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The state of short-term expectation

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  • Mark Hayes

Abstract

The claim that Keynes makes a tacit assumption in Chapter 3 of The General Theory, that short-term expectations are fulfilled, is unwarranted and unnecessary. The seminal paper by Kregel (1976) and its subsequent development by Chick, among others, which has contributed to the general acceptance of this claim, is critically evaluated in depth. The present paper clears the ground for a recognition that Keynes instead adopted the assumption of judicious foresight, which would now be called short-term rational expectations. This recognition in turn should encourage a reappraisal of Keynes’s thought, by mainstream economists and others.

Suggested Citation

  • Mark Hayes, 2011. "The state of short-term expectation," Working Papers PKWP1107, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp1107
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    References listed on IDEAS

    as
    1. M. G. Hayes, 2006. "The Economics of Keynes," Books, Edward Elgar Publishing, number 12601.
    2. Mark Hayes, 2007. "The Point of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 19(1), pages 55-80.
    3. Olivier Allain, 2009. "Effective Demand and Short-term Adjustments in the General Theory," Review of Political Economy, Taylor & Francis Journals, vol. 21(1), pages 1-22.
    4. John King, 1993. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Working Papers 1993.16, School of Economics, La Trobe University.
    5. Claudio Sardoni, 2008. "Some considerations on equilibrium and realism," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(3), pages 485-490, April.
    6. M. G. Hayes, 2013. "The State of Short-term Expectation," Review of Political Economy, Taylor & Francis Journals, vol. 25(2), pages 205-224, April.
    7. J. E. King, 1994. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 17(1), pages 3-31, September.
    8. M. G. Hayes, 2008. "Keynes's degree of competition," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 15(2), pages 275-291.
    9. Tony Lawson, 2005. "The (confused) state of equilibrium analysis in modern economics: an explanation," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(3), pages 423-444.
    10. Vercelli,Allessandro, 1991. "Methodological Foundations of Macroeconomics," Cambridge Books, Cambridge University Press, number 9780521392945, October.
    11. Dany Lang & Mark Setterfield, 2006. "History versus equilibrium? on the possibility and realist basis of a general critique of traditional equilibrium analysis," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(2), pages 191-209.
    12. Jochen Hartwig, 2007. "Keynes vs. the Post Keynesians on the Principle of Effective Demand," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 14(4), pages 725-739.
    13. Kregel, J A, 1976. "Economic Methodology in the Face of Uncertainty: The Modelling Methods of Keynes and the Post-Keynesians," Economic Journal, Royal Economic Society, vol. 86(342), pages 209-225, June.
    14. Edward J. Amadeo, 1989. "Keynes’s Principle of Effective Demand," Books, Edward Elgar Publishing, number 11.
    15. Gary Mongiovi, 2000. "Shackle on Equilibrium: A Critique," Review of Social Economy, Taylor & Francis Journals, vol. 58(1), pages 108-124.
    16. J. A. Kregel, 1987. "Keynes’s Given Degree of Competition: Comment on McKenna and Zannoni," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 9(4), pages 490-495, July.
    17. Roger Backhouse, 2004. "History and equilibrium: A partial defense of equilibrium economics," Journal of Economic Methodology, Taylor & Francis Journals, vol. 11(3), pages 291-305.
    18. Olivier Allain, 2009. "Effective demand and short-term adjustments in the General Theory," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00345891, HAL.
    19. Eleonora Sanfilippo, 2011. "The Short Period and the Long Period in Macroeconomics: An Awkward Distinction," Review of Political Economy, Taylor & Francis Journals, vol. 23(3), pages 371-388.
    20. Dany Lang & Mark Setterfield, 2007. "History versus equilibrium? on the possibility and realist basis of a general critique of traditional equilibrium analysis," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 29(2), pages 191-209, January.
    21. Mark Hayes, 2006. "The Economics of Keynes: A New Guide to The General Theory," Books, Post Keynesian Economics Society (PKES), number nggt.
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    Cited by:

    1. M.G. Hayes, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 661-671, October.
    2. M. G. Hayes, 2013. "The State of Short-term Expectation," Review of Political Economy, Taylor & Francis Journals, vol. 25(2), pages 205-224, April.

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    More about this item

    Keywords

    Keynes; effective demand; formation of expectations;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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