Keynes's Views on Formalism and Mathematics: On the Role Played by Mathematical Formalism in His IS-LP(LM) Model As Presented in the General Theory in Chapter 21
31 Pages Posted: 21 Sep 2017
Date Written: September 20, 2017
J. M. Keynes’s general comments made on pp. 275-276, pp. 297-298, and p.305 of the General Theory concerning the relationship between mathematics and economics has been very severely misinterpreted by economists in general for the last eight decades. Hundreds of commentators have cited these pages while being completely oblivious to the fact that Keynes presented his complete IS-LP (LM) model on the very next line of the same page, page 298. Keynes’s entire analysis, including potential problems with the model, was presented on pp. 298-303 of the General Theory. Keynes spent five pages listing what these potential problems were. Very specific qualifications, constraints and criticisms, that needed to be considered when applying the model, were presented by Keynes. Nevertheless, Keynes made it crystal clear on p. 299 of the General Theory that his entire model, presented on p. 298, was a system of simultaneous equations that would yield a specific, determinate, equilibrium result if it was solved using the available, aggregate facts about consumption, investment, the multiplier, and the amount of liquidity preference.
Keynes’s masterful performance in 1936 has been portrayed as partially incomprehensible by the vast majority of both Post Keynesian and Neoclassical synthesis Keynesian economists. What is incomprehensible is that Keynes’s clearly presented IS-LP (LM) model, with an additional supporting mathematical analysis that was provided on pp. 304-306 of the General Theory, could have been overlooked by all economists for the last 83 years.
Keywords: Harrod, Hicks, Keynes, Is-Lm, Liquidity Preference, Qje 1937, Chapter 15, Pp. 180-182 Of Gt, Chapter 21
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation