Abstract
Don Patinkin regarded himself a Keynesian economist, in the sense that he did not believe that the automatic market mechanism of price change efficiently leads the economy to its full-employment path. In his 1956 Money, Interest and Prices Patinkin advanced an interpretation of Keynesian macroeconomics as disequilibrium economics. However, he was perceived as an anti-Keynesian economist by a substantial part of the profession. The present essay discusses why was that so, based on an investigation of the “central message” of Patinkin’s theoretical framework and on unpublished archive material.
Frankly, I have never been able to understand why my Money, Interest, and Prices was regarded in some circles as an anti-Keynesian work. I have always regarded it as a work that strengthened the Keynesian view by diverting attention from the pointless semantic issue of whether there could or could not exist a situation of “unemployment equilibrium”, to the real question of the efficacy of price flexibility in restoring full employment. (Letter from Don Patinkin to James Tobin, 1 Jan 1992; Duke University, Don Patinkin Papers).
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Notes
- 1.
Long-run neutrality of money was a topic that attracted Patinkin’s attention, which led him to investigate, together with Otto Steiger, the origins of the terms “neutrality of money” and “veil of money”. Patinkin and Steiger (1989) found the earliest use of “veil of money” in a book by D.H. Robertson in the 1920s. If I may strike a personal note, that is how I started to correspond with Patinkin in the early 1990s (as a graduate student in Cambridge), when I let him know that I had come across “veil of money” in books by Böhm-Bawerk and Irving Fisher written at the end of the 19th century. With characteristic interest, Patinkin encouraged me to write a note about it, which became my first published international article (Boianovsky 1993).
- 2.
As pointed out by Patinkin (1956), Knut Wicksell ([1898] 1936) had already considered the role of the real balance effect in monetary economics. Wicksell influenced Patinkin not so much with the introduction of real balances in excess demand functions, but with the stability analysis of the price level, which would become an important feature of Money, Interest, and Prices (Boianovsky 1998).
- 3.
However, Patinkin 1974, pp. 128-29, had defended Keynesian economics from Friedman’s charge by pointing to the econometric work of L. Klein and others in the 1950s, where the rate of change of money-wages depends on on the rate of unemployment and the rate of inflation; see Boianovsky 2002, section 5.
- 4.
“Thus a basic contribution of the General Theory is that it is in effect the first practical application of the Walrasian theory of general equilibrium : ‘practical’ not in the sense of empirical … but in the sense of reducing Walras’ formal model of n simultaneous equations in n unknowns to a manageable model form which implications for the real world could be drawn” (Patinkin 1987, p. 27). “The analysis of the General Theory is essentially that of general equilibrium. The voice is that of Marshall, but the hands are those of Walras. And in his IS-LM interpretation of the General Theory, Hicks quite rightly and quite effectively concentrated on the hands” (Patinkin 1987, p. 35).
- 5.
Cf. Donzelli (2007).
- 6.
Cf. De Vroey (2009, 2004).
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Acknowledgements
I would like to thank Michel de Vroey, Jérôme de Boyer des Roches, Rebeca Gomez, Ephraim Kleiman, David Laidler, Cristina Marcuzzo, Goulven Rubin and (other) participants at the conference on “Perspectives on Keynesian Economics”, Ben Gurion University, Beer Sheva (July 2009) and at a seminar at Université Paris-Dauphine (June 2009) for helpful comments on an earlier draft. Financial support from the Brazilian Research Council (CNPq) is gratefully acknowledged.
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A Commentary on Mauro Boianovsky’s “Was Patinkin a Keynesian Economist?”
A Commentary on Mauro Boianovsky’s “Was Patinkin a Keynesian Economist?”
Michel De Vroey
Mauro Boianovsky’s paper on Patinkin is an excellent piece of intellectual biography bringing out the complex itinerary of one of the great interpreters of Keynes. I hope that one day Boianovsky will have the opportunity to extend it into a full-blown book. As I have no basic qualms with his general account, my comment will focus on one particular point, namely my disappointment at discovering that his paper fails to deliver on its promising title, “Was Patinkin a Keynesian economist?”
