Tyler Beck Goodspeed
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199846658
- eISBN:
- 9780199950126
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199846658.001.0001
- Subject:
- Economics and Finance, Economic Systems
While standard accounts of the theoretical debates in 1930s economic thought invariably pit John Maynard Keynes against Friedrich von Hayek, this reflexive dichotomy is in many respects exceedingly ...
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While standard accounts of the theoretical debates in 1930s economic thought invariably pit John Maynard Keynes against Friedrich von Hayek, this reflexive dichotomy is in many respects exceedingly superficial. It is the argument of this book that both Keynes and Hayek developed their respective theories of the business cycle within the tradition of Swedish economist Knut Wicksell, and that this shared genealogy manifested itself in significant theoretical affinities between the two apparent antagonists. The salient features of Wicksell’s work, namely, the importance of money, the role of uncertainty, coordination failures, and the element of time in capital accumulation, all motivate the Keynesian and Hayekian theories of economic fluctuations, and contributed, The author argues to a fundamental convergence between the two economists during the course of the 1930s. Moreover, this shared, “Wicksellian” vision of the economic problem points to a very different research agenda from that of the Walrasian-style, general equilibrium analysis that has dominated postwar macroeconomics. The book aims not only to deconstruct some of the historical misconceptions of the Keynes versus Hayek debate but also to suggest how the insights thus uncovered can inform and instruct modern theory. While much of the analysis is quite technical, it does not assume previous knowledge of 1930s economic theory and thus should be accessible to economists, political scientists, and historians with general economics training, as well as to graduate students in these fields.Less
While standard accounts of the theoretical debates in 1930s economic thought invariably pit John Maynard Keynes against Friedrich von Hayek, this reflexive dichotomy is in many respects exceedingly superficial. It is the argument of this book that both Keynes and Hayek developed their respective theories of the business cycle within the tradition of Swedish economist Knut Wicksell, and that this shared genealogy manifested itself in significant theoretical affinities between the two apparent antagonists. The salient features of Wicksell’s work, namely, the importance of money, the role of uncertainty, coordination failures, and the element of time in capital accumulation, all motivate the Keynesian and Hayekian theories of economic fluctuations, and contributed, The author argues to a fundamental convergence between the two economists during the course of the 1930s. Moreover, this shared, “Wicksellian” vision of the economic problem points to a very different research agenda from that of the Walrasian-style, general equilibrium analysis that has dominated postwar macroeconomics. The book aims not only to deconstruct some of the historical misconceptions of the Keynes versus Hayek debate but also to suggest how the insights thus uncovered can inform and instruct modern theory. While much of the analysis is quite technical, it does not assume previous knowledge of 1930s economic theory and thus should be accessible to economists, political scientists, and historians with general economics training, as well as to graduate students in these fields.
Athol Fitzgibbons
- Published in print:
- 1990
- Published Online:
- November 2003
- ISBN:
- 9780198283201
- eISBN:
- 9780191596254
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198283202.001.0001
- Subject:
- Economics and Finance, History of Economic Thought
This is an overview of the writings of John Maynard Keynes. It shows that a logically coherent structure of ideas, based on a single vision, permeated all aspects of Keynes's thought. This vision ...
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This is an overview of the writings of John Maynard Keynes. It shows that a logically coherent structure of ideas, based on a single vision, permeated all aspects of Keynes's thought. This vision integrated Keynes's theories of probability and uncertainty with his moral and political philosophy.Keynes's probability theory rejected both pseudo‐quantification and undue scepticism. His macroeconomics assumed that the world was complex and changing, and that many elements in a decision could not be meaningfully quantified. In many respects, his political philosophy, which was meant to be a third way to Marxism and laissez‐faire, reflected his economics. It treated the economy neither as a perfect machine nor as a system doomed to failure, but as a fallible human institution subject to judgement, and improvable by human reason.All of Keynes's writings are considered, including his unpublished early works. This history of economic thought discusses the meaning and development of Keynes's system, considers how it changed over time, and shows that he was misled by an exaggerated notion of the power of ideas.Less
This is an overview of the writings of John Maynard Keynes. It shows that a logically coherent structure of ideas, based on a single vision, permeated all aspects of Keynes's thought. This vision integrated Keynes's theories of probability and uncertainty with his moral and political philosophy.
