Comparing and Contrasting Keynes’s Verbal, Literary, English Prose Version of His Is-Lm(lp) Model in Chapter 18 of the General Theory With His Mathematical Version of Is-Lm(lp) in Chapter 21 of the General Theory

Abstract

Keynes provided two versions of his IS-LM(LP) model in the General Theory. The first version was the verbal, English, literary, prose version contained in chapter 18 of the General Theory. This version was targeted for economists, such as Joan Robinson and Dennis Robertson, who could not grasp a mathematical presentation using a set of simultaneous linear equations due to their lack of basic mathematics. The second version was a mathematical version provided in chapter 21 in sections IV through VI. The mathematical version has been completely overlooked by all economists since 1936. A possible reason for the economics profession’s failure to grasp Keynes’s IS-LM model since 1936 is based on a group think approach that is combined with cognitive dissonance. This explanation centers on a “true believer” approach that, since Joan Robinson, Austin Robinson, and Richard Kahn actually worked with J M Keynes on the writing the General Theory, their claim, that there is no IS-LM model in the General Theory, must be true.

Keywords: IS-LM, IS-LP(LM), J. Robinson, R. Kahn, Keynes, mathematical illiteracy, A. Robinson, Y=C+I, D-Z model

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