Mathematical Interpretations of Keynes’s General Theory

IntroductionM any changes had occurred in the last century in every science. sparings was not the censure and a transformation into the theoretical approach took place in the 30s. In 1936 Keynes published The frequent theory of Employment, Interest and Money. Its main ideas chasten the foundations of macroeconomics and had influenced economics since.Unfortunately, Keynes had (and has) a bad reputation as a writer, because of this there has been constant analysis and interpretations of what he meant. Economists affirmed that Keyness innovating work, as any new approach, had just about inconsistencies. Further, the book had piddling use of mathematics and, thus, had small proof of what it stated. Therefore, these ideas need interpretation and testing into the real world.Keynes master(prenominal) IdeasKriesler and Nevile (2000) define the books main points as followsin a capitalist economy role, and hence unemployment, is determined by effective sess decisions about product ion and investment are made on the root word of expectations, and monetary variables influence real variables such as output and employment and real variables, in turn, influence monetary ones.One of the nigh scare off tasks was to set up a mathematical foundation of the cited Keyness works. The most important economic experts who performed this job were, in a crossed fertilization dish up as Heller (2000) points it, Roy Harrod, James Meade and mainly John Hicks. In fact, in 1937 Hicks published an influential article, Mr. Keynes and the Classics A suggested interpretation that rapidly became the standard of Keynesian economics theory.Mathematical FoundationsThe Keyness ideas stated in the paragraphs above turned into elemental mathematical prototypes of the macro-economy and the most long-lived and flexible, the IS-LM work, came from John R. Hicks (Morgan 2001). Despite that, some authors suggest that Harrod and Meade had inspired the IS-LM model proposed by Hicks (Young, qt . in Heller, 2002)1. Others suggest that Champernowne and Reddaway overly had some contribution into the models formalization (Barens 1998, qt in Heller, 2002)Besides the septuple interpretations of Keyness work, Hicks one remains as one of the most important.As pointed by Heller (2000), the models proposed as explanations had similar expressions which are systems of simultaneous equations. And the mathematical sayings success of Keyness General Theory is because of the mathematical refinement and the exact nature of systems of simultaneous equations, which many consider alike and particularly to Hicks who was the only one in representing the theory through diagrams. (Heller, 2002)As pointed, Harrod was another economist who performed a mathematical foundation for Keyness work. According to him, Keynes system corrects the conventional theory allowing the Income level to be not given, the price level does not depend on the money, and money demand is divided in two. repayable to all of this Harrod states that Keynes system is better than the traditional one. Keynes had a very compulsive view of Harrods development of his own work, which Harrods presented in the same convention where Hicks did. Hence, Keynes thought that Harrod works interpreted correctly his own ideas.But these authors success in interpreting Keyness ideas is not free of detractors. Kriesler and Nevile (2000) made a expire stand of this economists reject the IS-LM framework as being neither a valid simplification of the arguments in the General Theory nor a original model for analyzing macroeconomic issues. Economists think the IS-LM model ignores expectations and it is not useful to disassemble a particular economy beside the static equilibrium2. They also affirm that Hicks took Keynesian macroeconomics to another direction from the one intended by the works author. The same authors assert that Keyness own vision on Hicks model did have the faults that post Keynesians typi treaty asc ribe to IS-LM.3ConclusionKeyness work and the freighter mathematical development gave, to governments and to economists, answers that can be easily explained and understood by everyone only using analytical tools as diagrams or simple mathematics. What is more, those ideas were beyond the economic common sense of the time governments can spend during depressions.Affirming if these formalizations of the model are what Keyness work pointed might be intimidating. Regardless of this and the antithetic views, Hicks simplification and formalization of the model is useful, and catches the spirit of the work. As any firstborn interpretation improvements were (and still are) made but the first task was accomplished.ReferencesHeller, Claudia, The General Theory of Employment, Interest and Money According to Brian Reddaway Economia em Revista, Vol. 10, pp. 15-32, 2002Heller, Claudia, The General Theory tax write-off According to Roy Harrod in Mr. Keynes and Traditional Theory, Revista de E conomia (Curitiba), Vol. 23, pp. 27-49, 2000Keynes, John Maynard, The General Theory of Employment, Interest, and Money (New York Prometheus Books, 1997).Morgan, Mary, The formation of Modern Economics Engineering and Ideology, Department of Economic History, London School of Economics, May 2001, Available at http//www.lse.ac.uk/economicHistory/home.aspx1 Young proposed that to call it the IS-LM Harrod-Meade model. 2 It is important to make clear that many have pointed rational expectations as one of the inconsistencies in Keyness work. 3 Post Keynesian economists main tyro to the IS-LM model is its static equilibrium nature, thus has no means to deal economys path of adjustment.