The growing evidence of Keynes's methodology advantage and its consequences within the four macro-markets framework
AbstractRecent developments in econometrics and economic theory attest the growing evidence of strong uncertainty. The paper argues that these developments both question seriously the methodological foundations of the mainstream macroeconomics and support Keynes's powerful concepts and theory. It emphasizes how replacing ‘risk' with strong uncertainty suffices to transform the standard four-macro-markets system into a shifting demand-driven system, with the result that price rigidity is not to be considered the cause of the effective demand leadership (although, as Keynes pointed out, some rigidity is required to give us some stability in a monetary economy). As it is not based on a restrictive definition of uncertainty, Keynes's theory is more realistic than the mainstream. It is also more general, for the equilibrium level of employment depends on the views about the future, instead of having a unique ‘natural' anchor.
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Bibliographic InfoPaper provided by HAL in its series Post-Print with number halshs-00189221.
Date of creation: 20 Sep 2008
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Publication status: Published - Presented, Methodology after Keynes, 11th SCEME seminar in economic methodology, joint with the Post Keynesian Economics Study Group and the Scottish Institute for Research in Economics, 2008, Stirling, United Kingdom
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General equilibrium; Uncertainty; Post-Keynesian;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-11 (All new papers)
- NEP-CBA-2008-11-11 (Central Banking)
- NEP-HPE-2008-11-11 (History & Philosophy of Economics)
- NEP-MAC-2008-11-11 (Macroeconomics)
- NEP-PKE-2008-11-11 (Post Keynesian Economics)
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University of California at San Diego, Economics Working Paper Series
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