Econintersect: Economist Paul Davidson, a life long student of John Maynard Keynes’ work, presents a short summary in four videos of the essential elements of Keynes’ theories that separate him from classical and neoclassical thinking on economics. There are four videos to follow which total about 26 minutes for all.
Davidson is interviewed by Robert Johnson, Executive Director of INET (Institute for New Economic Thinking). He discusses the three axioms of classical economics which Keynes proved were wrong and which proofs have been forgotten (ignored?) by many in the post-Keynsian era: (1) components of economic processes are not “parallel” (independent) but are interactive; (2) financial assets and real physical assets are not interchangeable; and (3) the future is uncertain and not determined by probability distributions from the past.
The Ergodic Axiom does not apply to financial and economic systems, according to Davidson. Econintersect would say for these fields ergodic theory constitutes a fallacy of composition.
Davidson says the model for the Eurozone might be a new (German financed) “Marshall Plan“. Davidson says the creditor has the means to resolve excessive debt while the debtor often does not.
Davidson says that Ricardo’s Law of Comparative Advantage was a terrible mistake. Davidson says that comparative advantage applies correctly only for natural resources and weather sensitive industries (like agriculture). The application of of the Law of Comparative Advantage is totally invalid for labor, machinery and intellectual industries like manufacturing, finance and technology. Econintersect: This points out another fallacy of composition that has hindered economic thought.
