The Mathematically Erroneous, Error Filled Post Keynesian 'D-Z' Model: Blaming J M Keynes for 60 Years of Post Keynesian Errors and Mistakes

Abstract

J Smithin’s recent June, 2012 draft article, titled “A Rehabilitation of the Model of Effective Demand from Chapter 3 of Keynes’s General Theory (1936)”, provides an excellent summary of the error filled Post Keynesian D-Z model, as well as focusing on Patinkin’s partially correct criticisms of that model. Patinkin was the first to point out the impossibility that Z=pO. Patinkin confronted P. Davidson in 1989 on this issue by demonstrating that footnote 2 on pp. 55-56 of the General Theory (1936; GT) directly contradicted the Post Keynesian claim. Davidson and the Post Keynesian school have been engaged in a cover up ever since that time. The Post Keynesian cover up focused on blaming Keynes for the footnote.

This paper will point out in detail the myraid mathematical errors contained in the Post Keynesian D-Z model, the errors in Patinkin’s critique, and the cover up that resulted from Patinkin’s discovery. These errors basically resulted from the failure of Post Keynesian and other economists to correctly integrate the derivative specified by Keynes on p. 55 in ft. .2 of the GT and their attempt to ignore and bypass Keynes’s warning to Robertson in March,1935 that the technical analysis of the D-Z model was not in chapter 3 of the General Theory, but in a later chapter, called “The Employment Function”, which, of course, is chapter 20 of the GT.

The bizarre claims of Hayes and Ambrosi, that Keynes’s D-Z model is based on partial derivatives in the GT and that the footnote is abominable, are also examined and demonstrated to be intellectually worthless.

Keywords: D-Z, Aggregate supply function, Aggregate supply curve, D-Z model

JEL Classification: B20, B22, B32