How can we restore the generality of the General Theory?

Abstract

In this paper, I tackle the key issue raised by Pasinetti, namely why Keynes failed to accomplish his revolution and build a unifying ‘monetary theory of production’ framework. I argue that this occurred because, following his Marshallian background, he adopted an oversimplified view of the structure of theories, a problem which, following Leontief, might be labelled as ‘implicit theorising’ (IT). By making a comparison between the General Theory and standard macroeconomics based on Lakatos’s ‘research programme’ notion, this paper explores IT in a systematic fashion and stresses two key points. First, Keynes did not attack the ‘true’ orthodox postulates but only the conclusions deriving from them. Secondly, he failed to articulate his own research programme effectively. Based on these points, the paper concludes that filling such gaps in Keynes’s theory is the precondition for restoring his generality claim.

General Theorizing and Historical Specificity in the ‘Keynes Versus the Classics’ Dispute

“…From the standpoint of GET to which he subscribed, Keynes's aggregate propensities cannot be truly independent data because, in this theory, only the 'deep parameters' enjoy this status. (For analysis of these issues, see, for example, Togati 1998Togati , 2019.…”

“…112-3). For a detailed account of the standard RP, see alsoTogati (2019).16 For this reason, I suggest that modern standard theory is not truly 'universal': it applies in fact only to advanced forms of capitalism.…”

On the “Generality” of the General Theory. Or Why Keynes Lost His Battle and What to Do to Re-win It Again

“…As already noted, Keynes's implicit theorizing is the almost inevitable result of the fact that he was facing the Marshalllian paradigm-in the shape of Pigou's classical model-whose presuppositions-such as organic interdependence view, broad view of rationality and competition, reference to real world conditions in which people rely on conventions-he shared to a large extent. Clearly, he could not be prepared to demarcate his approach from general equilibrium built on quite different presuppositions, such as atomistic and axiomatic foundations, which was simply not there (see Togati, 2019).…”

“…Indeed, one of the aspects of Keynes's forced implicit theorizing is that he failed to clarify his postulates in a manner paralleling general equilibrium. While the latter relies on the axioms of individual rationality, the constructive method and equilibrium (see e.g., Togati, 2019), it is not at all clear what are the corresponding postulates of the GT; in particular, it is not clear the status of Keynes's "quasi naturalistic" approach: to what extent can his aggregate propensities be reduced to individual rationality? Are they a postulate or simplifying assumptions?…”