Keynes's probability theory rejected both pseudo‐quantification and undue scepticism. His macroeconomics assumed that the world was complex and changing, and that many elements in a decision could not be meaningfully quantified. In many respects, his political philosophy, which was meant to be a third way to Marxism and laissez‐faire, reflected his economics. It treated the economy neither as a perfect machine nor as a system doomed to failure, but as a fallible human institution subject to judgement, and improvable by human reason.
All of Keynes's writings are considered, including his unpublished early works. This history of economic thought discusses the meaning and development of Keynes's system, considers how it changed over time, and shows that he was misled by an exaggerated notion of the power of ideas.
Richard M. Goodwin
- Published in print:
- 1990
- Published Online:
- November 2003
- ISBN:
- 9780198283355
- eISBN:
- 9780191596315
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198283350.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This collection of short essays provides an application of chaotic dynamics to economic systems. Each chapter presents several economic models incorporating differential (or difference) equations ...
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This collection of short essays provides an application of chaotic dynamics to economic systems. Each chapter presents several economic models incorporating differential (or difference) equations such as the Rössler equations, which exhibit a chaotic attractor. Combining the insights of Schumpeter, Marx, and Keynes, the models endogenously generate irregular, wavelike growth. Goodwin therefore argues that the apparent unpredictability of economic systems is due to deterministic chaos as much as to exogeneous shocks. The book is aimed primarily at economists interested in theories of economic growth. However, readers with a general interest in the application of chaos theory to social sciences will also find it useful. Some mathematical knowledge of systems of differential equations is assumed.Less
This collection of short essays provides an application of chaotic dynamics to economic systems. Each chapter presents several economic models incorporating differential (or difference) equations such as the Rössler equations, which exhibit a chaotic attractor. Combining the insights of Schumpeter, Marx, and Keynes, the models endogenously generate irregular, wavelike growth. Goodwin therefore argues that the apparent unpredictability of economic systems is due to deterministic chaos as much as to exogeneous shocks. The book is aimed primarily at economists interested in theories of economic growth. However, readers with a general interest in the application of chaos theory to social sciences will also find it useful. Some mathematical knowledge of systems of differential equations is assumed.
J. R. Hicks
- Published in print:
- 1987
- Published Online:
- November 2003
- ISBN:
- 9780198772873
- eISBN:
- 9780191596438
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198772874.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Capital and Growth by John Hicks was published in 1965 and rapidly established itself as a landmark in economic theory. This book takes earlier work and examines it critically for its ...
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Capital and Growth by John Hicks was published in 1965 and rapidly established itself as a landmark in economic theory. This book takes earlier work and examines it critically for its present-day value. The theme, now more clearly identified, is a comparative study of the economics of change, and brings in many of Hicks's subsequent developments and refinements — in particular a ‘neo-Austrian’ theory of capital which he developed in Capital and Time (1973). A new chapter on Keynes's methods has been added. This book presents a complete classification of the family of models appropriate for analysing dynamic economics.Less
Capital and Growth by John Hicks was published in 1965 and rapidly established itself as a landmark in economic theory. This book takes earlier work and examines it critically for its present-day value. The theme, now more clearly identified, is a comparative study of the economics of change, and brings in many of Hicks's subsequent developments and refinements — in particular a ‘neo-Austrian’ theory of capital which he developed in Capital and Time (1973). A new chapter on Keynes's methods has been added. This book presents a complete classification of the family of models appropriate for analysing dynamic economics.
Michio Morishima
- Published in print:
- 1969
- Published Online:
- November 2003
- ISBN:
- 9780198281641
- eISBN:
- 9780191596667
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0198281641.001.0001
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Discusses economic growth within the framework of the theory of equilibrium. Attempts on the one hand to resolve much of the controversy on growth that results from differences in assumptions made by ...
