Keynes on the Theory of Interest
In my previous post, I asserted that Keynes used the idea that savings and investment (in the aggregated) are identically equal to dismiss the neoclassical theory of interest of Irving Fisher, which...
View ArticleThe Well-Defined, but Nearly Useless, Natural Rate of Interest
Tyler Cowen recently posted a diatribe against the idea monetary policy should be conducted by setting the interest rate target of the central bank at or near the natural rate of interest. Tyler’s post...
View ArticleThinking about Interest and Irving Fisher
In two recent posts I have discussed Keynes’s theory of interest and the natural rate of interest. My goal in both posts was not to give my own view of the correct way to think about what determines...
View ArticleOnce Upon a Time When Keynes Endorsed the Fisher Effect
One of the great puzzles of the General Theory is Keynes’s rejection of the Fisher Effect on pp. 141-42. What is even more difficult to understand than Keynes’s criticism of the Fisher Effect, which I...
View ArticleKeynes on the Theory of the Rate of Interest
I have been writing recently about Keynes and his theory of the rate of interest (here, here, here, and here). Perhaps unjustly – but perhaps not — I attribute to him a theory in which the rate of...
View ArticleThe Trump Rally
David Beckworth has a recent post about the Trump stock-market rally. Just before the election I had a post in which I pointed out that the stock market seemed to be dreading the prospect of a Trump...
View ArticleIn the General Theory Keynes First Trashed and then Restated the Fisher Equation
I am sorry to have gone on a rather extended hiatus from posting, but I have been struggling to come up with a new draft of a working paper (“The Fisher Effect under Deflationary Expectations“) I wrote...
View ArticleWhat Do Stock Prices Tell Us about the Economy?
Stock prices (as measured by the S&P 500) in 2017 rose by over 20%, an impressive amount, and what is most impressive about it is perhaps that this rise prices came after eight previous years of...
View ArticleIrving Fisher Demolishes the Loanable-Funds Theory of Interest
In some recent posts (here, here and here) I have discussed the inappropriate application of partial-equilibrium analysis (aka supply-demand analysis) when the conditions under which the ceteris...
View ArticleWhat’s Wrong with DSGE Models Is Not Representative Agency
The basic DSGE macroeconomic model taught to students is based on a representative agent. Many critics of modern macroeconomics and DSGE models have therefore latched on to the representative agent as...
View ArticleAn Austrian Tragedy
It was hardly predictable that the New York Review of Books would take notice of Marginal Revolutionaries by Janek Wasserman, marking the susquicentenial of the publication of Carl Menger’s Grundsätze...
View ArticleGeneral Equilibrium, Partial Equilibrium and Costs
Neoclassical economics is now bifurcated between Marshallian partial-equilibrium and Walrasian general-equilibrium analyses. With the apparent inability of neoclassical theory to explain the...
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