RE: GT and microfoundations

[mongiovg@xxxxxxxxxxx (Mongiovi Gary)]

John:

I reviewed the Keppler book for The Manchester School (1995, pp.443-445).
   Keppler argues that Keynes missed an opportunity to put the theory of
effective demand on sound microfoundations:  "monopolistic competition,"
Keppler contends, "is ultimately the only microeconomic theory fully
compatible with Keynesian macroeconomics."  Not surprisingly, Keppler is
highly sympathetic to New Keynesian theory.  This in fact is what I think
is wrong with Keppler's view:  the theory of monopolistic competition leads
to New Keynesian economics - which is not where I think Keynes wanted to
go.

Keppler tries to make the case that monopolistic competition was somehow a
revolutionary break from Marshallian orthodoxy, when, on the contrary, it
was a rather clumsy attempt to rescue Marshall from Sraffa's 1925-26
critique.  Keynes's theory, though, IS revolutionary, that is,
fundamentally incompatible with orthodoxy.  But you can't preserve the
revolutionary character of the GT by trying to ground it in a a variation
of the orthodox theory of value.  What you'll end up with is New
Keynesianism, which is neither new nor Keynesian.


That, anyway, was the gist of one part of my review. I'd look to Marx or
Sraffa for Keynes's "microfoundations".

Ciao.

Gary M.



-----Original Message-----
From:	John M. Legge [SMTP:jlegge@xxxxxxxxxx]
Sent:	Saturday, January 29, 2000 11:07 PM
To:	POST-KEYNESIAN THOUGHT
Subject:	GT and microfoundations

I have just completed reading Keppler's Monopolistic Competition Theory in
which the author traces the development of monopolistic competition theory
from Sraffa's 1926 epitaph for perfect competition to Stigler's and
Friedman's unchallenged rejection of monopolistic competition on
essentially
ideological grounds in the 1950s.

Keppler makes the point that many of the Cambridge people behind the
original developmnet of monopolistic competition theory were also
associates
of Keynes, and refocussed their efforts on macroeconomics after the
pubklication of the GT, leaving Chamberlin to battle the University of
Chicago on his own.

On page 189 Keppler writes:
...although Keynesianism is still very much alive (albeit on the defense),
it will continue to lack microfoundations as long as monopolistic
compeittion is not taken into account.  Some research in this field is
still
active...

Is this a fair statement of the position?

JML