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Discusses economic growth within the framework of the theory of equilibrium. Attempts on the one hand to resolve much of the controversy on growth that results from differences in assumptions made by various authors and, on the other hand, to make a contribution to the theory of dynamic economics. Practical problems are not discussed, and the economy dealt with is isolated from foreign countries and is provided with a knowledge of industrial arts that does not change throughout the time horizon concerned. Factors such as public spending, foreign trade, technical improvement, and monetary policies are, therefore, ignored, even though they are usually important in determining the actual rate of economic growth. In the first half of the book, decisions regarding investment are made by private enterprises either in the neoclassical or Keynesian manner, while in the second half the planning authorities are responsible for directing firms so that they invest society's savings in such a way that the economy will progress along a path of efficient or optimal growth. The book is divided into four parts that discuss prototype models of economic growth, models resulting from the von Neumann model, models after the ‘von Neumann revolution’, and further model developments. An appendix is included on the von Neumann equilibrium, which aims at a clearer comprehension of Chs. 6 and 7.Less
Discusses economic growth within the framework of the theory of equilibrium. Attempts on the one hand to resolve much of the controversy on growth that results from differences in assumptions made by various authors and, on the other hand, to make a contribution to the theory of dynamic economics. Practical problems are not discussed, and the economy dealt with is isolated from foreign countries and is provided with a knowledge of industrial arts that does not change throughout the time horizon concerned. Factors such as public spending, foreign trade, technical improvement, and monetary policies are, therefore, ignored, even though they are usually important in determining the actual rate of economic growth. In the first half of the book, decisions regarding investment are made by private enterprises either in the neoclassical or Keynesian manner, while in the second half the planning authorities are responsible for directing firms so that they invest society's savings in such a way that the economy will progress along a path of efficient or optimal growth. The book is divided into four parts that discuss prototype models of economic growth, models resulting from the von Neumann model, models after the ‘von Neumann revolution’, and further model developments. An appendix is included on the von Neumann equilibrium, which aims at a clearer comprehension of Chs. 6 and 7.
Fred Campano and Dominick Salvatore
- Published in print:
- 2006
- Published Online:
- May 2006
- ISBN:
- 9780195300918
- eISBN:
- 9780199783441
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0195300912.003.0010
- Subject:
- Economics and Finance, Development, Growth, and Environmental
This chapter examines the question of whether there is a connection between income distribution and the macro-economy. The debate surrounding Kuznets’ inverted ‘U-shaped’ hypothesis is explained. ...
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This chapter examines the question of whether there is a connection between income distribution and the macro-economy. The debate surrounding Kuznets’ inverted ‘U-shaped’ hypothesis is explained. Techniques for projecting income shares under the assumption of the ‘U-shaped’ hypothesis are demonstrated.Less
This chapter examines the question of whether there is a connection between income distribution and the macro-economy. The debate surrounding Kuznets’ inverted ‘U-shaped’ hypothesis is explained. Techniques for projecting income shares under the assumption of the ‘U-shaped’ hypothesis are demonstrated.
Peter Clarke
- Published in print:
- 1990
- Published Online:
- October 2011
- ISBN:
- 9780198202196
- eISBN:
- 9780191675201
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198202196.003.0013
- Subject:
- History, British and Irish Modern History, Economic History
If tactical commitments and opportunism fuelled Keynes's progress towards the position of the Treatise, can the origins of the General Theory be explained along similar lines? Keynes's abandonment of ...
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If tactical commitments and opportunism fuelled Keynes's progress towards the position of the Treatise, can the origins of the General Theory be explained along similar lines? Keynes's abandonment of the Treatise, so soon after publication, is remarkable, given the forceful way in which he deployed its rhetoric about a gap between savings and investment. However, this appealing rhetoric concealed difficulties in the formal logic of the theory. Keynes subsequently regarded his progress towards the theory of effective demand as the outcome of a series of ‘moments of transition’. It is an account which stands up to historical scrutiny, and it suggests that there were four chronological stages, of which the principle of effective demand constituted the second. The General Theory was thus a fundamental challenge to the theoretical basis of neo-classical economics.Less
If tactical commitments and opportunism fuelled Keynes's progress towards the position of the Treatise, can the origins of the General Theory be explained along similar lines? Keynes's abandonment of the Treatise, so soon after publication, is remarkable, given the forceful way in which he deployed its rhetoric about a gap between savings and investment. However, this appealing rhetoric concealed difficulties in the formal logic of the theory. Keynes subsequently regarded his progress towards the theory of effective demand as the outcome of a series of ‘moments of transition’. It is an account which stands up to historical scrutiny, and it suggests that there were four chronological stages, of which the principle of effective demand constituted the second. The General Theory was thus a fundamental challenge to the theoretical basis of neo-classical economics.
Peter Clarke
- Published in print:
- 1990
- Published Online:
- October 2011
- ISBN:
- 9780198202196
- eISBN:
- 9780191675201
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198202196.003.0003
- Subject:
- History, British and Irish Modern History, Economic History
Even after the disruptive experience of the First World War, the economic role of the state was conceived in terms which had become canonical in the late nineteenth century. The Treasury and the Bank ...
