview and a value judgment that remain unchanged. On the other hand, a policy strategy with a protective belt inevitably evolves owing to changes in reality and advances in scientific knowledge. This is why the Keynesian policy strategy has shifted from being fiscal-led to one that is monetary-led because of the influence of monetarism; further, the Great Recession has even led to their integration.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128224333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The claim that Keynes regarded himself as a “Chapter 12" Keynesian is inaccurate and misleading. Keynes’s chapter 12 discussion and definition of uncertainty in the General Theory is simply a footnote to his much more general theoretical discussion about uncertainty made in chapter 26 of the A Treatise on Probability in 1921 pages 309-312 which concentrated on economics specifically. This was demonstrated in the 1937-38 Keynes-Townshend correspondence, where there is no discussion of the 1937 QJE article or radical uncertainty.
Keynes had two interrelated and interconnected models in the General Theory. They were the D-Z model, which dealt with expected aggregate demand, D, and the IS-LM(LP) model, which dealt with actual or realized aggregate demand, Y. Keynes incorporated uncertainty and expectations into his D-Z model of chapters 20 and 21 after having provided readers of the General Theory with a very brief introduction to the Theory of Effective Demand in Chapter 3 of the General Theory. Keynes’s use of his IS-LM(LP) model in chapter 15 (pp.199-209) provided a brief introduction to the final, complete presentation of his IS-LM(LP) model in Chapter 21 where Keynes brought all of the elements that made up the IS-LM(LP) model together in Section Four of Chapter 21.
This analysis incorporated the LM(LP) equation missing from the classical and neoclassical model of the rate of interest (r) that Keynes had demonstrated to Harrod, in his letter of August 27th,1935, was only a single downward sloping curve in (r,Y) space that intersected nothing, so that the existence of a quantitative determinate equilibrium in classical and neoclassical theory was an impossibility in (r,Y) space. Harrod capitulated completely in his letter to Keynes of August 30th,1935 and acknowledged that Keynes had indeed come up with a very important missing equation and had made a major advance in economic theory. Keynes incorporated his August 27th analysis, using a version of Harrod’s original diagram, in chapter 14 of the General Theory on pages 179-182. Keynes showed diagrammatically that the classical and neoclassical theory of the rate of interest amounted to a single IS curve in (r,Y) space that intersected nothing. Data (in his February, 1937 QJE article, he reverts to a "missing equation” characterization) was missing that could only be provided by the LM(LP) curve in order to have a quantitative, determinate, unique equilibrium as stated explicitly by Keynes on page 299 of the General Theory.
These interrelated and interconnected models work in harmony together with each other. It is quite impossible to use one without the other and expect to fully grasp Keynes’s mathematical, technical analysis. The D-Z model incorporated expectations and uncertainty in order to analyze the anticipated or expected amount of Effective Demand, D. Based on this analysis, a specific actual or realized amount of Effective Demand, Y, results. Keynes then combines
{"title":"J. M Keynes Was Never a ‘Chapter 12’ Keynesian: The Claim That He Was a ‘Chapter 12’ Keynesian Was Manufactured by Joan Robinson and G. L. S. Shackle After His Death by Changing Keynes’s Definition of Uncertainty to Radical Uncertainty","authors":"M. E. Brady","doi":"10.2139/ssrn.3479891","DOIUrl":"https://doi.org/10.2139/ssrn.3479891","url":null,"abstract":"The claim that Keynes regarded himself as a “Chapter 12\" Keynesian is inaccurate and misleading. Keynes’s chapter 12 discussion and definition of uncertainty in the General Theory is simply a footnote to his much more general theoretical discussion about uncertainty made in chapter 26 of the A Treatise on Probability in 1921 pages 309-312 which concentrated on economics specifically. This was demonstrated in the 1937-38 Keynes-Townshend correspondence, where there is no discussion of the 1937 QJE article