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Showing posts with the label Axel Leijonhufvud

How Say's Law May Encounter Difficulties

"The fact that there exists a potential barter bargain of goods for labor services that would be mutually agreeable to producers as a group and labor as a group is irrelevant to the motion of the system. The individual steel producer cannot pay a newly hired worker by handing over to him his physical product (nor will the worker try to feed his family on a ton-and-a-half of cold-rolled sheet a week)." -- Axel Leijonhufvud, Keynesian Economics and the Economics of Keynes , p. 90

Theory Hides in Aggregates

"it sometimes proves difficult to trace... theoretical conflicts to assumptions which have been explicitly stated. This is partly because we habitually concentrate on making those assumptions explicit which specify the relationships between the variables actually appearing in the model. The immediately antecedent stage in model-construction, i.e., the selection of aggregates, is often the stage where implicit theorizing enters in. "The behavioral assumptions underlying a particular mode of aggregation are, however, just as important as the behavioral relationships assumed to hold between the variables defined." -- Leijonhufvud, On Keynesian Economics and the Economics of Keynes , p. 38-39

The Macroeconomist as Weatherman

Imagine that, over the past 200 years, there have been a bunch of meteorologists studying the weather. What has happened, though, is that one of them, living in Florida, has focused on thunderstorms. He came up with a pretty good model of thunderstorms, but then announced, "The weather is made up of a series of thunderstorms: to be safe, people need to install lots of lightening rods everywhere, and very good drainage so that streets and creeks don't flood." Another fellow lived in Oklahoma, and he focused on tornadoes. He developed a pretty good model of tornadoes, and then declared. "The weather is characterized by periods of calm followed by tornadoes: to remain safe, people need good solid basements and very sturdy wooden shutters." A third meteorologist lived in California. His studies focused on seasonal variations in rain. He developed a good model of those, and then professed that "Human weather problems can be solved, if only people find ways ...