This question touches on a real issue: we have here an author, who from the beginning of his scientific career up to its end has considered himself a disciple of Keynes, yet recurrently faced criticism about the anti-Keynesian character of his contribution, leveled not only by Post-Keynesians but also, and more surprisingly, by authors such as Clower and Leijonhudvud. I expected Boianovsky to address this conundrum but he did not so. Here is then an outline of the paper that he could have written!
There must be good reasons for questioning the Keynesian character of Patinkin’s work, reasons that are absent when it comes for example to the writings of Davidson or Leijonhufvud. I see at least two such reasons. The first is Patinkin’s endorsement of the Pigou effect, re-coined as the real balance effect. It constitutes a central piece of his monetary theory but it has a devastating effect as far as Keynesian theory is concerned since it results in the collapse of the claim that involuntary unemployment can exist when the economy is in equilibrium. By taking such a stance, the “Keynesian” Patinkin comes close to shooting himself in the foot. Anti-Keynesian authors were soon to perceive the importance of this point. The second reason lays in Patinkin’s decision to read Keynes through Walrasian rather than Marshallian lenses.Footnote 4 True, Keynes wanted to study an economy as a whole, his point being that unemployment originated in other parts of the economy than the labor market. But this did not make him a Walrasian economist. In other words, the Walrasian approach should not be granted a monopoly over general equilibrium while this is the standpoint adopted by Patinkin.
Small wonder then that Patinkin appears to be a split intellectual personality forced to engage in intellectual contortions. I am thinking, first, of his assertion that the real balance effect plays a central theoretical role but is of little empirical relevance and, second, of his limiting the existence of involuntary unemployment to the duration of the adjustment towards equilibrium process, his disequilibrium theory of involuntary unemployment. None of these two solutions is satisfactory. The argumentation for or against the existence of involuntary unemployment ought to proceed at the abstract theoretical level and not by resorting to vague empirical assertions. As to slow adjustment towards equilibrium, this feature has no room in Walrasian theory as it ought to be assumed that the tâtonnement process takes place in logical time.Footnote 5 A last contortion is Patinkin’s interpretation of the General Theory twisting Keynes’s text in order to having it corroborate his own disequilibrium claim.
A further point is that the question making the title of Boianovsky’s article cannot be tackled in earnest without addressing the definition of the “Keynesian” adjective. Boianovsky deals with this point in too loose a way by stating that “Keynesian economists are those who believe that the automatic market mechanism of price change does not efficiently lead the economy to its full-employment path” (Boianoski 2010, p. ). My own viewpoint is that a distinction should be drawn between two meanings of the Keynesian term.Footnote 6 First, it may refer to a vision as to the working of the market economy and its associated policy conclusion. Against this aspect, being Keynesian means to believe that the market system can fall prey to market failures, which can be remedied upon through demand activation policies. Defenders of the free market system are anti-Keynesian in this policy cause conception. Second, it may refer to a precise conceptual apparatus drawn from a lineage going from Marshall to Keynes and, next, to the IS-LM model. Being a Keynesian in this sense means to use the Marshall–Keynes–Hicks framework – to all intents and purposes, the IS-LM model. Economists using any other conceptual apparatus are non-Keynesian in this second sense. This is the case for works following the Walrasian line (Patinkin, Barro and Grossman) or the Marshall–Chamberlin (imperfect competition models) line. Note that no normative connotation should be attached to being or not being Keynesian in either of the two senses. The purpose of the distinction is just to remedy upon the prevailing semantic confusion.
Once this distinction is drawn, the question forming the title of Boianovsky’s paper is easily solved. Patinkin was Keynesian as far as the first criterion is concerned but non-Keynesian against the second criterion. At first, this may look a bizarre combination but upon scrutiny it is not so. Certainly, Patinkin is not isolated in holding such a mixed position. His mirror image is Friedman who had few qualms with Keynes’s conceptual apparatus while, obviously, being anti-Keynesian from the aspect of the policy cause defended. Modern neo-Keynesian authors are in the same position as Patinkin. They hold a Keynesian vision of the market economy and favor demand activation but they have abandoned the Marshall–Keynes–Hicks conceptual line. The difference between Patinkin and them is that he adamantly wants to attach his reasoning to Keynes’s, at the price of the above noted contortions, while they just do not mind.
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Boianovsky, M. (2011). Was Patinkin a Keynesian Economist?. In: Arnon, A., Weinblatt, J., Young, W. (eds) Perspectives on Keynesian Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-14409-7_5
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