Keynes’s missing axioms

Kakarot-Handtke, Egmont (2011): Keynes’s missing axioms.

Abstract

Between Keynes’s verbalized theory and its formal basis persists a lacuna. The conceptual groundwork is too small and not general. The quest for a comprehensive formal basis is guided by the question: what is the minimum set of foundational propositions for a consistent reconstruction of the money economy? We start with three structural axioms. The claim of generality entails that it should be possible to prove that Keynes’s formalism is a subset of the structural axiom set. The axioms are applied to a central part of the General Theory in order to achieve consistency and generality.

• Item Type: MPRA Paper
• Language: English
• Keywords: New framework of concept; Structure-centric; Axiom set; Full employment; Intermediate situation; Emergent money; Singularity; System immanent risk; Distributed profit; Saving; Investment; Allais-Identity
• 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 > E25 - Aggregate Factor Income Distribution; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; 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; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology

References

Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris: Presses Universitaires de France, 2nd edition.

Boland, L. A. (2003). The Foundations of Economic Method. A Popperian Perspective. London, New York, NY: Routledge, 2nd edition.

Boulding, K. (1950). A Reconstruction of Economics. New York, NY: Science Editions.

Boylan, T. A., and O’Gorman, P. F. (2007). Axiomatization and Formalism in Economics. Journal of Economic Surveys, 21(2): 426–446.

Buiter, W. H. (1980). Walras’ Law and All That: Budget Constraints and Balance Sheet Constraints in Period Models and Continuous Time Models. International Economic Review, 21(1): 1–16. URL http://www.jstor.org/stable/2526236.

Chick, V. (1998). On Knowing One’s Place: The Role of Formalism in Economics. Economic Journal, 108(451): 1859–1869. URL http://www.jstor.org/stable/2565849.

Coddington, A. (1976). Keynesian Economics: The Search for First Principles. Journal of Economic Literature, 14(4): 1258–1273. URL http://www.jstor.org/ stable/2722548.

Davidson, P. (1996). Reality and Economic Theory. Journal of Post Keynesian Economics, 18(4): 479–508. URL http://www.jstor.org/stable/4538504.

Davidson, P. (1998). Reviving Keynes’s Revolution. In D. L. Prychitko (Ed.), Why Economists Disagree, pages 68–82. Albany, NY: State University of New York Press.

Davidson, P. (2002). Financial Markets, Money and the Real World. Cheltenham, Northampton, MA: Edward Elgar.

Davidson, P. (2005). Responses to Lavoie, King, and Dow on What Post Keynesianism Is and Who Is a Post Keynesian. Journal of Post Keynesian Economics, 27(3): 393–408. URL http://www.jstor.org/stable/4538934.

Debreu, G. (1959). Theory of Value. An Axiomatic Analysis of Economic Equilibrium. New Haven, London: Yale University Press.

Dennis, K. (1982). Economic Theory and the Problem of Translation (I). Journal of Economic Issues, 16(3): 691–712. URL http://www.jstor.org/stable/4225211.

Desai, M. (1989). Endogenous and Exogenous Money. In J. Eatwell, M. Milgate, and P. Newman (Eds.), Money, The New Palgrave, pages 146–150. London, Basingstoke: Macmillan.

Desai, M. (2008). Profit and Profit Theory. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online, pages 1–11. Palgrave Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=pde2008_P000213.

Dillard, D. (2010). The Theory of a Monetary Economy. In K. K. Kurihara (Ed.), Post Keynesian Economics, pages 3–30. London, New York, NY: Routledge. (1955).

Eisner, R. (1995). US National Saving and Budget Deficits. In G. A. Epstein, and H. M. Gintis (Eds.), Macroeconomic Policy After the Conservative Era, pages 109–142. Cambridge: Cambridge University Press.

Ellerman, D. P. (1986). Property Appropriation and Economic Theory. In P. Mirowski (Ed.), The Reconstruction of Economic Theory, pages 41–92. Boston, MA, Dordrecht, Lancaster: Kluwer-Nijhoff.

Föllmer, H. (1974). Random Economies with Many Interacting Agents. Journal of Mathematical Economics, 1: 51–62.

Georgescu-Roegen, N. (1970). The Economics of Production. American Economic Review, Papers and Proceedings, 60(2): 1–9. URL http://www.jstor.org/stable/1815777.

Godley, W., and Lavoie, M. (2007). Monetary Economics. An Integrated Approach to Credit, Money, Income and Wealth. Houndmills, Basingstoke, New York, NY: Palgrave Macmillan.

Godley, W., and Shaikh, A. (2002). An Important Inconsistency at the Heart of the Macroeconomic Model. Journal of Post Keynesian Economics, 24(3): 423–441. URL http://www.jstor.org/stable/4538786.