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Even after the disruptive experience of the First World War, the economic role of the state was conceived in terms which had become canonical in the late nineteenth century. The Treasury and the Bank of England saw themselves as guardians of sound finance. Budgets had to be balanced; the parity of the pound sterling had to be maintained so that it was ‘as good as gold’; and Free Trade had to be preserved. Only by elevating these interlocking policies into matters of principle could they be rendered ‘knave-proof’. The same conception can be found in the Treasury View of the late 1920s, as promulgated by Churchill. The authorities' principled commitment to sound finance in the late 1920s is thus no myth and the Treasury View was, as Keynes suggested, a crucial barrier against the adoption of an active policy to tackle unemployment.Less
Even after the disruptive experience of the First World War, the economic role of the state was conceived in terms which had become canonical in the late nineteenth century. The Treasury and the Bank of England saw themselves as guardians of sound finance. Budgets had to be balanced; the parity of the pound sterling had to be maintained so that it was ‘as good as gold’; and Free Trade had to be preserved. Only by elevating these interlocking policies into matters of principle could they be rendered ‘knave-proof’. The same conception can be found in the Treasury View of the late 1920s, as promulgated by Churchill. The authorities' principled commitment to sound finance in the late 1920s is thus no myth and the Treasury View was, as Keynes suggested, a crucial barrier against the adoption of an active policy to tackle unemployment.
E. H. H. GREEN
- Published in print:
- 2002
- Published Online:
- January 2010
- ISBN:
- 9780198205937
- eISBN:
- 9780191717116
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198205937.003.0004
- Subject:
- History, Political History
This chapter outlines perhaps the fullest, earliest Conservative response to Keynes through the ideas of the Conservative politician Arthur Steel–Maitland. These evolved from the time of his ...
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This chapter outlines perhaps the fullest, earliest Conservative response to Keynes through the ideas of the Conservative politician Arthur Steel–Maitland. These evolved from the time of his involvement in the pre-1914 tariff debate as a member of the Confederacy, the Compatriots Club, and the Unionist Social Reform Committee, through his engagement with the ‘new economics’ of the inter-war years. Steel–Maitland's ideas on tariff reform, constructive imperialism, social reform, industrial relations, state intervention, the ‘slump’ and mass unemployment are reviewed.Less
This chapter outlines perhaps the fullest, earliest Conservative response to Keynes through the ideas of the Conservative politician Arthur Steel–Maitland. These evolved from the time of his involvement in the pre-1914 tariff debate as a member of the Confederacy, the Compatriots Club, and the Unionist Social Reform Committee, through his engagement with the ‘new economics’ of the inter-war years. Steel–Maitland's ideas on tariff reform, constructive imperialism, social reform, industrial relations, state intervention, the ‘slump’ and mass unemployment are reviewed.
Daniel Béland and Robert Henry Cox (eds)
- Published in print:
- 2010
- Published Online:
- January 2011
- ISBN:
- 9780199736430
- eISBN:
- 9780199866106
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199736430.001.0001
- Subject:
- Political Science, Comparative Politics
Writing about ideas, John Maynard Keynes noted that they are “more powerful than is commonly understood. Indeed the world is ruled by little else.” One would expect, therefore, that political ...
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Writing about ideas, John Maynard Keynes noted that they are “more powerful than is commonly understood. Indeed the world is ruled by little else.” One would expect, therefore, that political science—a discipline that focuses specifically on the nature of power—would have a healthy respect for the role of ideas. However, for a variety of reasons—not least of which is the influence of rational choice theory, which presumes that individuals are self-maximizing rational actors—this is not the case, and the literature on the topic is fairly thin. As this book shows, ideas are in fact powerful shapers of political and social life. The book provides a general overview of the theoretical, empirical, and methodological issues raised by social science research on ideas and politics. Throughout, it hones in on three central questions. What is the theoretical basis for studying ideas in politics? What are the best methods? What sort of empirical puzzles can be solved by examining ideas and related phenomena such as discourse, policy paradigms, and framing processes?Less
Writing about ideas, John Maynard Keynes noted that they are “more powerful than is commonly understood. Indeed the world is ruled by little else.” One would expect, therefore, that political science—a discipline that focuses specifically on the nature of power—would have a healthy respect for the role of ideas. However, for a variety of reasons—not least of which is the influence of rational choice theory, which presumes that individuals are self-maximizing rational actors—this is not the case, and the literature on the topic is fairly thin. As this book shows, ideas are in fact powerful shapers of political and social life. The book provides a general overview of the theoretical, empirical, and methodological issues raised by social science research on ideas and politics. Throughout, it hones in on three central questions. What is the theoretical basis for studying ideas in politics? What are the best methods? What sort of empirical puzzles can be solved by examining ideas and related phenomena such as discourse, policy paradigms, and framing processes?
