The Irreconcilable Inconsistencies of Neoclassical Macroeconomics: A False Paradigm (Routledge Frontiers of Political Economy)

The Irreconcilable Inconsistencies of Neoclassical Macroeconomics: A False Paradigm (Routledge Frontiers of Political Economy)

John Weeks

Language: English

Pages: 330

ISBN: 1138799157

Format: PDF / Kindle (mobi) / ePub


In the course of this book it is argued that the loss of what is essentially "macro" in Keynes is the result of a preference for a form of equilibrium analysis that gives unqualified support to the ideology of free markets. In the case of Marx, his theory of exploitation and from this the stress on class struggle, led to an almost complete neglect of his contribution to the analysis of the aggregate demand and supply of commodities.

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Fundamental Institutions of Capitalism Ernesto Screpanti   35 Transcending Transaction The search for self-­generating markets Alan Shipman   36 Power in Business and the State An historical analysis of its concentration Frank Bealey   37 Editing Economics Essays in honour of Mark Perlman Edited by Hank Lim, Ungsuh K. Park and Geoff Harcourt   38 Money, Macroeconomics and Keynes Essays in honour of Victoria Chick, volume one Edited by Philip Arestis, Meghnad Desai and Sheila Dow   39

effect of investment. The analysis can restrict itself to savings alone, and frequently does. Omitting reference to investment makes the model considerably more comprehensible for it eliminates at least two nagging contradictions: how two different categories of expenditure, consumption and investment, could relate to the same commodity, and how a system could be in equilibrium with unchanging aggregate demand but expanding capacity. The diagram reveals another characteristic of the model. It is

complexities of reality conceal. If it is the case that an increase in employment must be bought at lower wages, then the model is powerful indeed. Paul Samuelson offered an analogy from physics to justify such counterintuitive conclusions. An object dropped from any height within the earth’s gravitation pull accelerates at 32 feet per second. This general property of the earth’s gravity refers to conditions in a perfect vacuum. Any actual falling body will accelerate slower, due to air

percent, then the aggregate value of bonds is one hundred billion dollars. If all bonds and all money were outside, then aggregate wealth, Q, is [M* + B*/r]. Real wealth is q = Q/p. The impact of q on the various variables in the model is the wealth effect, or Pigou effect. This new variable, q, is introduced into all relevant functional relationships, saving, investment, the demand for money and the demand for bonds. Further, the interest rate is included as a determinant of saving. To keep

valuation problem. Among the least read parts of The General Theory are the passages that grapple with the problem of valuing aggregate output in monetary and in price-­ independent terms. The lack of attention to Keynes’s discussion of the aggregation and valuation problem is in contrast to his own statements. Early in The General Theory he writes that proper choice of units to measure his aggregate concepts was one of the “three perplexities which most impeded my process” (Keynes 1936, 37).

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