June 11, 2019

G. L. S. Shackle: Not such a #GreatThinker

Comment on The British Academy on ‘Great Thinkers: John Kay FBA on G. L. S. Shackle FBA’*


“He [Shackle] also claimed the importance of Gunnar Myrdal’s analysis by which saving and investment are allowed to adjust ex ante to each other. However, the reference to ex ante and ex post analysis has become so usual in modern macroeconomics that the position of Keynes to not include it in his work, is currently considered as an oddity, if not a mistake. As Shackle put it: Myrdalian ex ante language would have saved the General Theory from describing the flow of investment and the flow of saving as identically, tautologically equal, and within the same discourse, treating their equality as a condition which may, or not, be fulfilled.”#1

Like his Post Keynesian colleagues, G. L. S. Shackle never spotted the lethal blunder in the General Theory. It is this: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63)

This syllogism is conceptually and logically defective because Keynes NEVER came to grips with profit: “His Collected Writings show that he wrestled to solve the Profit Puzzle up till the semi-final versions of his GT but in the end he gave up and discarded the draft chapter dealing with it.” (Tómasson et al.)

Let this sink in, the economist Keynes NEVER understood profit, i.e. the fundamental concept of economics. So, Keynes’ I=S is false and by consequence the multiplier and all I=S/IS-LM models. Instead, Q≡I−S is true with Q as macroeconomic profit.#2, #3

Keynes, Shackle, and the Post Keynesians were simply too stupid for the elementary algebra that underlies macroeconomics.

Egmont Kakarot-Handtke

* Link to TBA Tweet
#1 Wikipedia G. L. S. Shackle
#2 How Keynes got macro wrong and Allais got it right
#3 Links on Michael Roberts’ ‘Keynes: socialist, liberal or conservative?’

For details of the big picture see cross-references Refutation of I=S and cross-references Failed/Fake Scientists.