Mark Blyth
- Published in print:
- 2010
- Published Online:
- January 2011
- ISBN:
- 9780199736430
- eISBN:
- 9780199866106
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199736430.003.0005
- Subject:
- Political Science, Comparative Politics
This chapter argues that ideational scholarship rests, implicitly or explicitly, on a particular way of looking at the world, a distinct social ontology. It uses this understanding to make the ...
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This chapter argues that ideational scholarship rests, implicitly or explicitly, on a particular way of looking at the world, a distinct social ontology. It uses this understanding to make the further case that unless one is practicing a self-consciously ideational social science, one might be, as Keynes famously put it, a Euclidian geometer in a non-Euclidian world. That is, to continue his geometric metaphor, we might live in world of knots and spheres, but without attending to ideas, social scientists are equipped to see only right angles and squares. In making this case, the chapter and this book as a whole move beyond the claim that ideas matter and that scholarship should “take them seriously”, and suggest instead that practicing social science without viewing ideas as fundamental to both the nature of human action and causation in social systems produces seriously misleading explanations.Less
This chapter argues that ideational scholarship rests, implicitly or explicitly, on a particular way of looking at the world, a distinct social ontology. It uses this understanding to make the further case that unless one is practicing a self-consciously ideational social science, one might be, as Keynes famously put it, a Euclidian geometer in a non-Euclidian world. That is, to continue his geometric metaphor, we might live in world of knots and spheres, but without attending to ideas, social scientists are equipped to see only right angles and squares. In making this case, the chapter and this book as a whole move beyond the claim that ideas matter and that scholarship should “take them seriously”, and suggest instead that practicing social science without viewing ideas as fundamental to both the nature of human action and causation in social systems produces seriously misleading explanations.
E. H. H GREEN
- Published in print:
- 2002
- Published Online:
- January 2010
- ISBN:
- 9780198205937
- eISBN:
- 9780191717116
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198205937.003.0007
- Subject:
- History, Political History
This chapter charts the development of the political economy of Harold Macmillan from the 1920s to his retirement as Prime Minister in the autumn of 1963. It outlines the changing nature of his ...
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This chapter charts the development of the political economy of Harold Macmillan from the 1920s to his retirement as Prime Minister in the autumn of 1963. It outlines the changing nature of his concept of a ‘middle way’ between socialism and unfettered capitalism, and the similarly challenging response of the Conservative Party to it. Macmillan's ideas on industrial reorganisation enabled by the State, State investment, the regulation of capital markets, monetary policy and employment, and their similarities and differences with those of Keynes are discussed.Less
This chapter charts the development of the political economy of Harold Macmillan from the 1920s to his retirement as Prime Minister in the autumn of 1963. It outlines the changing nature of his concept of a ‘middle way’ between socialism and unfettered capitalism, and the similarly challenging response of the Conservative Party to it. Macmillan's ideas on industrial reorganisation enabled by the State, State investment, the regulation of capital markets, monetary policy and employment, and their similarities and differences with those of Keynes are discussed.
Sheila Dow
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691155234
- eISBN:
- 9781400846450
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691155234.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter examines John Maynard Keynes' views on knowledge, expectations, and rationality. It focuses not only on Keynes' ideas on expectation formation but also on the degree of confidence ...
