nep-pke New Economics Papers
on Post Keynesian Economics
Issue of 2009‒10‒31
one paper chosen by
Karl Petrick
University of the West Indies

  1. The Marshallian roots of KeynesÕs General Theory By Michel DE VROEY

  1. By: Michel DE VROEY (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: The aim of this paper is to elucidate Keynes's Marshallian lineage. I argue that the result of bringing out the Marshallian antecedents of the General Theory highlights KeynesÕs failure to achieve the theoretical project he was striving at, namely to demonstrate an involuntary unemployment result in the arising of which nominal wage rigidity would play no role. In the first part of the paper, I reexamine MarshallÕs theory of value. This sectionÕs main conclusion is that no theory of unemployment is to be found in MarshallÕs writings. In section two, I study the literature spanning from Marshall to Keynes, focusing on Beveridge, Hicks and Pigou, in order to see whether the lacuna present in MarshallÕs writings happened to be filled. Documenting the emergence of the notion of frictional unemployment, I come to the conclusion that its arising went along with little theoretical elaboration. The third and last part of the paper is a critical reflection on the General Theory. I start by making the point that KeynesÕs theory of effective demand ought to be viewed as an extension of MarshallÕs analysis of firmsÕ short-period production decisions. This enables me to bring out the decisive role played by the wage rigidity assumption in KeynesÕs reasoning. I claim that, except for this assumption, the differences between Ôeffective demand ˆ la MarshallÕ and Ôeffective demand ˆ la KeynesÕ are minor. I close my analysis of KeynesÕs reasoning by showing that no real removal of the nominal rigidity assumption is to be found in chapter 19 of the General Theory.
    Date: 2009–06–30

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