or radical uncertainty. <br><br> Keynes had two interrelated and interconnected models in the General Theory. They were the D-Z model, which dealt with expected aggregate demand, D, and the IS-LM(LP) model, which dealt with actual or realized aggregate demand, Y. Keynes incorporated uncertainty and expectations into his D-Z model of chapters 20 and 21 after having provided readers of the General Theory with a very brief introduction to the Theory of Effective Demand in Chapter 3 of the General Theory. Keynes’s use of his IS-LM(LP) model in chapter 15 (pp.199-209) provided a brief introduction to the final, complete presentation of his IS-LM(LP) model in Chapter 21 where Keynes brought all of the elements that made up the IS-LM(LP) model together in Section Four of Chapter 21. <br><br> This analysis incorporated the LM(LP) equation missing from the classical and neoclassical model of the rate of interest (r) that Keynes had demonstrated to Harrod, in his letter of August 27th,1935, was only a single downward sloping curve in (r,Y) space that intersected nothing, so that the existence of a quantitative determinate equilibrium in classical and neoclassical theory was an impossibility in (r,Y) space. Harrod capitulated completely in his letter to Keynes of August 30th,1935 and acknowledged that Keynes had indeed come up with a very important missing equation and had made a major advance in economic theory. Keynes incorporated his August 27th analysis, using a version of Harrod’s original diagram, in chapter 14 of the General Theory on pages 179-182. Keynes showed diagrammatically that the classical and neoclassical theory of the rate of interest amounted to a single IS curve in (r,Y) space that intersected nothing. Data (in his February, 1937 QJE article, he reverts to a \"missing equation” characterization) was missing that could only be provided by the LM(LP) curve in order to have a quantitative, determinate, unique equilibrium as stated explicitly by Keynes on page 299 of the General Theory.<br><br>These interrelated and interconnected models work in harmony together with each other. It is quite impossible to use one without the other and expect to fully grasp Keynes’s mathematical, technical analysis. The D-Z model incorporated expectations and uncertainty in order to analyze the anticipated or expected amount of Effective Demand, D. Based on this analysis, a specific actual or realized amount of Effective Demand, Y, results. Keynes then combines","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114800416","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Four alarming stylized facts have recently emerged in the United States: (i) a decline in the labor share of income; (ii) a decline in labor productivity; (iii) an increase in the top 1% wealth share, and (iv) an increase in the capital-income ratio. In Capital in the XXI Century, Thomas Piketty’s argument is that the r > g inequality determines an increase in the capital-income ratio; if the elasticity of substitution in production is above one, the profit share rises. We provide a contrasting explanation that draws from the Post Keynesian approach to differential saving propensities between classes and the Classical-Marxian theory of induced technical change. In a simple model of ‘capitalists’ and ‘workers,’ we show that institutional changes that lower the labor share—declining unionization, increasing monopsony power in the labor market, the global ‘race to the bottom’ in unit labor costs, or the exhaustion of path-breaking scientific discoveries—can reduce labor productivity growth because of the lessened incentives to innovate to save on labor costs. A falling labor share reduces workers’ total savings, and wealth concentrates in the capitalists’ hands. A higher profit share and wealth share both put pressure on accumulation: but the long-run growth rate, which is anchored to labor productivity growth, has fallen. To restore balanced growth, the capital-income ratio must rise, independent of the elasticity of substitution. These tendencies are not inevitable: taxation can be used to implement any wealth distribution targeted by policymakers; while worker-crushing institutional arrangements can also in principle be reversed through policy. Neither change appears likely given the current institutional and global policy climate.