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This chapter examines John Maynard Keynes' views on knowledge, expectations, and rationality. It focuses not only on Keynes' ideas on expectation formation but also on the degree of confidence attached to those expectations (i.e., uncertainty) and what this means for macroeconomic theory. After providing a synthetic account of Keynes' ideas on knowledge and expectations, along with his understanding of the source of uncertainty, the chapter considers his emphasis on the role of conventional judgment, and of conventions more generally, as well as the implications of these ideas for how we may understand and use the concept of rationality in a Keynesian framework, alongside considerations of logic and consistency. Keynes' concern with the interplay between individuality and sociality sheds some light on Keynes in relation to the formulation of microfoundations. The chapter concludes with a discussion of the implications of Keynes' ideas on knowledge, expectations, and rationality for economic methodology.Less
This chapter examines John Maynard Keynes' views on knowledge, expectations, and rationality. It focuses not only on Keynes' ideas on expectation formation but also on the degree of confidence attached to those expectations (i.e., uncertainty) and what this means for macroeconomic theory. After providing a synthetic account of Keynes' ideas on knowledge and expectations, along with his understanding of the source of uncertainty, the chapter considers his emphasis on the role of conventional judgment, and of conventions more generally, as well as the implications of these ideas for how we may understand and use the concept of rationality in a Keynesian framework, alongside considerations of logic and consistency. Keynes' concern with the interplay between individuality and sociality sheds some light on Keynes in relation to the formulation of microfoundations. The chapter concludes with a discussion of the implications of Keynes' ideas on knowledge, expectations, and rationality for economic methodology.
Roger E. A. Farmer
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691155234
- eISBN:
- 9781400846450
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691155234.003.0008
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter examines the persistence of unemployment by drawing from John Maynard Keynes' two central ideas. The first idea is that any unemployment rate can persist as an equilibrium. The second is ...
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This chapter examines the persistence of unemployment by drawing from John Maynard Keynes' two central ideas. The first idea is that any unemployment rate can persist as an equilibrium. The second is that the unemployment rate that prevails is determined by animal spirits. The chapter introduces a three-equation monetary model termed “Farmer monetary model,” which replaces the New Keynesian Phillips curve with a belief function that describes how agents form expectations of future nominal income. The chapter builds and estimates the Farmer monetary model using U.S. data for the period from the first quarter of 1952 to the fourth quarter of 2007. It compares the Farmer monetary model to a New Keynesian model by computing the posterior odds ratio. It shows that the posterior odds favor the Farmer monetary model and concludes by discussing the implications of this finding for fiscal and monetary policy.Less
This chapter examines the persistence of unemployment by drawing from John Maynard Keynes' two central ideas. The first idea is that any unemployment rate can persist as an equilibrium. The second is that the unemployment rate that prevails is determined by animal spirits. The chapter introduces a three-equation monetary model termed “Farmer monetary model,” which replaces the New Keynesian Phillips curve with a belief function that describes how agents form expectations of future nominal income. The chapter builds and estimates the Farmer monetary model using U.S. data for the period from the first quarter of 1952 to the fourth quarter of 2007. It compares the Farmer monetary model to a New Keynesian model by computing the posterior odds ratio. It shows that the posterior odds favor the Farmer monetary model and concludes by discussing the implications of this finding for fiscal and monetary policy.
Edmund S. Phelps
- Published in print:
- 2013
- Published Online:
- October 2017
- ISBN:
- 9780691155234
- eISBN:
- 9781400846450
- Item type:
- chapter
- Publisher:
- Princeton University Press
- DOI:
- 10.23943/princeton/9780691155234.003.0009
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter examines indeterminacies in wage and asset price expectations. It first considers what it argues are fatal flaws in Keynesian economics, comparing crude Keynesianism with a crude natural ...
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This chapter examines indeterminacies in wage and asset price expectations. It first considers what it argues are fatal flaws in Keynesian economics, comparing crude Keynesianism with a crude natural rate of unemployment. It then introduces a structuralist model of employment and economic growth that better illuminates the long slump without inflation in the United States. In a structuralist model, nonmonetary forces operate through structural channels to impact the path of employment and its medium-term level (as well as its long-term level). Asset prices, such as housing prices, are expressed in real terms. The chapter describes how structuralist models approaches issues relating to asset prices and wages and concludes by explaining how to think about expectation formation in modern economies—economies of the sort that became the lifetime subject of Frank H. Knight, John Maynard Keynes, and F. A. Hayek.Less
This chapter examines indeterminacies in wage and asset price expectations. It first considers what it argues are fatal flaws in Keynesian economics, comparing crude Keynesianism with a crude natural rate of unemployment. It then introduces a structuralist model of employment and economic growth that better illuminates the long slump without inflation in the United States. In a structuralist model, nonmonetary forces operate through structural channels to impact the path of employment and its medium-term level (as well as its long-term level). Asset prices, such as housing prices, are expressed in real terms. The chapter describes how structuralist models approaches issues relating to asset prices and wages and concludes by explaining how to think about expectation formation in modern economies—economies of the sort that became the lifetime subject of Frank H. Knight, John Maynard Keynes, and F. A. Hayek.
