Clower's about-face regarding the 'Keynesian Revolution'

Plassard, Romain (2015): Clower's about-face regarding the 'Keynesian Revolution'.

Abstract

Robert W. Clower’s article “The Keynesian Counter-Revolution: A Theoretical Appraisal” (1965) deeply influenced the course of Keynesian macroeconomics by contributing to the transition from IS/LM macroeconomics to fix-price theories. Despite this influence, no scholar proposed to explain its origins, with the notable exception of Roger E. Backhouse and Mauro Boianovsky (2013). They explained that the 1965 piece was the result of an independent research program rooted in the works of Clower during the 1950s. My paper aims to offer an alternative explanation. It is synthesized in the metaphor of an about-face to stress that a theoretical break is at the origin of this contribution. This break, initiated in the early 1960s, is characterized by a double change in perspective (individual equilibrium vs. individual disequilibrium, and compatibility vs. incompatibility between Keynesian and Walrasian theories). The intellectual context, particularly Don Patinkin (1956; 1958), will be invoked to trace the roots of this about-face. Consequently, rather than independency and linearity, I argue that dependency and non-linearity are the two salient features of Clower’s intellectual path.

• Item Type: MPRA Paper
• Language: English
• Keywords: microfoundations of macroeconomics, disequilibrium theory, instability of the full employment equilibrium, Clower.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B21 - Microeconomics; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General

References

Archibald, G.C., and Richard, G. Lipsey. (1960). Monetary and Value Theory: A Critique of Lange and Patinkin, The Review of Economic Studies, 26(1), pp. 1-22.

Backhouse, R., and Mauro, Boianovsky. (2013). Transforming Modern Macroeconomics: Exploring Disequilibrium Microfoundations 1956-2003. Cambridge: Cambridge University Press.

Barro, R., and Herschel, I. Grossman. (1971). A General Disequilibrium Model of Income and Employment, American Economic Review, 61(1), pp. 82-93.

Burstein, ML., and Robert W. Clower. (1960). On the Invariance of Demand for Cash and Other Assets, The Review of Economic Studies, 28(1), pp. 32-36.

Bushaw, D.W., and Robert W. Clower. (1954b). Price Determination in a Stock-Flow Economy, Econometrica, 22(3), pp. 328-343.

Bushaw, D.W., and Robert W. Clower. (1957). Introduction to Mathematical Economics, Homewood: The Irwin Series in Economics.

Clower, R.W. (1952). Theories of capital accumulation with special reference to their ability to explain the experience of the U.S since 1870, Thesis submitted for the Degree of Doctor of Philosophy, Robert Clower papers, Box 1-2001-0088, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1952a). Mr. Graaff’s Producer-Consumer Theory: A Restatement and Correction, The Review of Economic Studies, 20(1), pp. 84-85.

Clower, R.W. (1952b). Professor Duesenberry and Traditional Theory, The Review of Economic Studies, 13(3), pp. 165-178.

Clower, R.W. (1953). Business Investment and the Theory of Prices, Proceedings of the Twenty-Eighth Annual Conference of the Western Economic Association, pp. 22-24.

Clower, R.W. (1954). Productivity, Thrift and the Rate of Interest, The Economic Journal, 64(253), pp. 107-115.

Clower, R.W. (1954a). An Investigation into the Dynamics of Investment, The American Economic Review, 44(1), pp. 64-81.

Clower, R.W. (1954i). On the Existence of a General Theory of Price Determination. Manuscript. Robert Clower papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1955). Toward a Generalized Theory of Price Determination. Manuscript. Robert Clower Papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1958?). On the Microdynamics of Price Formation in N-Seller Markets. Manuscript. Robert Clower Papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1958). A Study of Elementary Learning and Response Mechanism in Dynamical Monopoly Model. Manuscript. Robert Clower Papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1959). Inductive Inference and Business Behavior. Manuscript. Robert Clower Papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1959i). Some Theory of an Ignorant Monopolist, The Economic Journal, 69(276), pp. 705-716.

Clower, R.W. (1959ii). Stock and Flow Quantities: A Common Fallacy, Economica, 26, p. 251.

Clower, R.W. (1960?). Keynes and the Classics: A Reinterpretation. Manuscript. Robert Clower Papers, Box 4, David M. Rubenstein Rare Book and Manuscript Library, Duke University.