{"title":"Income Shares, Secular Stagnation, and the Long-Run Distribution of Wealth","authors":"Luke Petach, Daniele Tavani","doi":"10.2139/ssrn.3198311","DOIUrl":"https://doi.org/10.2139/ssrn.3198311","url":null,"abstract":"Four alarming stylized facts have recently emerged in the United States: (i) a decline in the labor share of income; (ii) a decline in labor productivity; (iii) an increase in the top 1% wealth share, and (iv) an increase in the capital-income ratio. In Capital in the XXI Century, Thomas Piketty’s argument is that the r > g inequality determines an increase in the capital-income ratio; if the elasticity of substitution in production is above one, the profit share rises. We provide a contrasting explanation that draws from the Post Keynesian approach to differential saving propensities between classes and the Classical-Marxian theory of induced technical change. In a simple model of ‘capitalists’ and ‘workers,’ we show that institutional changes that lower the labor share—declining unionization, increasing monopsony power in the labor market, the global ‘race to the bottom’ in unit labor costs, or the exhaustion of path-breaking scientific discoveries—can reduce labor productivity growth because of the lessened incentives to innovate to save on labor costs. A falling labor share reduces workers’ total savings, and wealth concentrates in the capitalists’ hands. A higher profit share and wealth share both put pressure on accumulation: but the long-run growth rate, which is anchored to labor productivity growth, has fallen. To restore balanced growth, the capital-income ratio must rise, independent of the elasticity of substitution. These tendencies are not inevitable: taxation can be used to implement any wealth distribution targeted by policymakers; while worker-crushing institutional arrangements can also in principle be reversed through policy. Neither change appears likely given the current institutional and global policy climate.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125496388","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop an aggregate demand analysis of a small open economy based on all agents’ dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which the structure is as simple as the conventional Keynesian cross analysis. We apply the model to examine the effects of changes in various parameters, such as the terms of trade, foreign asset holdings and government purchases, on aggregate demand. They are quite different from those under full employment and those of the Mundell-Fleming model.
{"title":"A Simple Aggregate Demand Analysis With Dynamic Optimization in a Small Open Economy","authors":"K. Hashimoto, Yoshiyasu Ono","doi":"10.2139/ssrn.3430086","DOIUrl":"https://doi.org/10.2139/ssrn.3430086","url":null,"abstract":"We develop an aggregate demand analysis of a small open economy based on all agents’ dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which the structure is as simple as the conventional Keynesian cross analysis. We apply the model to examine the effects of changes in various parameters, such as the terms of trade, foreign asset holdings and government purchases, on aggregate demand. They are quite different from those under full employment and those of the Mundell-Fleming model.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"57 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125603249","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper develops tools for global prior sensitivity analysis in large Bayesian models. Without imposing parametric restrictions, the framework provides bounds for a wide range of posterior statistics given any prior that is close to the original in relative entropy. The methodology also reveals parts of the prior that are important for the posterior statistics of interest. To implement these calculations in large models, we develop a sequential Monte Carlo algorithm and use approximations to the likelihood and statistic of interest. We use the framework to study error bands for the impulse response of output to a monetary policy shock in the New Keynesian model of Smets and Wouters (2007). The error bands depend asymmetrically on the prior through features of the likelihood that are hard to detect without this formal prior sensitivity analysis.
{"title":"Global Robust Bayesian Analysis in Large Models","authors":"P. Ho","doi":"10.2139/ssrn.3452643","DOIUrl":"https://doi.org/10.2139/ssrn.3452643","url":null,"abstract":"This paper develops tools for global prior sensitivity analysis in large Bayesian models. Without imposing parametric restrictions, the framework provides bounds for a wide range of posterior statistics given any prior that is close to the original in relative entropy. The methodology also reveals parts of the prior that are important for the posterior statistics of interest. To implement these calculations in large models, we develop a sequential Monte Carlo algorithm and use approximations to the likelihood and statistic of interest. We use the framework to study error bands for the impulse response of output to a monetary policy shock in the New Keynesian model of Smets and Wouters (2007). The error bands depend asymmetrically on the prior through features of the likelihood that are hard to detect without this formal prior sensitivity analysis.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"381 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115973762","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study optimal time-consistent monetary and fiscal policy in a New Keynesian model where occasional declines in agents’ confidence give rise to persistent liquidity trap episodes. Insights from widely studied fundamental-driven liquidity traps are not a useful guide for enhancing welfare in this model. Raising the inflation target, appointing an inflation-conservative central banker, or allowing for the use of government spending as an additional stabilization tool can exacerbate deflationary pressures and demand deficiencies during the liquidity trap episodes. However, appointing a policy-maker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps. (JEL E31, E52, E61, E62, E63)
{"title":"Expectations-Driven Liquidity Traps: Implications for Monetary and Fiscal Policy","authors":"Taisuke Nakata, Sebastian Schmidt","doi":"10.17016/FEDS.2019.053","DOIUrl":"https://doi.org/10.17016/FEDS.2019.053","url":null,"abstract":"We study optimal time-consistent monetary and fiscal policy in a New Keynesian model where occasional declines in agents’ confidence give rise to persistent liquidity trap episodes. Insights from widely studied fundamental-driven liquidity traps are not a useful guide for enhancing welfare in this model. Raising the inflation target, appointing an inflation-conservative central banker, or allowing for the use of government spending as an additional stabilization tool can exacerbate deflationary pressures and demand deficiencies during the liquidity trap episodes. However, appointing a policy-maker who is sufficiently less concerned with government spending stabilization than society eliminates expectations-driven liquidity traps. (JEL E31, E52, E61, E62, E63)","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121934660","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This reply to Botte (2019) responds to criticisms of the methods used to estimate the normal rate of capacity utilization and a tolerable interval of variation in the actual rate of capacity utilization around the normal rate in Setterfield (2019a). It concludes with some further reflections on the concept of corridor instability.
