Keynes's Identity, Ricardian Virtue, and the Partial Dichotomy

Abstract

Ricardo offers us the supreme intellectual achievement, unattainable by weaker spirits, of adopting a hypothetical world remote from experience as though it were the world of experience and then living in it consistently. With most of his successors common sense cannot help breaking in—with injury to their logical consistency. (J. M. Keynes, The General Theory, p. 192.)What was the contribution of Lord Keynes to the development of general equilibrium theory? It is becoming possible now, with the passage of a quarter-century, to view Keynes's General Theory as an (important) episode in the continuous development of general neo-classical systems. From one vantage point, it is paradoxical that his work should have been accepted as the Grand Departure from its neo-classical progenitors—even though Keynes presented it in that light—since his interpretations of these systems are almost always kept visible for purposes of comparison. On the other hand, Keynes's impact on economic policy, on the methodology and analytics of quantitative economics, and on the working economist's “vision” of reality, may be seen even today to be of that order of power rightfully termed “revolutionary.”