Abstract
Economists study only money; physicists and ecologists study only real wealth. Thus never the two shall meet. This split in our metal disciplines, this split in our minds really, does not foster an intellectual climate in which we can seriously tackle the worrisome problems of our ecology, problems that seem to accelerate their bite with every passing year. Concordian economics is the mental framework which can give hospitality to both sets of disciplines. In Part I of this chapter we will concentrate our attention on the process of revision of Keynes’ model of the economic system; we revise the “forms,” not the substance, of Keynes’ ideas. The first section analyzes weaknesses in Keynes’ original model; the second suggests remedies and, ultimately, a new model of the macrosystem; the third section provides an overview of some of the implications of the new model. In Part II we shall see how this revision favors an integration of the world of real wealth with the world of monetary wealth.
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Notes
- 1.
General Theory (p. 83) and Keynes (1937b, p. 249). To be precise, Keynes used the qualification “old-fashioned” for the entire proposition of the equality of S to I. The emphasis, however, was on the concept of saving.
- 2.
This interpretation implies that the equilibrium between saving and investment is instantaneous and continuous. In the General Theory (pp. 183–184), Keynes in fact stressed that: “Saving and Investment are the determinates of the system, not the determinants. They are the twin results of the system’s determinants, namely, the propensity to consume, the schedule of the marginal efficiency of capital and the rate of interest.” (Italics added). (Cf. also p. 328).
-
a.
Consequently, this interpretation also implies that one cannot accept Keynes’ classifications and admit a difference between ex-ante and ex-post saving (as Robertson is entitled to do), or between “observable savings” and “schedules of savings,” Klein (pp. 91–92 and 110–117), or between actual and desired savings, Hansen (1949: 225), or any other such distinction.
-
b.
On the other hand, it should not be denied that there are passages in the General Theory which—if read literally—might lead to a different interpretation than the one provided in the text. (Cf., sp. pp. 74, 117, 122–123, and Chap. 14).
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a.
- 3.
The relevance of this observation resides in the obvious linkage which exists between economics and the larger social and cultural context: viz., the Protestant/Puritan ethic; viz., the social and political status accorded to the businessman in the contemporary world.
- 4.
The precise definition of consumption in the General Theory (p. 62) is drawn in terms of sales. And a sale is only an exchange of wealth. Also, income is in the same page precisely defined as total sales minus aggregate user costs of the entrepreneurs—with user cost including the concept of obsolescence, destruction, etc. (see pp. 23, 53–55, 58, and 66–73).
- 5.
Cf. Keynes’ letter of January 1, 1935, to George Bernard Shaw quoted in Harrod (1951: 462).
- 6.
Kaldor and Mirrlees, speaking of the characteristics of their model, stated (1971: 166): “… like all ‘Keynesian’ economic models, it assumes that ‘savings’ are passive …” (Italics added).
- 7.
The I = C equality becomes intelligible as soon as one disaggregates both I and C into their component elements: the first component becomes I = Kc + Kk (where Kc stands for production of consumer goods and Kk stands for production of capital goods), and the second component becomes C = Cc + Ck (where Cc stands for consumption of—or expenditure on—consumer goods and Ck stands for consumption of—or expenditure on—capital goods). In the 1937a article, Keynes wrote, p. 190: “I say that effective demand is made up of two items—investment-expenditure … and consumption-expenditure.” (I = Ck + Cc ). [Formal changes were brought to this paragraph in 2023].
- 8.
Because of its guidance from Ben Bernanke, most notable now is the work done at the Bendheim Center for Finance at Princeton (May 26, 1997, and ff.).
- 9.
See much work done at the Santa Fe Institute.
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Gorga, C. (2023). From the Revision of Keynes’ Model to Economics for Physicists and Ecologists. In: Concordian Economics, Vol. 1. Springer Studies in Alternative Economics. Springer, Cham. https://doi.org/10.1007/978-3-031-47320-3_4
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