Don Patinkin's PhD Dissertation as the Prehistory of Disequilibrium Theories

Abstract

The opening sentence of Money, Interest, and Prices, has attracted the attention of most scholars who wrote about Don Patinkin's works in recent years. As shown by Boianovsky (2006), Merhling (2002) or Rubin (2002a), reading Patinkin's doctoral dissertation shed new light on his major work. However, these articles contain only partial presentations of the thesis. This essay contributes to fill in this gap. It offers a detailed presentation of the second part of Patinkin's Ph.D dissertation and claims that this document foreshadowed the research programs of disequilibrium theorists of the 1970's. "On the consistency of economic models: a theory of involuntary unemployment", the text submitted to a committee composed of Gregg Lewis, Paul Douglas, Theodore O. Yntema and chaired by Jacob Marschak in August 1947, was composed of two parts. The first part analyzed how various general equilibrium models failed to incorporate money in a consistent manner. As indicated by the general title, the second part of the thesis, on involuntaryunemployment, seemed the most important to the young economist. Actually, the two parts were written in reverse order. Patinkin started from the idea of explaining unemployment as the consequence of an "inconsistency" of the classical system (Patinkin, 1995, 379). But in a second phase, probably under the influence of the members of the Cowles Commission (Mehrling, 2002), he undertook to develop Lange's criticism of the traditional dichotomy of general equilibrium theory between the determination of relative prices and the determination of money prices.

Oskar Lange and the Walrasian Interpretation of Is-Lm

“…But what Patinkin proposed to do was to reconstruct the Keynesian model by modifying the microeconomics of the Walrasian framework. As I explained in Rubin (2012), the result was not totally satisfactory, to say the least. This led Patinkin to abandon his attempt at formalizing mathematically the Keynesian model in chapters 13 and 14 of Money, Interest and Prices .…”

“…In other words, in 1947 Patinkin inaugurated a “discontinuity viewpoint” with respect to the relation between the theory of Walras and IS-LM. Since I have elaborated this view elsewhere (Rubin 2012), my argumentation will be brief.…”

“…For instance, one may argue that it was at the origin of the disequilibrium theories of Jean-Pascal Benassy, Jacques Dreze, and Edmond Malinvaud. As argued by De Vroey (2004) and Goulven Rubin (2012), these theories descended from the work of Patinkin (1956) and were an attempt to incorporate involuntary unemployment in the Walrasian framework. 2 On the other side of the battlefield, it may also be said that the confusion played a role in the genesis of Robert Lucas’s Walrasian macroeconomics.…”

“…Rubin (2012) shows that Don Patinin’s PhD thesis, an illustration of the confusion that is the subject of this paper, was the pre-history of disequilibrium theories.…”