{"title":"Tolerable Ranges of Variation in the Rate of Capacity Utilization and Corridor Instability: A Reply to Florian Botte","authors":"M. Setterfield","doi":"10.2139/ssrn.3395560","DOIUrl":"https://doi.org/10.2139/ssrn.3395560","url":null,"abstract":"This reply to Botte (2019) responds to criticisms of the methods used to estimate the normal rate of capacity utilization and a tolerable interval of variation in the actual rate of capacity utilization around the normal rate in Setterfield (2019a). It concludes with some further reflections on the concept of corridor instability.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-05-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131796683","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
J M Keynes’s brief and detailed summaries of his original IS-LM(LP) models in Chapters 15 and 21, respectively, of the General Theory were overlooked by the economics profession in the 20th and 21st centuries due to three main reasons.
The first reason was the claims made by the Keynesian fundamentalists,Joan Robinson and GL S Shackle, that Keynes’s supposed definition of uncertainty as complete and total ignorance of the future precluded the use of formal mathematical and statistical models of the macro economy. Therefore, any IS-LM model in the General Theory was an impossibility.
The second reason was based on the supposed claim ,made by Backhouse,Young, Dimand, and Rubin, that Keynes was an adherent of the Marshallian view of formal mathematical exposition, which supposedly emphasized presenting only verbal chains of exposition that were based on mathematical analysis, which was then removed from the published work. Therefore, although Keynes created earlier versions of IS-LM to work with in 1933,1934, and 1935, Keynes decided to remove his formal IS-LM model by scattering the three components of his IS-LM model throughout the General Theory in 1936. Keynes substituted a strictly verbal, literary, prose analysis in its place.
The third reason was based on the claim, made by Hawtrey, Robertson, Robinson, Viner, Hansen and Ahiakpor, that Keynes’s liquidity preference analysis was restricted only to chapter 13 of the General Theory alone ,where the crucial analysis was based on the equation specified on page 168 of the General Theory, M=L(r),so that the demand and supply for money is identical to the demand and supply for liquidity. Keynes’s chapter 15 definition of liquidity preference on p.199 is ignored. Adherents of this view likewise overlooked Keynes’s analysis on pages 207-209 of chapter 15 and pages 298-306 of chapter 21 of the General Theory.
All three of these reasons are badly flawed because they all ignore Keynes’s analysis on pages 199, 207-209 of Chapter 15 and pages 298-306 of chapter 21 of the General Theory. Once these pages are studied carefully, it becomes clear that Keynes incorporated an improved IS-LM(LP) model in the General Theory that was superior to the earlier 1933,1934,and 1935 versions he had presented in his student lectures and the mid 1934 draft copy of the General Theory.
