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

19 Pages Posted: 8 Feb 2014 Last revised: 18 Apr 2014

Egmont Kakarot-Handtke

University of Stuttgart - Institute of Economics and Law

Date Written: February 8, 2014

Abstract

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 had been logically defective ab initio.

Keywords: new framework of concepts, structure-centric, axiom set, Hicks, Allais

JEL Classification: B59, E12, E13

Suggested Citation

Kakarot-Handtke, Egmont, Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It (February 8, 2014). Available at SSRN: https://ssrn.com/abstract=2392856 or http://dx.doi.org/10.2139/ssrn.2392856

Egmont Kakarot-Handtke (Contact Author)

University of Stuttgart - Institute of Economics and Law ( email )

Keplerstrasse 17
Stuttgart
Germany

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