Gordon, D. M. (1995). Putting the Horse (Back) Before the Cart: Disentangling the Macro Relationship Between Investment and Saving. In G. A. Epstein, and H. M. Gintis (Eds.), Marcoeconomic Policy After the Conservative Era, pages 57–108. Cambridge: Cambridge University Press.

Graziani, A. (1996). Money as Purchasing Power and Money as a Stock of Wealth in Keynesian Economic Thought. In G. Deleplace, and E. J. Nell (Eds.), Money in Motion, pages 139–154. Houndmills, Basingstoke, London: Macmillan.

Hahn, F. H. (1980). General Equilibrium Theory. Public Interest. Special Issue: The Crisis in Economic Theory, pages 123–138.

Hahn, F. H. (1982). Money and Inflation. Oxford: Blackwell.

Hahn, F. H. (1984). Equilibrium and Macroeconomics. Cambridge, MA: MIT Press.

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.

Halévy, E. (1960). The Growth of Philosophic Radicalism. Boston, MA: Beacon Press.

Heilbroner, R., and Milberg, W. (1995). The Crisis of Vision of Modern Economic Thought. Cambridge, New York, NY, Melbourne: Cambridge University Press.

Heilbroner, R. L. (1942). Saving and Investments: Dynamic Aspects. American Economic Review, 32(4): 827–828. URL http://www.jstor.org/stable/1816763.

Hicks, J. R. (1939). Value and Capital. Oxford: Clarendon Press, 2nd edition.

Hollander, S. (1977). Adam Smith and the Self-Interest Axiom. Journal of Law and Economics, 20(1): 133–152. URL http://www.jstor.org/stable/725090.

Hudík, M. (2011). Why Economics is Not a Science of Behaviour. Journal of Economic Methodology, 18(2): 147–162.

Jevons, W. S. (1911). The Theory of Political Economy. London, Bombay, etc.: Macmillan, 4th edition.

Kakarot-Handtke, E. (2011a). Primary and Secondary Markets. SSRN Working Paper Series, 1917012: 1–25. URL http://ssrn.com/abstract=1917012.

Kakarot-Handtke, E. (2011b). The Propensity Function as General Formalization of Economic Man/Woman. SSRN Working Paper Series, 1942202: 1–28. URL http://ssrn.com/abstract=1942202.

Kakarot-Handtke, E. (2011c). Properties of an Economy Without Human Beings. SSRN Working Paper Series, 1863788: 1–23. URL http://ssrn.com/abstract=1863788.

Kakarot-Handtke, E. (2011d). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–25. URL http://ssrn.com/abstract=1838203.

Kakarot-Handtke, E. (2011e). Reconstructing the Quantity Theory (I). SSRN Working Paper Series, 1895268: 1–26. URL http://ssrn.com/abstract=1895268.

Kakarot-Handtke, E. (2011f). Squaring the Investment Cycle. SSRN Working Paper Series, 1911796: 1–25. URL http://ssrn.com/abstract=1911796.

Kakarot-Handtke, E. (2011g). Unemployment Out of Nowhere. SSRN Working Paper Series, 1885544: 1–22. URL http://ssrn.com/abstract=1885544.

Kakarot-Handtke, E. (2012). Income Distribution, Profit, and Real Shares. SSRN Working Paper Series, 2012793: 1–13. URL http://ssrn.com/abstract=2012793.

Kaldor, N. (1985). Economics Without Equilibrium. Armonk, NY: M.E. Sharpe.

Kaldor, N. (1988). The Role of Effective Demand in the Short Run and the Long Run. In A. Barrère (Ed.), The Foundations of Keynesian Analysis, pages 153–160. Houndmills, London: Macmillan.

Kalecki, M. (1987). Bestimmungsgrößen der Profite. In Krise und Prosperität im Kapitalismus, pages 133–147. Marburg: Metropolis.

Keynes, J. M. (1971). A Treatise on Money. The Pure Theory of Money. The Collected Writings of John Maynard Keynes Vol. V. London, Basingstoke: Macmillan.

Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.

Klant, J. J. (1984). The Rules of the Game. Cambridge, London, etc.: Cambridge University Press.

Knight, F. H. (2006). Risk, Uncertainty and Profit. Mineola, NY: Dover.

Kreuzenkamp, H. A., and McAleer, M. (1995). Simplicity, Scientific Inference and Econometric Modeling. Economic Journal, 105: 1–21. URL http://www.jstor.org/stable/2235317.

Laidler, D. (1999). Fabricating the Keynesian Revolution. Cambridge: Cambridge University Press.