Keynes makes it crystal clear in his discussion on pages 298-299 that he was presenting a mathematical model that had the following characteristics : • One can calculate a quantitative answer using it • The model is composed of three elements a), b), and c). a) is the consumption function, C, with both the mpc and investment multiplier specified. b) is the Investment function, I, which is a downward sloping function of the rate of interest, r. c) is the Liquidity Preference equation from page 199 of chapter 15, which is a function of both of Y and r, where Y=C+I. • The three elements provide an anal
凯恩斯在《通论》第15章和第21章分别对他的原始IS-LM(LP)模型进行了简要和详细的总结，但由于三个主要原因，20世纪和21世纪的经济学专业人士忽视了这一点。第一个原因是凯恩斯原教旨主义者琼·罗宾逊(Joan Robinson)和GL S沙克尔(GL S Shackle)的主张，他们认为凯恩斯对不确定性的假定定义是对未来的完全无知，排除了对宏观经济的正式数学和统计模型的使用。因此，通论中的任何IS-LM模型都是不可能的。第二个原因是基于巴克斯豪斯、杨、迪芒和鲁宾提出的假设，即凯恩斯是马绍尔形式数学论述观点的追随者，这种观点强调只呈现基于数学分析的口头论述链，然后从出版的作品中删除。因此，尽管凯恩斯在1933年、1934年和1935年创建了早期版本的IS-LM模型，但凯恩斯决定在1936年将他的IS-LM模型的三个组成部分分散到通论中，从而删除他的正式IS-LM模型。凯恩斯用严格的口头、文学、散文分析取代了它。第三个原因是基于Hawtrey、Robertson、Robinson、Viner、Hansen和Ahiakpor的主张，即凯恩斯的流动性偏好分析仅限于《通论》第13章，其中关键的分析是基于《通论》第168页指定的方程M=L(r)，因此货币的需求和供给与流动性的需求和供给是相同的。凯恩斯第15章对流动性偏好的定义在第199页被忽略了。这种观点的拥护者同样忽略了凯恩斯在《通论》第15章207-209页和第21章298-306页的分析。这三个理由都存在严重缺陷，因为它们都忽略了凯恩斯在《通论》第15章199页、207-209页和第21章298-306页的分析。一旦仔细研究这些页面，就会发现凯恩斯在《通论》中加入了一个改进的IS-LM(LP)模型，该模型优于他在学生讲座中提出的1933年、1934年和1935年的版本，以及1934年中期的《通论》草稿。凯恩斯在298-299页的讨论中清楚地表明，他提出了一个具有以下特征的数学模型:•人们可以使用它来计算定量答案•该模型由三个元素组成a)， b)和c)。a)是消费函数c, mpc和投资乘数都指定。b)是投资函数I，它是利率r的一个向下倾斜的函数。c)是第15章第199页的流动性偏好方程，它是Y和r的函数，其中Y= c +I。•这三个元素提供了一个分析，是有价值的介绍秩序和方法的查询•这三个元素定义了一组联立方程•方程提供了一个确定的答案或结果。•在凯恩斯的is - lm (LP)第21章模型中没有不确定性/预期。凯恩斯在第298-299页的通论中完美地描述了他的is - lm (LP)模型。这是对他早前的1933、1934和1935年版本的重大改进。希克斯的is - lm版本，就像哈罗德的版本一样，凯恩斯的通论，发表在1937年的《计量经济学》上，是凯恩斯的is - lm模型在《通论》第21章的低劣版本，因为希克斯的版本没有支持，微观的，D-Z分析，包括预期和不确定性，正如凯恩斯在《通论》第20章和第21章中提出的那样。
{"title":"How the Economics Profession Overlooked Keynes’s IS-LM (LP) Model in Chapter 21 of the General Theory in the 20th and 21st Centuries","authors":"M. E. Brady","doi":"10.2139/ssrn.3374113","DOIUrl":"https://doi.org/10.2139/ssrn.3374113","url":null,"abstract":"J M Keynes’s brief and detailed summaries of his original IS-LM(LP) models in Chapters 15 and 21, respectively, of the General Theory were overlooked by the economics profession in the 20th and 21st centuries due to three main reasons.<br><br>The first reason was the claims made by the Keynesian fundamentalists,Joan Robinson and GL S Shackle, that Keynes’s supposed definition of uncertainty as complete and total ignorance of the future precluded the use of formal mathematical and statistical models of the macro economy. Therefore, any IS-LM model in the General Theory was an impossibility. <br><br>The second reason was based on the supposed claim ,made by Backhouse,Young, Dimand, and Rubin, that Keynes was an adherent of the Marshallian view of formal mathematical exposition, which supposedly emphasized presenting only verbal chains of exposition that were based on mathematical analysis, which was then removed from the published work. Therefore, although Keynes created earlier versions of IS-LM to work with in 1933,1934, and 1935, Keynes decided to remove his formal IS-LM model by scattering the three components of his IS-LM model throughout the General Theory in 1936. Keynes substituted a strictly verbal, literary, prose analysis in its place. <br><br>The third reason was based on the claim, made by Hawtrey, Robertson, Robinson, Viner, Hansen and Ahiakpor, that Keynes’s liquidity preference analysis was restricted only to chapter 13 of the General Theory alone ,where the crucial analysis was based on the equation specified on page 168 of the General Theory, M=L(r),so that the demand and supply for money is identical to the demand and supply for liquidity. Keynes’s chapter 15 definition of liquidity preference on p.199 is ignored. Adherents of this view likewise overlooked Keynes’s analysis on pages 207-209 of chapter 15 and pages 298-306 of chapter 21 of the General Theory.