Re: Minsky, FIH, and stability

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center     974-4221
Dear Barkley: You are like a moving target, you never settle in one position
long enough to defend it.   If the real world in nonergodic, then, by definitio
n there can NOT be any rational expectations, since the latter requires the
ergodic axiom. You cannot defend nonlinearities as being realistic, and then ta
talk about "NK models get the same rreslut with full rational expectations but
with reasonable nonlinearities."
      Keynes's belief in the necessity for "socialization of investment" develo
ps from his long-run analysis of "TATDT974-3021 Properties of Interest and <one
y" of Chapter 17 of the GT. I don't think you will find any hint of nonlinearit
ies, coordination failures, etc in Chapter 17. What you will find is that
"the attribute of liquidity" requires (p. 241) and
 that given these essential properties "no further increase in the rate of
investment is possible" whether the equilibrum be a full employment one or not
(p.236). Thus if the free market will not increase the rate of investment when
the marginal efficiency ofall real assets are equal to the marginal efficiency
of the money asset ("whose own rate of interest is greatest") , there is a need
This equality of marginal efficiencies that Keynes is discussing indicates a
complete coordination of the investment and interest rate markets -- not a
lack of coordination!

Have a good day!