Completing D. Patinkin's Partially Correct, Incomplete Assessment of J M Keynes's Role as the Creator in the Development of the IS-LM Model

19 Pages Posted: 14 Jun 2017 Last revised: 28 Jun 2017

See all articles by Michael Emmett Brady

Michael Emmett Brady

California State University, Dominguez Hills

Date Written: June 13, 2017

Abstract

Patinkin came very, very close in 1987 to discovering for himself that Keynes,not Hicks, was the creator and developer of IS-LM. Unfortunately, he stopped his analysis right at the point where he could have established Keynes’s priority over Hicks.

On pp.180-181 in chapter 14 of the GT,Keynes dealt with the classical and neoclassical theory of the rate of interest. Keynes provided the reader with an explanation as to why the interest rate is not explained by the forces of thrift and productivity alone. He stated that in order to have a determinant theory of the rate of interest, the state of liquidity preference, the amount of money, and their relationships to the rate of interest were required. Keynes provided that answer in chapter 15 on pp. 199-202.He also showed how his analysis could explain the special classical case of full employment in section IV of that chapter.

Patinkin is correct that Keynes did not provide a geometrical exposition of IS and LM in the GT. What Keynes provided was a mathematical and verbal exposition of IS and LM in the GT.Keynes had no objections to IS LM, in general ,outside of the fact that IS LM needed (1) a microfoundation in the theory of the firm and (2) needed to be able to deal with expectations. Keynes meet both of these shortcomings in chapters 20 and 21 of the GT.

Keywords: Harrod,Hicks,IS-LM ,Liquidity preference,Patinkin,chapter 15,pp.180-182 of GT

JEL Classification: B10,B12,B14,B16,B20,B22

Suggested Citation

Brady, Michael Emmett, Completing D. Patinkin's Partially Correct, Incomplete Assessment of J M Keynes's Role as the Creator in the Development of the IS-LM Model (June 13, 2017). Available at SSRN: https://ssrn.com/abstract=2985286 or http://dx.doi.org/10.2139/ssrn.2985286

Michael Emmett Brady (Contact Author)

California State University, Dominguez Hills ( email )

1000 E. Victoria Street, Carson, CA
Carson, CA 90747
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
13
Abstract Views
338
PlumX Metrics