Re: Bruno Ventelou responds to Peter Dorman

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

      Just for the record, Keynes most certainly
knew about multiple equilibria, although I think
that he viewed them as rare and mostly
unimportant, an important distinction.  The
possibility of multiple equilibria was first
recognized by van Mangoldt in 1863.  Both
Marshall and Walras were aware of the possibility
in the 1870s.
      I would note that all of their examples involved
backward-bending supply curves (or "forward-falling"
in the case of Walras, who reversed the price and
quantity axes from the Marshallian standard).  Such
things certainly exist in the real economy, btw.  The
whole discussion of the role of gross substitutability
is for pure exchange models where there is no production
but only given endowments of goods that are then traded.
      Keynes recognized the possibility of multiple
macro equilibria in a few scattered places in the GT.  But
one has to do some stretching to make the interpretation,
and his have nothing to do with either of the above, but more
with funny expectational effects, arguably not "true" equilibria
(but then lots of anti-Keynesians dismiss his work because
it supposedly does not reflect "true equilibria").  One such
case for Keynes may be on p. 191 of the GT in his discussion
of Ricardo's theory of interest.
Barkley Rosser

-----Original Message-----
From: Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Date: Wednesday, April 14, 1999 9:41 PM
Subject: Bruno Ventelou responds to Peter Dorman


>I translate Bruno Ventelou's note to me and include the
>original French.   I don't really want to be his
>interlocutor on this group, but I do want to bring his
>work to the attention of the PKT discussion group, so
>here it is, by way of publicity.  Please note, folks
>that this is in theory an *introductory intellectual
>history* of what came before Keynes, Keynes, and many
>strands of thinking that followed, so I find myself
>rather bemused by the heavy intellectual apparatus
>brought to bear on the translation of "substitutabilite
>brute."  --gn
>
>Here's le Professeur Ventelou:
>
>Gross substitutability is the correct term, used in
>micro textbooks.  The notion of multiple equilibria,
>based on very orthodox arguments, seems to me necessary
>to present in this part of the book.  The most orthodox
>references to Keynes refer to it,  showing that
>wherever there are multiple equilibria, it is possible
>for the government to intervene to move market actors
>to the "right equilibrium."  This is not necessary for
>Keynesian policy in the strict sense of the term, but
>it suffices to show that even orthodox economics does
>not exclude public intervention.  I chose Wald because
>he published in 1933!  But Arrow et al are better known
>for their equivalent, and better stated, results.
>
>The notion of subsequent (posterieurs) multiple
>equilibria, including the most heterodox ones based on
>non-participation in exchange, are very interesting,
>and very useful in interpreting Keynes in the largest
>sense of the term.  BUT,
>
>1.  Keynes didn't know about them;
>2.  They are less convincing, for orthodox readers,
>than arguments coming from orthodox theory.
>
>Nonetheless, Peter Dorman is right.  I should take up
>better this second, more expansive reinterpretation of
>multiple equilibria.  I tried to do that in Chapter 5
>of the 1997 version of Lire Keynes et le Comprendre,
>but at the time I didn't understand the question
>well.   I'm much more comfortable with it now.  I
>intend to take it up in the second French edition, and
>naturally with you [Greg Nowell], in the English
>translation.
>
>--BV.
>
>
>
>Après lectures des débats :
>
>"Gross substituability" est le bon terme (celui utilisé
>dans les manuels de
>microéco)
>
>La notion d'équilibres multiples (celle basées sur ces
>seuls arguments très
>orthodoxes) me paraît nécessaire à présenter dans cette
>partie. Les lectures
>de Keynes (les plus orthodoxes) y font référence, en
>montrant que là où il y
>a équilibres multiples, il y a possibilité pour le
>gouvernement d'intervenir
>pour orienter les agents sur le "bon équilibre". Il ne
>s'agit pas
>nécessairement d'une politique keynésienne au sens
>stricte du terme, mais
>cela suffit à montrer que l'économie même orthodoxe
>n'exclut pas
>l'intervention publique. Wald est choisi pour sa date
>1933!!! C'est Arrow,
>et al qui sont connu pour leurs résultats équivalents
>(mais mieux dits).
>
>Les notions d'équilibres multiples postérieures
>(celles, plus hétérodoxes,
>basée sur la non participation à l'échange) sont très
>intéressantes, et
>utile pour réinterpréter Keynes d'une manière très
>large. MAIS
>1 Keynes n'a pas pu en avoir connaissance
>2 elles sont moins convainquantes (pour les orthodoxes)
>que des arguments en
>provenance directe du corpus orthodoxe...
>Néanmoins P Dorman a raison, il faudrait que j'aborde
>mieux cette deuxième
>réinterprétation large de Keynes par les équilibres
>multiples (dans le
>chapitre 5 de la version 97 de LKC, je m'y essaye mais
>à l'époque je
>connaissait mal cette question. Aujourd'hui je me sens
>plus à l'aise. Je le
>ferai donc prochainement, à la fois pour une seconde
>édition française, et
>bien sûr avec toi pour une traduction en anglais).
>
>--
>Gregory P. Nowell
>Associate Professor
>Department of Political Science, Milne 100
>State University of New York
>135 Western Ave.
>Albany, New York 12222
>
>Fax 518-442-5298
>
>
>