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IS-LM "à la Hicks" versus IS-LM "à la Modigliani"

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  • De Vroey, Michel

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

The aim of this paper is to revisit Hicks‚ "Mr Keynes and the Classics" article. It is argued that Hicks' own model, his IS-LL model, is significantly different from the subsequent textbook IS-LM models. In short, Hicks' classical model exhibits involuntary unemployment and allows for monetary expansion to have real effects, features which are absent in subsequent standard models. I also argue that Modigliani's 1944 article has played an important role in recasting Hicks initial model. Thus a distinction ought to be drawn between "IS-LM à la Hicks" and "IS-LM à la Modigliani", modern IS-LM models being molded on the latter. Hence the conclusion that the transition from Keynes' to Keynesian economics is a two-step process, its first stage concerning the passage from the General Theory to Hicks' model, its second stage the shift from Hicks' use of the IS-LM framework to Modigliani's recasting.

Suggested Citation

  • De Vroey, Michel, 1997. "IS-LM "à la Hicks" versus IS-LM "à la Modigliani"," LIDAM Discussion Papers IRES 1998003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1998003
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    Cited by:

    1. Michel De Vroey, 2012. "Microfoundations: A Decisive Dividing Line between Keynesian and New Classical Macroeconomics?," Chapters, in: Microfoundations Reconsidered, chapter 5, Edward Elgar Publishing.
    2. Michel De Vroey & Pierre Malgrange, 2012. "From The Keynesian Revolution to the Klein-Goldberger model: Klein and the dynamization of Keynesian theory," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 20(2), pages 113-136.
    3. Edward Nelson, 2004. "Money and the Transmission Mechanism in the Optimizing IS-LM Specification," History of Political Economy, Duke University Press, vol. 36(5), pages 271-304, Supplemen.
    4. Michael D. Bordo & Anna J. Schwartz, 2004. "IS-LM and Monetarism," History of Political Economy, Duke University Press, vol. 36(5), pages 217-239, Supplemen.
    5. Michel De Vroey, 2004. "The History of Macroeconomics Viewed against the Background of the Marshall-Walras Divide," History of Political Economy, Duke University Press, vol. 36(5), pages 57-91, Supplemen.
    6. Béraud, Alain, 2003. "Keynes et Pigou sur le salaire monétaire et l’emploi : une synthèse du débat," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(1), pages 147-162, Mars-Juin.
    7. Antonella Rancan, 2014. "Modigliani's comments on Sylos Labini's theory of unemployment (1956-1958)," PSL Quarterly Review, Economia civile, vol. 67(270), pages 269-282.
    8. Rancan, Antonella, 2012. "Modigliani's 1944 Wage Rigidity Assumption and the Construction of the Neoclassical Synthesis," Economics & Statistics Discussion Papers esdp12069, University of Molise, Department of Economics.
    9. Michel De Vroey, 2001. "L'histoire des théories économiques sous le prisme de l'hétérodoxie. Une analyse critique de l'Histoire de la pensée économique de Ghislain Deleplace," Cahiers d'Économie Politique, Programme National Persée, vol. 38(1), pages 115-133.
    10. Michel De Vroey & Pierre Malgrange, 2012. "Klein et l’émergence de la modélisation macroéconomique," Économie et Statistique, Programme National Persée, vol. 451(1), pages 21-30.
    11. Goulven Rubin, 2002. "From equilibrium to disequilibrium: the genesis of Don Patinkin's interpretation of the Keynesian theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(2), pages 205-225.

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