Pavlina Tcherneva speaks in this interview about an MMT solution to unemployment: a direct employment program. Some good remarks on the inadequacy of the old IS-LM models and neoclassical synthesis Keynesianism.
While of course there are limitations to those old Neo-Keynesian models by Sir John R. Hicks and Paul A. Samuelson, what is your opinion of those models as an educator, Lord Keynes?
I personally think as pedagogical tools, they're still worth using. Of course they may not be accurate to Keynes's model, but at least they can allow for *some* of Keynes's policy prescriptions. Which is better than having no policy prescriptions at all.
The trouble with IS-LM, the Keynesian cross and Phillips curve is that they essentially sank the neoclassical synthesis Keynesian ship once stagflation came: models that led to the collapse of your macro-theory as the reigning economics are a most serious problem.
They may have sank the Neo-Keynesian vessel, but there is a reason that all three models are entrenched in economic pedagogy today. I agree with you that they had that flaw which led to their demise, however, Paul Krugman uses IS/LM to help explain a liquidity trap. Is there really nothing useful to these Neo-Keynesian models in your view, Lord Keynes?
I agree with Blue Aurora, models are helpful for introductory purposes. I actually like the way Karen Vaughn states her position on models:
"As useful as our models are for many worthy purposes, perhaps out of excess admiration for our own work, when it comes to proposing regulatory regimes economists may be guilty of confusing models with the real world. As we tell our students, models are helpful abstractions of a complex reality that hopefully lay bare important characteristics of the real world we want to understand. But this does not mean that they are viable alternatives to that reality."
"Economic Policy for an Imperfect World" - K.Vaughn (great article btw)
While of course there are limitations to those old Neo-Keynesian models by Sir John R. Hicks and Paul A. Samuelson, what is your opinion of those models as an educator, Lord Keynes?
ReplyDeleteI personally think as pedagogical tools, they're still worth using. Of course they may not be accurate to Keynes's model, but at least they can allow for *some* of Keynes's policy prescriptions. Which is better than having no policy prescriptions at all.
The trouble with IS-LM, the Keynesian cross and Phillips curve is that they essentially sank the neoclassical synthesis Keynesian ship once stagflation came: models that led to the collapse of your macro-theory as the reigning economics are a most serious problem.
ReplyDeleteThey may have sank the Neo-Keynesian vessel, but there is a reason that all three models are entrenched in economic pedagogy today. I agree with you that they had that flaw which led to their demise, however, Paul Krugman uses IS/LM to help explain a liquidity trap. Is there really nothing useful to these Neo-Keynesian models in your view, Lord Keynes?
ReplyDeleteI agree with Blue Aurora, models are helpful for introductory purposes. I actually like the way Karen Vaughn states her position on models:
ReplyDelete"As useful as our models are for many worthy purposes, perhaps out of excess admiration for our own work, when it comes to proposing regulatory regimes economists may be guilty of confusing models with the real world. As we tell our students, models are helpful abstractions of a complex reality that hopefully lay bare important characteristics of the real world we want to understand. But this does not mean that they are viable alternatives to that reality."
"Economic Policy for an Imperfect World" - K.Vaughn (great article btw)