<br><br>All three of these reasons are badly flawed because they all ignore Keynes’s analysis on pages 199, 207-209 of Chapter 15 and pages 298-306 of chapter 21 of the General Theory. Once these pages are studied carefully, it becomes clear that Keynes incorporated an improved IS-LM(LP) model in the General Theory that was superior to the earlier 1933,1934,and 1935 versions he had presented in his student lectures and the mid 1934 draft copy of the General Theory.<br><br> Keynes makes it crystal clear in his discussion on pages 298-299 that he was presenting a mathematical model that had the following characteristics :<br>• One can calculate a quantitative answer using it<br>• The model is composed of three elements a), b), and c). a) is the consumption function, C, with both the mpc and investment multiplier specified. b) is the Investment function, I, which is a downward sloping function of the rate of interest, r. c) is the Liquidity Preference equation from page 199 of chapter 15, which is a function of both of Y and r, where Y=C+I.<br>• The three elements provide an anal","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128766083","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I construct a general, game theoretic model of markets. Agents in the model choose how much of each good to supply/demand, and at what prices. Trading can occur at non-market-clearing prices. There is an explicit rationing mechanism that kicks in if markets fail to clear. The game is very complicated, but a massive simplification occurs in the limit of a large number of players. This allows a proof of existence of a pure strategy equilibrium. I also prove an analogue of the first fundamental theorem of welfare economics.
The game is Keynesian in that 1) markets needn't clear at equilibrium so there can be unemployment and 2) there is the possibility of multiple equilibria with different levels of aggregate supply/demand, and distinct Pareto rankings. The model is microfounded and Keynesian. Fiat money can be accommodated as a store of value and a medium of exchange. The model is well placed for investigating dynamics.
{"title":"General Equilibrium Theory, but Better","authors":"Steven Kerr","doi":"10.2139/ssrn.3216012","DOIUrl":"https://doi.org/10.2139/ssrn.3216012","url":null,"abstract":"I construct a general, game theoretic model of markets. Agents in the model choose how much of each good to supply/demand, and at what prices. Trading can occur at non-market-clearing prices. There is an explicit rationing mechanism that kicks in if markets fail to clear. The game is very complicated, but a massive simplification occurs in the limit of a large number of players. This allows a proof of existence of a pure strategy equilibrium. I also prove an analogue of the first fundamental theorem of welfare economics. <br><br>The game is Keynesian in that 1) markets needn't clear at equilibrium so there can be unemployment and 2) there is the possibility of multiple equilibria with different levels of aggregate supply/demand, and distinct Pareto rankings. The model is microfounded and Keynesian. Fiat money can be accommodated as a store of value and a medium of exchange. The model is well placed for investigating dynamics.","PeriodicalId":127579,"journal":{"name":"ERN: Keynes; Keynesian; Post-Keynesian (Topic)","volume":"127 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128153126","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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