At 10:42 AM 12/13/00 -0600, you wrote:
>Jim- Are you an advocate of IS-LM??
No, but ISLM provides a good language for the _start_ of a discussion,
since almost every macroeconomist knows it. For example, Paul Davidson, a
well-known anti-ISLMicist, uses IS-LM in his paper on the finance demand
for money (reprinted in his MONEY IN THE REAL WORLD). He may now be more
purist, but he's still got that blot on his escutcheon (from his own purist
perspective).
I'm afraid that ISLM will survive until someone presents a clear
alternative, since criticizing a theory doesn't smash it until there's an
obvious replacement. It's interesting that in Thomas Palley's excellent
book on post-Keynesian macroeconomics, he presents a series of useful
models that aim to get us away from the official Keynesianism (what
Robinson termed "bastard Keynesianism"). The economics is quite different,
but the graph remains the same. In his final, most complete, model, what do
we see but ISLM? he draws it upside-down and (if I remember correctly),
backward, but it's still ISLM. The story behind the curves is different,
but it's the same graph. (I've lost my copy of that book, alas!)
It sort of reminds me of Rasputin. All sorts of folks have tried to kill
ISLM, in all sorts of ways, but it survives. Even the recent article (from
a quite establishmentarian perspective) by David Romer, I believe, in
Brad's journal (THE JOURNAL OF ECONOMIC PERSPECTIVES) didn't kill it as
much as arguing that the LM curve shouldn't be upward-sloping, since the
Fed can fine-tune interest rates.
In the end, I think ISLM has a little to say about the short run, but see
the rate of profit as the main variable running a capitalist economy, along
with such things as the debt load, expectations, and unused capacity.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
