Re: New vs. Post Keynesians

[Jim Devine <JNDF%LMUACAD.BITNET@xxxxxxxxxxxxxxxxx>]

Gee, what a patronizing response from Professor Davidson! I'll try not
to respond in kind.

(1) I wasn't talking about the relative speed of adjustment of prices
versus quantities (as Leijonhufvud was originally).  I was simply
talking about the possibility of a quantity-constrained market.

(2) I wasn't talking about "what Kenynes (really) said," but rather
to issues of economic theory -- such as the idea of a quantity-
constrained markets -- that may actually help us understand what
is happening in the world.  I'm sorry, but I have a low tolerance
for appeals to authority as a mode of argumentation. Give me
empirical references ("facts"), logical deduction, or methodological
philosophy anyday, but authorities are often wrong or subject to
interpretation or right only in specific contexts.

(3) I wasn't trying to hang one empirically relevant assumption
(either dP/dt < dq/dt or the possibility of quantity-constrained
markets) onto "classical microfoundations" in order to explain
involuntary unemployment. I thought I made it explicit that such
matters should be seen as part of a larger tapestry of non-
Walrasian, non-classical assumptions in order to construct
non-Walrasian, non-classical macroeconomics.  Indeed, my goal
is to build neo-Marxian macro, incorporating some (new and
post) Keynesian economics to fill gaps.  (BTW, I am equally
impatient with appeals to Marx's authority.)

As I said before, I see nothing wrong with _ad hoc_ assumptions
as long as they are moving in the direction of empirical reality.
Whether an assumption is _ad hoc_ or not depends on one's
initial theory, while an _ad hoc_ assumption in one theory
might be taken by another theory in a non-_ad hoc_ way.

(4) I totally agree with the assertion (whether from Professor
Davidson or from J.M. Keynes) that the marginal physical product
of labor curve is not a demand curve (if the former even exists).
(I'd draw the demand for labor-power curve as vertical in the
short run and find longer-term MPP of L curves as irrelevant.)
I also agree totally with the idea that we live in a monetary
economy (I think M-C-M' is  a good description of  the way
capitalism works, where M = money laid out, C is commodities
purchased and transformed, and M' is the initial M plus
surplus-value in monetary form, assuming that effective
demand is sufficient, so that dM > 0).

However, for some limited purposes, it is sometimes reasonable
to make the assumption that the MPP of labor-power curve is
a demand curve and that we live in a non-monetary economy,
even though to my mind, these assumptions are totally
unrealistic.  It is very important, however, to make it
clear that one is making such assumptions.  (BTW, I like
to state assumptions as simplifications of empirical
reality rather than as additions to some existing logical-
deductive system such as the Walrasian system.)

(5)I think that the Patinkin business of the difference
between effective and notional demands for labor-power
(again using Clower's terminology)
helps clarify *one reason* why the MPP of labor curve is
not a demand for labor-power curve.  To my mind, for this
formulation to actually work, one has to recognize that
we live in a monetary economy. (I would add other reasons
why the MPP of L curve is not the demand for labor-power
curve, such as the fallacy of composition.)

(6) In addition, we also have to recognize that we live in
a class society.  That's something that Keynes and many or most
Keynesians miss, with their view that almost all of the relevant
conflicts are "horizontal", i.e., within the capitalist class
(i.e., Keynes' rentiers vs. industrial capitalists conflict) or
within the working class (unionized vs. non-unionized workers,
etc.) I also find  most Keynesians dreadfully unaware that we
live in a dynamic economy.  Present company excepted, of course?

question authority!

Jim Devine   BITNET: jndf@lmuacad    INTERNET: jdevine@xxxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950