Clower, R.W. (1960). Keynes and the Classics: A Dynamical Perspective, The Quarterly Journal of Economics, 74(2), p. 318-323, Reprinted in Walker [1984], pp. 21-26.

Clower, R.W. (1965). The Keynesian Counter-Revolution: A Theoretical Appraisal, In Walker [1984], pp. 34-58. Clower, R.W. (1984). Afterword, In Walker [1984], pp. 259-272.

Clower, R.W. (1995). Economic Doctrine and Method: Selected Papers of R.W Clower, London: Edward Elgar.

De Vroey, M. (1999a). The Marshallian Market and the Walrasian Economy: Two Incompatible Bedfellows, Scottish Journal of Political Economy, 46, pp. 319-338.

Duarte P.G., and Gilberto T, Lima. (2012). Microfoundations Reconsidered: The Relationship of Micro and Macroeconomics in Historical Perspective. Cheltenham: Edward Elgar Publishing Limited.

Duesenberry, J.S (1949). Income, Saving and the Theory of Consumer Behavior. Cambridge, MA: Harvard University Press.

Graaff, Von De J. (1950). Income Effects and the Theory of the Firm, Review of Economic Studies, 23(2), pp. 79-86.

Harrod, R.F. (1939). An Essay in Dynamic Theory, Economic Journal, 49(193), pp. 14-33.

Gondolfo, G. (2010). Economic Dynamics. 4th edition. Springer.

Hahn F.H., and Takashi Negishi (1962). A Theorem on Non-Tâtonnement Stability Econometrica, 30(3), pp. 463-469.

Hicks, J. R. ([1939] 1946). Value and Capital, an inquiry into some Fundamental Principles of Economic Theory. 2nd ed. Oxford: Clarendon Press.

Hicks, J. R. (1950). A Contribution to the Theory of the Trade Cycle. Oxford: Clarendon Press.

Hoover, K. D. (2012). Microfoundational Programs, In Duarte and Lima [2012], pp. 19-61.

Hurwicz, L. (1946). Theory of the Firm and Investment, Econometrica, 14, pp. 109-136.

Keynes, J. M. ([1936] 2007) The General Theory of Employment, Interest and Money. New York: Palgrave Macmillan.

Lange, O. (1944). Price Flexibility and Employment. Cowles Commission for Research in Economics Monograph no. 8. San Antonio: Principia Press Trinity University.

Marcuzzo, M. C. (2012). Fighting Market Failure Collected Essays in the Cambridge Tradition of Economics. Routledge Studies in the History of Economics.

Modigliani, F. (1944). Liquidity Preference and the Theory of Interest and Money, Econometrica, 12(1), pp. 48-88.

Negishi, T. (1961). Monopolistic Competition and General Equilibrium The Review of Economic Studies, 28(3), pp.196-201.

Patinkin, D. (1956). Money, Interest and Prices. Evanston: Row Peterson.

Patinkin, D. (1959). Reply to R.W Clower and H. Rose, Economica, 26, pp. 253-255.

Patinkin, D. (1958). Liquidity Preference and Loanable Funds: Stocks and Flow Analysis, Econometrica, 59, pp. 1-27.

Plassard, R. (2015). The origins, development, and fate of Clower’s ‘stock-flow’ general-equilibrium program of microfoundations. Working paper.

Rubin, G. (2002). From Equilibrium to Disequilibrium: the Genesis of Don Patinkin’s interpretation of the Keynesian Theory, The European Journal for the History of Economic Thought, 9(2), pp. 205-225.

Rubin, G. (2005). La controverse entre Clower et Patinkin au sujet de la validité de la loi de Walras, Revue Economique, 56, pp.4-24.

Samuelson, P.A. (1947). Foundations of Economic Analysis. New York: Atheneum.

Triffin, R. (1940). Monopolistic Competition and General Equilibrium Theory. Cambridge: Harvard University Press.

Walker, D.A. (1984). Money and Markets: Essays in Honor of Robert W. Clower. Cambridge: Cambridge University Press.

Weintraub, E.R. (1979). Microfoundations: the compatibility of Microeconomics and Macroeconomics. Cambridge: Cambridge University Press.