Abstract
Most of Keynes’s interpreters have considered the analysis proposed in the General Theory as having no relation to the vision of capitalism which emerges from his earlier, fundamental works. This has created considerable and, in some instances, insuperable difficulties, both in understanding Keynes’s message (his theory) and in the analysis of the functioning of the economic system (his method).
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Notes
‘An economy is in equilibrium when it generates messages which do not cause agents to change the theories which they hold or the policies they pursue’ — F. Hahn, On the Notion of Equilibrium in Economics, An Inaugural Lecture (Cambridge University Press, 1973) p. 25.
See, in particular, J. R. Hicks, ‘IS-LM. An Explanation’, in J. R. Hicks, ‘Money, Interest and Wages’, Collected Essays in Economic Theory, vol. II (Oxford: Blackwell, 1982).
J. M. Keynes, Treatise on Probability, 1921, in Collected Writings of J. M. Keynes CW, VIII: pp. 6–7.
J. M. Keynes, Treatise on Probability, p. 77. On this line, see E. R. Weintraub, ‘The 4,827th Reexamination of Keynes’ System’, chap. 3, in E. R. Weintraub, Microfoundations (Cambridge University Press, 1979).
See, in particular, P. Garegnani, ‘On a Change in the Notion of Equilibrium in Recent Work on Value. A Comment on Samuelson’, in M. Brown, K. Sato and P. Zarembka (eds) Essays in Modern Capital Theory (Amsterdam, North-Holland, 1976).
See in particular, J. R. Hicks, The Crisis in Keynesian Economics (Oxford: Blackwell, 1974),
and J. R. Hicks, Causality in Economics (Oxford: Blackwell, 1979).
See J. R. Hicks, Capital and Growth (Oxford University Press, 1965).
There is an interesting discussion of this point in A. Vercelli, ‘Equilibrio e disequilibrio nella Teoria Generale di Keynes: il Ruolo dei salari monetari e le difficoltà di un metodo di puro equilibrio’, in A. Graziani, C. Imbriani and B. Jossa (eds), Studi di Economia Keynesiana (Liguori, Naples, 1981).
The price of existing capital goods is assumed to be the same as that of newly produced capital goods. It might be objected that this is not completely correct, in that existing goods are used in the current phase of production whereas newly produced goods are employed only in a subsequent phase. If this were thought necessary, it would be possible to take account of this distinction introducing a separate price for newly produced goods, thereby following Keynes. Given, however, that there is a necessary relationship between these two prices (in equilibrium the difference might be equivalent to the price of services for a single productive phase), this would not change the substance of the argument. If, on the other hand, one accepts the hypothesis of J. Tobin’s general equilibrium model (J. Tobin, ‘A General Equilibrium Approach’), namely that the two prices are completely independent, one arrives at different conclusions. For a critique of this approach, see C. Gnesutta, ‘Equilibrio del conto capitale e meccanismo di trasmissione degli impulsi monetari’, in F. Vicarelli (ed.), La Controversia Keynesiana (Il Mulino, Bologna, 1974).
The impossibility of reducing long-term expectations to past and present events is upheld with force by J. Tobin in his critique of the theory of rational expectations. See J. Tobin, Asset Accumulation and Economic Activity (Blackwell, Oxford, 1980).
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© 1988 Association pou le Dévelopment des Etudes Keynésiennes
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Vicarelli, F. (1988). Equilibrium and Probability: A Reinterpretation of the Methodological Foundations of the General Theory. In: Barrère, A. (eds) The Foundations of Keynesian Analysis. Keynesian Studies. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08062-5_6
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