Philosophy of Economic Thought - Essay Example

In spite of the fact that many of them had already dabbled into the interpretation of Keynes’s point of view, two of those whose analysis are worthy of being examined are Paul Davidson and Axel Leijonhufvud. The critics of Keynes believe that the main contributions made by Keynesians and post-Keynes theorists to economical theory are all negative, particularly as they seems to attack the conventional way of interpreting situations. For many of this critics, the saddest dimension that there is to it is that Keynes theorists, besides dumping the traditional ways of perceiving situations, is that they do not offer an alternative through which the ‘anguish’ experienced by people in their daily life can be reduced.

Paul Davidson does not agree at all with all what this critics opine. He believes that such positions are assumed by classical economists who find it almost impossible to align themselves with the change that is offered by Keynes (Davidson1994). The approach adopted by Davidson shows how Keynes’s General Theory is relevant to people in the globalised world in which we now live. (This actually is to annul the assumption by some individuals that Keynes’s General Theory is no longer relevant in this time and age). . Leijonhufvud believes that the stand of Keynesian economists was overhyped.

Unlike the paradise that some had conceived from it, the truth is that Keynes’s General Theory has many loopholes which were yet to be revealed. As with many other theories, whose foundations were not solidly founded, a wave of strong desire for change will sweep it into nonexistence. Leijonhufvud was one of the first few economists to present the new viewpoint which opines that typical Keynesian theory needed a major re-education or a new drive to ensure that they know what they should really stand for.

Leijonhufvud, for example, posits that the theory of markets fundamental IS-LM was lethally defective and should be substituted. To back up his point, he cites Keynesian’s reliance on inflexible wages. Patinkin (1948) proves that there are always some supposed levels of prices and wages which are low enough to engender a full employment level of cumulative demand. This is clearly in antagonism to the Keynesian position that insists unintended unemployment can be link to the prevention of wage or price rate from dropping to a hypothetical or supposed level.

It is quite ironic that Keynes who lived a huge part of his life as an open market analyst is the one who has developed theories whose major application is in closed economies (Keynes 1936). One of the points that Keynes may have wanted to prove is that even if one is inattentive to international trade and its impediments, a closed economy did not hold any regular market apparatus that assured a full-employment symmetry (Keynes 1936 p. 120). Davidson (1994) also has this to say: Any deliberate policy that aims to make a nation’s industries more