Kakarot-Handtke, Egmont (2012): Keynes’s employment function and the gratuitous Phillips curve disaster.
Download (174kB) | Preview
Keynes had a lot of plausible things to say about unemployment and its causes. His ‘mercurial mind’, though, relied on intuition which means that he could not prove his diverse opinions convincingly. This explains why Keynes’s ideas immediately invited bastardizations. One of them, the Phillips curve synthesis, proved to be fatal. This paper identifies Keynes’s undifferentiated employment function as weak spot. The structural employment function, on the other hand, works in inflationary and deflationary environments and supersedes the bastard Phillips curve. It will be rigorously demonstrated why there is no trade-off between price inflation and unemployment.
|Item Type:||MPRA Paper|
|Original Title:||Keynes’s employment function and the gratuitous Phillips curve disaster|
|Keywords:||new framework of concepts; structure-centric; axiom set; Say’s regime; Keynes’s regime; market clearing; full employment; product price flexibility; intertemporal budget balancing; multiplier; trade-off; price inflation; wage inflation|
|Subjects:||E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
|Depositing User:||Egmont Kakarot-Handtke|
|Date Deposited:||06. Dec 2012 13:50|
|Last Modified:||19. Feb 2013 07:31|
Ackerman, F. (2004). Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory. In F. Ackerman, and A. Nadal (Eds.), The Flawed Foundations of General Equilibrium, pages 14–32. London, New York, NY: Routledge.
Akerlof, G. A., and Shiller, R. J. (2009). Animal Spirits. Princeton, NJ, Oxford: Princeton University Press.
Blanchard, O. (2000). Macroeconomics. Saddle River, NJ: Prentice Hall, 2nd edition.
Blanchard, O., and Katz, L. F. (1997). What We Know and Do Not Know About the Natural Rate of Unemployment. Journal of Economic Perspectives, 11(1): 51–72.
Bruno, M., and Easterly, W. (1996). Inflation and Growth: In Search of a Stable Relationship. Review Federal Reserve Bank of St. Louis, May/June: 1–8. URL http://research.stlouisfed.org/publications/review/96/05/9605mb.pdf.
Davidson, P. (2009). The Keynes Solution. The Path to Global Economic Prosperity. New York, NY: Palgrave Macmillan.
Farmelo, G. (2009). The Strangest Man. The Hidden Life of Paul Dirac, Quantum Genius. London: Faber and Faber.
Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.
Forder, J. (2010). Friedman’s Nobel Lecture and the Phillips Curve Myth. Journal of the History of Economic Thought, 32(3): 329–348.
Hahn, F. H., and Solow, R. M. (1997). A Critical Essay on Modern Macroeconomic Theory. Cambridge, MA, London: MIT Press.
Hall, R. E. (2011). The Long Slump. American Economic Review, 101(2): 431–469. URL http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.2.431.
Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.
Kakarot-Handtke, E. (2011). Keynes’s Missing Axioms. SSRN Working Paper Series, 1841408: 1–32. URL http://ssrn.com/abstract=1841408.
Kakarot-Handtke, E. (2012). The Rhetoric of Failure: A Hyper-Dialog About Method in Economics and How to Get Things Going. SSRN Working Paper Series, 2047177: 1–50. URL http://ssrn.com/abstract=2047177.
Kates, S. (1998). Say’s Law and the Keynesian Revolution. How Macroeconomic Theory Lost its Way. Cheltenham, Northampton, MA: Edward Elgar.
Keen, S. (2011). Debunking Economics. London, New York, NY: Zed Books, rev. edition.
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan. (1936).
Klant, J. J. (1994). The Nature of Economic Thought. Aldershot, Brookfield, VT: Edward Elgar.
Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected View of the Principles of Evidence and the Methods of Scientific Investigation, volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.
Ormerod, P. (1994). The Death of Economics. London: Faber and Faber.
Phillips, A. W. (1958). The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957. Economica, 25: 283–299. URL http://www.jstor.org/stable/2550759.
Quiggin, J. (2010). Zombie Economics. How Dead Ideas Still Walk Among Us. Princeton, NJ, Oxford: Princeton University Press.
Samuelson, P. A., and Nordhaus, W. D. (1998). Economics. Boston, MA, Burr Ridge, IL, etc.: Irwin, McGraw-Hill, 16th edition.
Skidelsky, R. (2009). Keynes. The Return of the Master. London: Allen Lane.
Stiglitz, J. E. (2010). Freefall. America, Free Markets, and the Sinking of the World Economy. New York, NY: Norton.