Tyler Beck Goodspeed
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199846658
- eISBN:
- 9780199950126
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199846658.003.0002
- Subject:
- Economics and Finance, Economic Systems
This chapter delves into the first Keynesian and Hayekian variations on the Wicksellian theme, namely, Keynes’s A Treatise on Money (1930) and Hayek’s Prices and Production (1931). We explain that in ...
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This chapter delves into the first Keynesian and Hayekian variations on the Wicksellian theme, namely, Keynes’s A Treatise on Money (1930) and Hayek’s Prices and Production (1931). We explain that in both works, the authors integrate the role of relative prices fundamentally into Wicksell’s cumulative process and thereby seek to develop Wicksell’s theory into a theory of the business cycle. The market–natural rate distinction remains, as does the potential divergence between saving and investment, which for both authors drives the cycle. Ultimately, disequilibrium in the two models stems from an unresolved conflict within the structure of production, a rivalry between producers of consumer and investment goods corresponding strictly to the failure of adjustment between saving and investment. In this, the Wicksellian two-rates framework is decisive, constituting a disequilibrating trip wire within capital markets that touches off a progressive sequence of ultimately re-equilibrating secular price changes. Nonetheless, both models contain flaws, which the chapter touches upon.Less
This chapter delves into the first Keynesian and Hayekian variations on the Wicksellian theme, namely, Keynes’s A Treatise on Money (1930) and Hayek’s Prices and Production (1931). We explain that in both works, the authors integrate the role of relative prices fundamentally into Wicksell’s cumulative process and thereby seek to develop Wicksell’s theory into a theory of the business cycle. The market–natural rate distinction remains, as does the potential divergence between saving and investment, which for both authors drives the cycle. Ultimately, disequilibrium in the two models stems from an unresolved conflict within the structure of production, a rivalry between producers of consumer and investment goods corresponding strictly to the failure of adjustment between saving and investment. In this, the Wicksellian two-rates framework is decisive, constituting a disequilibrating trip wire within capital markets that touches off a progressive sequence of ultimately re-equilibrating secular price changes. Nonetheless, both models contain flaws, which the chapter touches upon.
Tyler Beck Goodspeed
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199846658
- eISBN:
- 9780199950126
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199846658.003.0003
- Subject:
- Economics and Finance, Economic Systems
This chapter dissects the exceedingly dense and highly abstract material from which the Keynes-Hayek debate derived its popular fame, namely, the counterreviews of A Treatise and Prices and ...
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This chapter dissects the exceedingly dense and highly abstract material from which the Keynes-Hayek debate derived its popular fame, namely, the counterreviews of A Treatise and Prices and Production, the ensuing correspondence between Keynes and Hayek, and the highly critical review of Hayek’s work by Keynes’s Cambridge colleague Piero Sraffa. The chapter finds that, far from fundamental disagreements of economic vision, the debate was in fact characterized by technical arcana, and often almost impenetrably abstruse disputes over definitions and terminology. Ultimately, however, the conclusion of the chapter is that the Keynes-Hayek-Sraffa controversy helped clarify some thorny issues in the Wicksell connection, particularly concerning the capital theory and the meaning of Wicksell’s natural rate.Less
This chapter dissects the exceedingly dense and highly abstract material from which the Keynes-Hayek debate derived its popular fame, namely, the counterreviews of A Treatise and Prices and Production, the ensuing correspondence between Keynes and Hayek, and the highly critical review of Hayek’s work by Keynes’s Cambridge colleague Piero Sraffa. The chapter finds that, far from fundamental disagreements of economic vision, the debate was in fact characterized by technical arcana, and often almost impenetrably abstruse disputes over definitions and terminology. Ultimately, however, the conclusion of the chapter is that the Keynes-Hayek-Sraffa controversy helped clarify some thorny issues in the Wicksell connection, particularly concerning the capital theory and the meaning of Wicksell’s natural rate.
Tyler Beck Goodspeed
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199846658
- eISBN:
- 9780199950126
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199846658.003.0004
- Subject:
- Economics and Finance, Economic Systems
This chapter takes up the second Keynesian iteration of the Wicksell connection. The chapter examines, in particular, how Keynes’s marginal propensity to consume, liquidity preference, marginal ...
