Re: Article in the Chronicle of Higher Education

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Ian Murray <seamus2001@xxxxxxxxx> =====
>If we are fallibilists, what is the difference between intuition and guess?
And if we can
>have no scientific knowledge of first principles without engaging in circular
reasoning or
>question begging, what does it mean to say they are universal truths?
Everyone thought the
>axioms of Euclid were universally true until Gauss, Bolyai, Lobachevsky and
Reimann came
>along.


Everyoner thought axioms of  classical economics were universal truths --
which they were -- but Keynes pointed out [p.3 of GT] that some of the
classical axioms were NOT applicable to the real world.

As Keynes noted, the classical economists were Euclidean geometers in a
noneuclidean world "who discovering that in experience straight lines
apparently parallel often meet, rebuke the lines for not keeping straight --
as the only remedy for the unfortunate collisions which are occuring. YET, IN
TRUTH, THERE IS NO REMEDY EXCEPT TO OVERTHOW THE AXIOM OF PARALLELS AND TO
WORK OUT A NON-eUCLIDEAN GEOMETERY. SIMETHING SIMILAR IS REQUIRED TODAY IN
ECONOMICS. WE NEED TO THROW OVER THE SECOND POSTULATE OF THE CLASSICAL SYSTEM
AND WORK OUT THE BEHAVIOR OF A SYSTEM IN WHICH INVOLUNTARY UNEMPLOYMENT IN THE
STRICT SENSE IS POSSIBLE" [GT, pp. 16-17]

Unfortunately for Keynes, as I pont out in my bookS POST KEYNESIAN
MACROECONOMIC THEORY and FINANCIAL MARKETS, MONEY AND THE REAL WORLD, the
classical economists had not clearly identified with names their fundamental
axioms that lead to the second postulate.  In 1935 Keynes identified one
classical axiom -- arguing that he was writing a book in which money is NEVER
neutral in either the short run or the long run.  In the General Theory he
stressed uncertainty --but that uncertainty required overthrowing the ergodic
axiom. However the ergodic axiom  was first identified in 1935 by the Moscow
School of Probability -- and hence that nomenclature was not known to Keynes.

Finally in Chapter 17 of the GT Keynes insists that one of the essential
properties of ALL liquid assets is that their elasticity of substitution with
respect to the products of industry is zero -- i.e., the gross substitution
axiom is therefore not applicable between money and other liquid assets
vis-a-vis producible goods.

So as I have said innumerble times, Keynes's theor is more general than the
classical theory [just like Einstein's theor is more general than Newton's
classical theory} because it requires less axioms.

Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
phone # (561)369-1951; fax #(561)369-1951;
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html