ABSTRACT
The persistence of J.M.Keynes’s misrepresentations of classical macroeconomics may be attributed largely to the popularity of the IS-LM model as a teaching tool inspired by J.R.Hicks’s 1937 article. The model has the particular appeal of reducing several complex interconnections of a monetary economy into a few simple mathematical equations subject to manipulations to derive a variety of conclusions. Built upon Keynes’s changed definitions of some key concepts in classical economics, such as “capital,” savings, investment, and money, the model is yet presented as a framework with which to contrast fairly and accurately classical and Keynes’s views of a monetary economy. Thus, the extent of Keynes’s distortions of classical macroeconomics is often lost on many users of the model. Furthermore, it is difficult to restate effectively the classical arguments in contrast to Keynes’s claims while employing the model, as the interminable disputes between Keynesians, monetarists, and new classical economists, all of whom use the “Keynesian language and apparatus” (Friedman 1968:15), well illustrate.
