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
Date Written: February 8, 2014
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: Suggested Citation