Lavoie, M. (1992). Foundations of Post-Keynesian Economics. Cheltenham: Edward Elgar.

Leijonhufvud, A. (1967). Keynes and the Keynesians: A Suggested Interpretation. American Economic Review, 57(2): 401–410. URL http://www.jstor.org/stable/1821641.

Leijonhufvud, A. (2009). Out of the Corridor: Keynes and the Crisis. Cambridge Journal of Economics, 33: 741–757.

Lerner, A. P. (1938). Saving Equals Investment. Quarterly Journal of Economics, 52: 297–309. URL http://www.jstor.org/stable/1881736.

Levy, S. J., and Levy, D. A. (1983). Profits and the Future of the American Society. Cambridge, Philadelphia, etc.: Harper and Row.

Lutz, F. A. (1938). The Outcome of the Saving-Investment-Discussion. Quarterly Journal of Economics, 52: 588–614. URL http://www.jstor.org/stable/1885035.

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.

Myrdal, G. (1939). Monetary Equilibrium. London, Edinburgh, Glasgow: William Hodge.

Nell, E. J. (1991). The Quantity Theory and the Mark-Up Equation. In I. H. Rima (Ed.), The Joan Robinson Legacy, pages 185–194. Armonk, NY, London: M.E. Sharpe.

O’Donnell, R. (1997). Keynes and Formalism. In G. C. Harcourt, and P. A. Riach (Eds.), A ’Second Edition’ of The General Theory, volume 2, pages 131–165. Oxon: Routledge.

Ohlin, B. (1937). Some Notes on the Stockholm Theory of Savings and Investment I. Economic Journal, 47(185): 53–69. URL http://www.jstor.org/stable/2225278.

Ormerod, P. (1994). The Death of Economics. London: Faber and Faber.

Patinkin, D. (1989a). Neutrality of Money. In J. Eatwell, M. Milgate, and P. Newman (Eds.), Money, The New Palgrave, pages 273–287. London, Basingstoke: Macmillan.

Patinkin, D. (1989b). Walras’s Law. In J. Eatwell, M. Milgate, and P. Newman (Eds.), General Equilibrium, The New Palgrave, pages 328–339. New York, NY, London: Macmillan.

Popper, K. R. (1980). The Logic of Scientific Discovery. London, Melbourne, Sydney: Hutchison, 10th edition.

Robbins, L. (1935). An Essay on the Nature and Significance of Economic Science. London, Bombay, etc.: Macmillan, 2nd edition.

Robinson, J. (1956). The Accumulation of Capital. London: Macmillan.

Rosenberg, A. (1980). Sociobiology and the Preemption of Social Science. Oxford: Blackwell.

Rotheim, R. J. (1981). Keynes’ Monetary Theory of Value (1933). Journal of Post Keynesian Economics, 3(4): 568–585. URL http://www.jstor.org/stable/4537623.

Samuelson, P. A., and Nordhaus, W. D. (1998). Economics. Boston, MA, Burr Ridge, IL, etc.: Irwin, McGraw-Hill, 16th edition.

Schmiechen, M. (2009). Newton’s Principia and Related ‘Principles’ Revisted, volume 1. Norderstedt: Books on Demand, 2nd edition.

Schmitt, B. (1996). A New Paradigm for the Determination of Money Prices. In G. Deleplace, and E. J. Nell (Eds.), Money in Motion, pages 104–138. Houndmills, Basingstoke, London: Macmillan.

Schumpeter, J. A. (2008). The Theory of Economic Development. An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. New Brunswick, NJ, London: Transaction Publishers. (1934).

Shaik, A. (1980). Laws of Production and Laws of Algebra: Humbug II. In E. J. Nell (Ed.), Growth, Profits, and Property, pages 80–95. Cambridge, New York, NY, Melbourne: Cambridge University Press.

Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.

Tómasson, G., and Bezemer, D. J. (2010). What is the Source of Profit and Interest? A Classical Conundrum Reconsidered. MPRA Paper, 20557: 1–34. URL http://mpra.ub.uni-muenchen.de/20557/.

Tobin, J. (1997). An Overview of the General Theory. In G. C. Harcourt, and P. A. Riach (Eds.), The ’Second Edition’ of The General Theory, volume 2, pages 3–27. Oxon: Routledge.

von Neumann, J., and Morgenstern, O. (2007). Theory of Games and Economic Behavior. Princeton: Princeton University Press. (1944).

Weintraub, S. (1978). The Missing Theory of Money Wages. Journal of Post Keynesian Economics, 1(2): 59–78. URL http://www.jstor.org/stable/4537470.

Wicksell, K. (1936). Interest and Prices. London: Macmillan.