gross substitution

["William B. Ryan" <william_b_ryan@xxxxxxxxxxx>]

Paul Davidson writes:
http://csf.colorado.edu/mail/pkt/spring99/msg00197.html

"If anyone had read my Post Keynesian Macroeconomic Theory book, they
would know that to reach his GENERAL THEORY, Keynes had to remove
three restrictive classical axioms: The ergodic axiom, the neutral
money axiom, and the gross substitution axiom...It follows from the
gross substitution axiom alone that observed unemployment is because
the money wage is fixed rather than flexible.  It also follows...that
if all exchange rates were flexible there can NEVER be a balance of
payments problem and there will always be global full employment."

Professor Davidson:

It seems to me that rejecting the gross substitution axiom is by
itself sufficient to invalidate Say's Law.

Then why is it also necessary to reject the ergodic axiom, which many
philosophers say is the very basis of the scientific method?

This aspect of your theory is what many of us find so difficult to
accept.

Bill Ryan: http://www.geocities.com/CapitolHill/Senate/7018





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