Re: Savings fallacy redux (was Re: Method)

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> There is no point in claiming to have found a "flaw" in
> Keynes' reasoning if you first replace the definitions
> for the terms used with entirely different definitions.

The question is whether Keynes' GT definitions make sense?

And, in Keynes' own judgement, as reflected in the concept of Money that was
implicit in his Treatise parable of the "banana plantation", the GT
definitions do not make sense.

John Hicks advised in 1973 that we should never forget that Keynes wore many
hats, not all of which were those of a technically precise theoretical
economist.

Surely, Keynes had not forgotten the Treatise concept of Money - in my view,
it was a natural outgrowth of the work that he and Dennis Robertson did in
the 1920s.  And, by changing course in his work on the General Theory,
Keynes was primarily responsible for the intellectual and personal break
that occurred between Robertson and him on account thereof.

I have long suspected that Keynes, whatever he might have thought at the
outset at his work on the General Theory, realized towards the end thereof
that his analytical structure could not pass muster as technically
coherent - and that, by inserting the following disclaimer in his Preface,
Keynes was acknowledging as much:

"When I began to write my Treatise on Money I was still moving along the
traditional lines of regarding the influence of money as something so to
speak separate from the general theory of supply and demand. [...]  This
book, on the other hand, has evolved into what is primarily a study of the
forces which determine changes in the scale of output and employment as a
whole; and, whilst it is found that money enters into the economic scheme in
an essential and peculiar manner, technical monetary detail falls into the
background."

Peculiar indeed - and better not brought up front where the "flaws" in the
monetary aspects of the GT would stand exposed for all to see and, thereby,
threaten to scuttle the more important objective of rescuing the World
Economy from Depression.

Gunnar


----- Original Message -----
From: "Dr. Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Saturday, August 31, 2002 3:12 PM
Subject: Re: Savings fallacy redux (was Re: Method)


> Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx> wrote,
>
> on Fri, 30 Aug 2002 15:06:14 -0400
>
>
> > "It would be too ridiculous to go about seriously to prove that
>
>  > wealth does not consist in money, or in gold or silver; but
>
> > in what money purchases, and is valuable only for
> > purchasing." (Book IV, Ch. 1)
>
>
> Of course.  This is why it is invalid to conflate financial
> wealth and real wealth.  Which implies that seperate terms
> are needed for the seperate values.  The GT points out the
> connection between finance for EXPENDITURE, the use of
> income to finance EXPENDITURE, and the use of income to
> accumulate FINANCIAL wealth, that is, the SAVING that takes
> place in the period.
>
> There is no point in claiming to have found a "flaw" in
> Keynes' reasoning if you first replace the definitions
> for the terms used with entirely different definitions.
> If in your theory, saving is not a net addition to
> financial assets, you are talking about different things.
> If you build a model in which some sort of "real" wealth
> plays a direct role in the finance of expenditure on
> goods and services, you would seem to be falling into
> the reverse trap to the one pointed out above: not only
> is money not real wealth, incapable of doing the things
> that real wealth can do, but real wealth is not money,
> incapable of doing the things that money can do.
>
>
>
>