On R. Skidelsky's Role in Promoting the Hicksian IS-LM Myth: How His Own Mathematical Confusion Concerning Keynes's Theory of Effective Demand D-Z Model and Keynes's IS-LP(LM) Model Completely Undermines His Claims About the General Theory
24 Pages Posted: 16 Oct 2017
Date Written: October 15, 2017
R Skidelsky’s complete misunderstanding of the role that formal mathematics played in the development of Keynes’s IS-LP (LM) model and his Theory of Effective Demand in the General Theory explains his confused and confusing comments about the development of the IS-LM model and his mistaken belief that Hicks was the one who developed and used mathematical modeling to formalize Keynes’s alleged “verbal” analysis in the General Theory.
Exactly the opposite is the case. Keynes, not Hicks, created the IS-LP(LM) model in December,1933 and explicitly incorporated it in chapters 15 and 21 in section IV of both chapters of the General Theory. Chapters 15 and 16 of Skidelsky’s 1992 John Maynard Keynes: The economist as savior -1920-1937 are an intellectual and historical mess that make no sense once it is realized that Keynes created, developed, taught, and applied the IS-LP(LM) model some four years before Hicks’s 1937 article appeared in print in Econometrica.
Dimand (2007, 2010), and later Rubin (2014, 2016), correctly realized what Skidelsky completely missed, which was that Keynes had constructed the first IS-LP (LM) model in December, 1933. It appears in the 1934 draft of the GT. By September, 1935, Keynes had integrated Y, aggregate Income, into the LP equation as it would appear on p.199 of the GT in chapter 15. Dimand correctly points out that this refutes Samuelson’s conjecture that Keynes did not understand his own model until he had read Hicks’s IS-LL interpretation in 1937, as well as the claims of the Robinson’s and Kahn that IS-LM was completely foreign to Keynes’s understanding of how an economic model is created in economics because he a was a partial equilibrium, Marshallian and not a general equilibrium Walrasian so that Keynes did NOT incorporate his 1933 formal, mathematical model into the GT because it was impossible to model uncertainty mathematically. Of course, Keynes had successfully modeled uncertainty mathematically in the A Treatise on Probability in both Part II and in chapter 26 with his c coefficient. Unfortunately, both Dimand and Rubin, while catching and rejecting one of J Robinson’s many myths about Keynes, fell for another one of her myths - that Keynes provided no formal mathematical model of IS-LP (LM) in the GT. Of course, it is all there in Section IV of chapter 15 and section IV of chapter 21. Both Dimand and Rubin simply overlooked Keynes’s modeling due to their acceptance of one of the many J. Robinson myths that she created about Keynes and the GT.
Keywords: Harrod, Hicks, IS-LM, Liquidity preference, Patinkin, chapter 15, pp.180-182 of GT, chapter 15, chapter 21
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation