Mr Keynes, the classics and the new Keynesians: a suggested formalisation

Rodolphe dos Santos Ferreira*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

Abstract

The paper suggests a new Keynesian model of the General Theory. A reduced form entails a diagram with three curves relating employment and the real wage, which represent the two fundamental classical postulates and the principle of effective demand. This diagram illustrates better than IS–LM the generality of Keynes's theory, clarifying the distinction between voluntary and involuntary unemployment. Other significant features are the role of the distribution of expected interest rates among heterogeneous agents, whether dispersed or concentrated, in shaping the LM curve, as well as the role of wage competitiveness constraints as a foundation of Keynes's relative wage hypothesis.
Original languageEnglish
Pages (from-to)801-838
Number of pages38
JournalEuropean Journal of the History of Economic Thought
Volume21
Issue number5
DOIs
Publication statusPublished - 3 Sep 2014
Externally publishedYes

Keywords

  • Coordination failures
  • Involuntary unemployment
  • Keynes's model
  • Liquidity trap
  • Relative wages

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