Mr. Keynes, the Classics and the new Keynesians: A suggested formalization
AbstractThe paper suggests a new Keynesian model of the General Theory. A reduced form entails a diagram with three curves relating employment and the real wage, which represent the two fundamental classical postulates and the principle of effective demand. This diagram illustrates better than IS-LM the generality of Keynes’s theory, clarifying the distinction of voluntary and involuntary unemployment. Other significant features are the role of the distribution of expected interest rates among heterogeneous agents, whether dispersed or concentrated, in shaping the LM curve, as well as the role of wage competitiveness constraints as a foundation of Keynes’s relative wage hypothesis.
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Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2013-16.
Date of creation: 2013
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Keynes’s model; involuntary unemployment; coordination failures; liquidity trap; relative wages.;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-02 (All new papers)
- NEP-HPE-2013-11-02 (History & Philosophy of Economics)
- NEP-MAC-2013-11-02 (Macroeconomics)
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