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This chapter takes up the second Keynesian iteration of the Wicksell connection. The chapter examines, in particular, how Keynes’s marginal propensity to consume, liquidity preference, marginal efficiency of capital, and notion of effective demand fit into chapter 17 of The General Theory, which is where the influence of the Keynes-Hayek-Sraffa exchange on Keynes’s thought is most evident. Echoing Leijonhufvud, the chapter argues that the Wicksell “connection” retains a strong presence in The General Theory, though Keynes has heavily disguised it.Less
This chapter takes up the second Keynesian iteration of the Wicksell connection. The chapter examines, in particular, how Keynes’s marginal propensity to consume, liquidity preference, marginal efficiency of capital, and notion of effective demand fit into chapter 17 of The General Theory, which is where the influence of the Keynes-Hayek-Sraffa exchange on Keynes’s thought is most evident. Echoing Leijonhufvud, the chapter argues that the Wicksell “connection” retains a strong presence in The General Theory, though Keynes has heavily disguised it.
Tyler Beck Goodspeed
- Published in print:
- 2012
- Published Online:
- September 2012
- ISBN:
- 9780199846658
- eISBN:
- 9780199950126
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199846658.003.0007
- Subject:
- Economics and Finance, Economic Systems
The central argument of this book is that Keynes and Hayek both consistently adhered to a theoretical approach to monetary economics, separate from the quantity theory and general equilibrium ...
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The central argument of this book is that Keynes and Hayek both consistently adhered to a theoretical approach to monetary economics, separate from the quantity theory and general equilibrium traditions of Irving Fisher and Léon Walras, established by the late nineteenth-century Swedish economist Knut Wicksell. The core of this Wicksell “connection” consists of three themes. The first is that a monetary economy is fundamentally different from a real, barter economy with money. Second, intertemporal coordination is the central problem in macroeconomics; whether and to what extent the rate of interest can effectively coordinate separate decisions to save and invest, and the market for financial assets, constitutes the sine qua non of economic fluctuations. Finally, the Wicksell connection is about the economics of information, or how, in the absence of a Walrasian auctioneer or hyper-rational representative agent, it is the function of markets and the price mechanism to transmit information. These themes suggest a Wicksell-Keynes-Hayek research agenda, distinct from current mainstream macroeconomics. Not only did Keynes and Hayek agree on far more than is typically recognized, but also that both would have disagreed in fundamental ways with modern macro.Less
The central argument of this book is that Keynes and Hayek both consistently adhered to a theoretical approach to monetary economics, separate from the quantity theory and general equilibrium traditions of Irving Fisher and Léon Walras, established by the late nineteenth-century Swedish economist Knut Wicksell. The core of this Wicksell “connection” consists of three themes. The first is that a monetary economy is fundamentally different from a real, barter economy with money. Second, intertemporal coordination is the central problem in macroeconomics; whether and to what extent the rate of interest can effectively coordinate separate decisions to save and invest, and the market for financial assets, constitutes the sine qua non of economic fluctuations. Finally, the Wicksell connection is about the economics of information, or how, in the absence of a Walrasian auctioneer or hyper-rational representative agent, it is the function of markets and the price mechanism to transmit information. These themes suggest a Wicksell-Keynes-Hayek research agenda, distinct from current mainstream macroeconomics. Not only did Keynes and Hayek agree on far more than is typically recognized, but also that both would have disagreed in fundamental ways with modern macro.
ANGUS DEATON
- Published in print:
- 2009
- Published Online:
- January 2012
- ISBN:
- 9780197264584
- eISBN:
- 9780191734069
- Item type:
- chapter
- Publisher:
- British Academy
- DOI:
- 10.5871/bacad/9780197264584.003.0006
- Subject:
- History, Cultural History
This lecture presents the text of the speech about economic development delivered by the author at the 2008 Keynes Lecture in Economics held at the British Academy. It examines macro and micro kinds ...
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This lecture presents the text of the speech about economic development delivered by the author at the 2008 Keynes Lecture in Economics held at the British Academy. It examines macro and micro kinds of economic assistance and evaluates how assistance works. The lecture suggests that econometric methodology needs to be assessed, not only by methodologists but also by those who are concerned with the substance of the issue.Less
This lecture presents the text of the speech about economic development delivered by the author at the 2008 Keynes Lecture in Economics held at the British Academy. It examines macro and micro kinds of economic assistance and evaluates how assistance works. The lecture suggests that econometric methodology needs to be assessed, not only by methodologists but also by those who are concerned with the substance of the issue.
