The growing evidence of Keynes's methodology advantage and its consequences within the four macro-markets framework
Recent 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.
|Date of creation:||20 Sep 2008|
|Publication status:||Published in 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, Sep 2008, Stirling, United Kingdom|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00189221v2|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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- Mordecai Kurz & Maurizio Motolese, "undated".
"Endogenous Uncertainty and Market Volatility,"
99005, Stanford University, Department of Economics.
- Mordecai Kurz & Maurizio Motolese, 1999. "Endogenous Uncertainty and Market Volatility," Working Papers 1999.27, Fondazione Eni Enrico Mattei.
- Benassy, Jean-Pascal, 2007. "IS-LM and the multiplier: A dynamic general equilibrium model," Economics Letters, Elsevier, vol. 96(2), pages 189-195, August.
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- George W. Evans & Garey Ramey, 2001. ""Adaptive Expectations, Underparameterization and the Lucas Critique," University of Oregon Economics Department Working Papers 2001-8, University of Oregon Economics Department, revised 01 Dec 2004.
- Evans, George W & Ramey, Garey, 2001. "Adaptive Expectations, Underparameterization and the Lucas Critique," University of California at San Diego, Economics Working Paper Series qt41f2h196, Department of Economics, UC San Diego.
- Preston, Bruce, 2006. "Adaptive learning, forecast-based instrument rules and monetary policy," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 507-535, April.
- Hinich, Melvin J. & Foster, John & Wild, Phillip, 2006. "Structural change in macroeconomic time series: A complex systems perspective," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 136-150, March. Full references (including those not matched with items on IDEAS)
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