Hicks Never Generalized Keynes's General Theory with IS-LM Because Keynes had Already Done so in Chapter 21 of the General Theory
24 Pages Posted: 25 Feb 2018 Last revised: 19 Mar 2018
Date Written: February 13, 2018
The belief that Hicks generalized Keynes’s General Theory with his IS-LM model is contradicted by Keynes’s own, explicit IS-LP(LM) model that was presented in Chapter 21 of the GT. This erroneous belief is based on a misreading of Chapter 13 of the General Theory that only considers Keynes’s initial M=L(r) model on page 168 while ignoring Keynes’s own generalization on page 199 of Chapter 15 where M=M1 plus M2=L1(Y) plus L2 (r) =L.
Keynes’s applications in Section IV of Chapter 15 on pp. 208-209 and Section IV of Chapter 21 on pp. 298-299 of the General Theory clearly demonstrated that his analysis required the use of (r,Y) space and not (r; Dm, Sm) space. The correct way of describing the history of the development of IS –LM is as Keynes-Hicks-Hansen and not as Hicks-Hansen.
Keywords: IS-LM, IS-LP(LM), Reddaway, Champernowne, Keynes Chapter 21, Chapter 15, Keynes's Views of Math
JEL Classification: B10, B12, B14, B16, B20, B22
Suggested Citation: Suggested Citation