July 13, 2013

What Keynesian revolution?

Comment on Fred Zaman on 'Rethinking Keynes’ non-Euclidian theory of the economy'


There are two kinds of revolutions, political and scientific, and you are in the wrong movie. The Keynesian Revolution was intended as a scientific revolution: “But, if my explanations are right, it is my fellow economists, not the general public, whom I must first convince. At this stage of the argument the general public, though welcome at the debate, are only eavesdroppers at an attempt by an economist to bring to an issue the deep divergences of opinion between fellow economists which have for the time being almost destroyed the practical influence of economic theory, and will, until they are resolved, continue to do so.” (Keynes, 1973, p. xxi)

Political revolutions are usually not started by politely throwing the public out of the auditorium.

Keynes and his contemporaries witnessed two scientific revolutions. In physics, Einstein put forth the theory of relativity, in mathematics Hilbert put forth the axiomatic method. Both scientific revolutions were recognized by their contemporaries as such. Keynes, like most economists before him, tried to profit from the prestige and triumph of the real sciences to sell a paltry piece of common sense.

The physicists got the GENERAL Theory of Relativity, and Keynes titled his book the GENERAL Theory. The mathematicians got the non-Euclidean axioms, Keynes threw over the second postulate of the classical doctrine [The utility of the wage ...] and declared this as akin to throwing over Euclid's axiom of parallels (Keynes, 1973, p. 17).

Keynes' talk of generality and axioms was sales talk for his fellow economists. He understood the axiomatic method but he did not apply it, quite the contrary: “There is, however, no absolute need to start with axioms, let alone particular ones, or even with abstraction. There is a role for historical generalisation, which relies on one of the most important logical tools, pattern recognition (metaphor, analogy); and a role for argument from first principles. Both of these procedures are part of what Keynes called ‘human logic’ in contrast to ‘formal logic.’” (Keynes, quoted in Chick, 1998, p. 1860)

Keynes never intended to leave the realm of common sense (aka human logic) “where nothing is clear and everything is possible” (see Section 3 of my paper in Real-World Economics Review, Issue No. 63, 2013).

It was the Neoclassicals who recognized that there is a real problem and tried to get out of the perennial verbiage of Political Economy: “The very definition of an economic concept is usually subject to a substantial margin of ambiguity. An axiomatized theory substitutes for an ambiguous economic concept a mathematical object that is subject to entirely definite rules of reasoning.” (Debreu, quoted in Ingrao et al., 1990, p. 287)

Let us face the facts: on the methodological point, the Neoclassicals are definitively superior. Keynesianism and axiomatization are a contradiction in terms. The Post Keynesians explicitly defend 'incoherent Babylonian babble' with their silly slogan “It is better to be vaguely right than precisely wrong” (for details see 2013, p. 96).

Time for Heterodoxy to stop wordplay with collision of parallels and collusion of capitalists and to start an intellectual revolution of their own. If Heterodoxy means something scientific then you have to put heterodox axioms against orthodox axioms or, as Keynes advertised, get up and move from Euclidean axioms to non-Euclidean axioms. This is a tough formal exercise.

Egmont Kakarot-Handtke

Chick, V. (1998). On Knowing One’s Place: The Role of Formalism in Economics. Economic Journal, 108(451): 1859–1869. URL
Ingrao, B., and Israel, G. (1990). The Invisible Hand. Economic Equilibrium in the History of Science. Cambridge, London: MIT Press.
Kakarot-Handtke, E. (2013a). Crisis and Methodology: Some Heterodox Misunderstandings. real-world economics review, 63: 98–117. URL
Kakarot-Handtke, E. (2013b). Why Post Keynesianism is Not Yet a Science. Economic Analysis and Policy, 43(1): 97–106. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.

For details of the big picture see cross-references Keynesianism.


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