Copyright (C) 2005 by Thomas H.A.M. Cool
Definition & Reality
in the
General Theory of Political Economy
Thomas Colignatus
Dutch University Press
&
Samuel van Houten Genootschap
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2nd edition, January 2005
(The first edition was in March & June 2000)
Copyright © Thomas H.A.M. Cool
http://www.dataweb.nl/~cool, cool@dataweb.nl
Colignatus is the preferred name of Thomas Cool in science.
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Prologue
The basic idea of this book is that Keynes’s _General Theory_ is
generalised even further by including endogenous government in the
model, so that we arrive at a truly general Political Economy. The
world had the Great Depression 1930-1940 and has the Great Stagflation
1970-today and by including ‘stagnation in economic policy making’ in
our analysis we find a better explanation. The general theory also
advises a democracy to create an Economic Supreme Court as a separate
constitutional power, next to the Legislative, Executive and Judicial
branches.
This book is primarily directed at my fellow economists and it
primarily gives theory and stylized facts. The colleagues will
specifically have to understand the ‘Definition & Reality methodology’
before they will appreciate that my analysis is scientifically
warranted. Much work remains to be done in practical research. And much
work remains to be done by the other professions.
Since the current imbalance of powers has many victims, it may be
hoped, none the less, that the parliaments of our democratic nations
investigate the issue too, so that there is more hope for improvement
in their living conditions. Parliaments should do as Alfred Marshall
(1890, 1947:3) wrote:
“Now at least we are setting ourselves seriously to inquire whether it
is necessary that there should be any so-called ‘lower-classes’ at all:
that is, whether there need be large numbers of people doomed from
their birth to hard work in order to provide for others the requisites
of a refined and cultured life; while they themselves are prevented by
their poverty and toil from having any share or part in that life.”
Books are more stimulating and more enjoyable to read if they are
guided by questions and if they cause questions themselves. This book
has been written in the style that it provides answers and thus it must
be feared to be a dull read. It is too late to change that style.
However, some questions are: (1) How is it possible that Europe has an
unemployment of about 10% for more than three decades now, and the USA
the mirror image of poverty ? (2) Can we really trust our governments ?
With this book ends a project that basically started with the Fall of
the Berlin Wall in 1989. My hope is that this book contributes to the
fall of some other walls, i.e. the intangible mental ones, consisting
of perceptions and conventions - but equally confining.
Contents in Brief
Book I Introduction 11
Book II Trias Politica and Economic Supreme Court 16
Book III Economics ‘as usual’ 36
Book IV Presentations for the general public 60
Book V Methodology: Definition & Reality 69
Book VI Structural models 87
Book VII Social Choice 158
Book VIII Supportive notions 186
Book IX Reduced form 198
Book X Conclusions 216
Appendices 266
The symbol ° is used to indicate market clearing equilibrium (and
possibly expectational). The symbol * or E[.]is used for expectations
and expectational equilibrium (and possibly market clearing). The
symbol °* is used for both, and · for the one or the other (and
possibly both).
Contents
Book I Introduction 11
1. Order of presentation 11
2. The general theory 11
3. Methodology 14