Who were the Real ‘Bastard Keynesians’? The Neoclassical Synthesis Keynesians (Samuelson, Hansen, Hicks, Klein, Solow) or the Post Keynesians (Joan Robinson, Austin Robinson, Richard Kahn, G L S Shackle, Sydney Weintraub, Paul Davidson)
33 Pages Posted: 19 Sep 2017
Date Written: September 16, 2017
J M Keynes developed, taught and applied his IS-LP(LM) model in the time period from December, 1933 to the publication of the General Theory in February, 2 1936. He provided a formal, mathematical analysis of his simultaneous, four equation, IS-LP(LM) model in the General Theory in chapters 15 and 21. Keynes integrated uncertainty, defined as an inverse function of the A Treatise on Probability’s concept of the weight of the evidence, into both the IS and LM curves. Keynes’s uncertainty concept represented different degrees of uncertainty. There was no such thing as radical uncertainty except in the case of investment in fixed, durable capital goods subject to technological innovation, change and obsolescence in the future.
Keynes also provided a microeconomic, mathematical foundation for an economic model using elasticity analysis that incorporated his general case and the Classical (Neoclassical) special case in chapters 20 and 21 of the General Theory on pp. 281-286 and pp. 304-306. This formal model, which Keynes called the D-Z model, incorporated changes in expected prices, expected profits and money wages. It served to support the Y income expenditure multiplier model, which was contained in the IS and LP(LM) equations. The neoclassical special case was demonstrated by Keynes to assert that the aggregate supply curve for output as a whole was completely inelastic because consumption and investment goods production was inversely or negatively related because a decrease in consumption would lead to an increase in savings that would lower the rate of interest and increase investment.
Keynes’s theory showed that this was not the general case. The general case was demonstrated by Keynes to be one where there was only some degree of elasticity. Keynes incorporated this analysis into his 1936 correspondence with Hicks and Harrod. Neither Hicks nor Harrod ever replied to Keynes’s points concerning his elasticity analysis.
The Post Keynesians (Joan Robinson, Austin Robinson, Richard Kahn, G L S Shackle, Sydney Weintraub, Paul Davidson, John Kenneth Galbraith) have denied for over 80 years that Keynes ever had any mathematically correct, developed, formal models of IS-LM or any micro foundations in the General Theory because Keynes supposedly realized that the all-powerful effects of radical (irreducible or fundamental) uncertainty made any such mathematical modeling impossible. This is completely wrong.
The Neoclassical Synthesis Keynesians (Samuelson, Hansen, Hicks, Klein, Solow), on the other hand, argued that Keynes did provide a mathematical model of his theory in the General Theory, but that it had to be extracted from a number of various different chapters in the General Theory. They also argued that Keynes’s emphasis on uncertainty, while interesting, was not fundamental to his model as extracted by Meade, Hicks and Harrod, and later by Hansen. Parts of this view are correct.
This paper shows that the Post Keynesians are completely wrong while the Neoclassical Synthesis Keynesians have some things right about Keynes’s analysis in the GT and some things wrong about Keynes’s analysis in the GT. What they have wrong, however, can’t be expressed formally in the subjective theory of probability. Tobin would be an example of this in his “liquidity preference as behavior toward risk” paper. Therefore, the real Bastard Keynesians turn out to be the Post Keynesians, who were the first to us the term “Bastard Keynesians”, to attack Samuelson and other such economists.
Keywords: Harrod, Hicks, IS-LM, Liquidity Preference, Patinkin, Chapter 15, Pp. 180-182 of GT, Chapter 21, Pp. 297-303
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation