A Study of How Economists Completely Overlooked and Misunderstood Keynes's Statements that '… If We Have All the Facts Before Us, We Shall Have Enough Simultaneous Equations to Give Us a Determinate Result.' on Page 299 and 'The Quantitative Effect Could Be Derived from the Three Elements' on Page 298 of the GT
31 Pages Posted: 2 Nov 2017 Last revised: 21 Nov 2017
Date Written: November 1, 2017
Economists since 1936 have been unable to understand or comprehend Keynes’s clear statements in chapter 21 that ”… if we have all the facts before us, we shall have enough simultaneous equations to give us a determinate result” on p.299 of the General Theory and Keynes’s statement that “the quantitative effect could be derived from the three elements” on page 298 of the General Theory. This failure to grasp that Keynes is analyzing his IS-LP(LM) model in chapter 21, as he said he would do in greater detail than he did in section 4 of Chapter 15, has led to the false conclusion for the last 81 years that there was no IS-LP(LM) analysis provided by Keynes in the General Theory, when in fact this analysis is central to the entire General theory.
No economist in the 20th or 21st century, who has written on Keynes’s GT, has demonstrated any inkling about what Keynes was doing in chapter 21 of the GT. We can now understand R. Kahn’s efforts, in his 1978 JEL paper and his 1984 book, in attempting to divert his readers attention away from chapter 21 of the GT. Chapter 21 provides a reader of the GT with an answer to the question, “What did Keynes really mean in the GT.”
The answer is his IS-LP(LM) model incorporating uncertainty as a shift parameter in the model. Only Champernowne (1936) was able to see the connection between IS-LM and Keynes’s conception of uncertainty.
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