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Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It

  • Kakarot-Handtke, Egmont

Krugman has recently revitalized IS-LM with a number of succinct analytical pieces on his blog. The reverberations were remarkable. Economists, however, are known often not grasp the full content of their own and, a fortiori, of others’ models. This happened to Keynes in the days of high theory and to Krugman in these days. Keynes applied a defect formalism, which is here replaced by objective-structural axioms. This yields the correct relationship between retained profit, saving, and investment which in turn makes it clear after the event that the IS-part of the IS-LM construct never could bear any substantive theoretical load.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53608.

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Date of creation: 11 Feb 2014
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Handle: RePEc:pra:mprapa:53608
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  1. Laidler,David, 1999. "Fabricating the Keynesian Revolution," Cambridge Books, Cambridge University Press, number 9780521641739.
  2. Kakarot-Handtke, Egmont, 2011. "Reconstructing the Quantity Theory (I)," MPRA Paper 32421, University Library of Munich, Germany.
  3. Keen, Steve, 2010. "Solving the paradox of monetary profits," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4, pages 1-32.
  4. F. A. Lutz, 1938. "The Outcome of the Saving-Investment Discussion," The Quarterly Journal of Economics, Oxford University Press, vol. 52(4), pages 588-614.
  5. repec:oup:qjecon:v:115:y:2000:i:4:p:1375-1409 is not listed on IDEAS
  6. Robert G. King, 1993. "Will the New Keynesian Macroeconomics Resurrect the IS-LM Model?," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 67-82, Winter.
  7. Ingo Barens, 1997. "What Went Wrong with IS-LM/AS-AD Analysis--And Why," Eastern Economic Journal, Eastern Economic Association, vol. 23(1), pages 89-99, Winter.
  8. Tomasson, Gunnar & Bezemer, Dirk J, 2010. "What is the Source of Profit and Interest? A Classical Conundrum Reconsidered," MPRA Paper 20320, University Library of Munich, Germany.
  9. A. P. Lerner, 1938. "Saving Equals Investment," The Quarterly Journal of Economics, Oxford University Press, vol. 52(2), pages 297-309.
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