Re: Monetary production versus monetary exchange economies

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

[Quoth I]
>> In any event, it is now much more clear why you promote such
>> gross misreadings of the General Theory.  You enter into it
>> sharing important premises with the Washington Consensus, which
>> are in fact premises that the General Theory disputes, and
>> on importing those premises, the result is far closer to the
>> Washington Consensus and far further from logical coherence
>> than the General Theory itself is.

>I am not sure I understand your point.

>If you are referring to my reference to the cæteris paribus notion
>that an increase/decrease in the supply of money will be associated
>with a decrease/increase in the rate of interest, then the explicit
>thrust of my argument was that this veritable cornerstone of The
>Washington Consensus is part and parcel of Post Keynesian Monetary
>Theory 101.

But of course in the Washington Consensus, money is exogeneous
(excpet when studying financial institutions, which is carefully
segregated), not partly or wholly endogenous as you will learn
in Post Keynesian Monetary Theory 101 (depending on whom you take
it from), and the increase in interest rates is, AS POINTED OUT
IN THE QUOTE BY KEYNES', due simply to the refusal of the monetary
authority to cooperate with the fiscal policy.  The question of
whether that is normally a failure of the monetary authority, as
you will learn in your PKMT101, or what the monetary authority
ought to normally be doing, as the Washington Consensus would
have it, is one of the points in dispute.  The two will
completely on that point, and the Washington Consensus benefits
from a reading of the General Theory that ignore what
Keynes means by monetary policy, and replaces it with the
"potted General Theory" LM curve in the ISLM model (thank's
Paul for the reminder of Hick's article).  Indeed, the ISLM
is part of the foundation for the less virulent strains of the
Washington Consensus, as anti-GT "Micro Markets Magnified"
type macro theory is part of the foundation of its more virulent
strains.  And pretending that the ISLM represents the GT is
a good way of neutralising any threat to the Washington
consensus from that theoretical base.

What I was actually referring to here was the idea of
a single X inside an L as a realistic model of the
income-expenditure loop.  Here, the General Theory is
explicit in arguing that questions of the level of
employment are outside the scope of such models,
so that there is no ambiguity on the question of where
the GT lies with respect to "Market Models Uber Alles".
Since this point is made explicitly, it is clear that
any effort to interpret the GT as saying the opposite
is simply due to a misreading, and is not the fault
of the GT itself.  Of course, in the post war period,
many who were labouring under the idea that a "Market
Models Uber Alles" approach was the sine qua none of
economic science, so substantial effort has been
expended in the last half century in misinterpreting
the General Theory in exactly that way.


Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx