A fundamental aspect of the confrontation between Neoclassical orthodoxy and Post-Keynesianism is the Theory of Production. Post Keynesianism, in particular the Sraffians, have criticized the basis on which orthodoxy analyzes production (and, in fact, they criticize its fundamental vision of the economic system) that remains virtually unchanged in the new Neoclassical orthodoxy. Two important pillars of this critique that would give rise to what is known as the Controversy around the Theory of Capital are the Reversion of Capital and the Double Reversion Theorem, Sraffianos. Sraffa undermines the foundations of the Neoclassical theory of production in such a way that his criticisms of the coherence of the Neoclassical orthodoxy approach to the way factors of production are combined have not been strongly refuted to this day. Whether a given approach to the behavior of economics is incons...

Since the appearance of the Rational Expectations Hypothesis introduced in macroeconomics in the late 1970s and until the late twentieth century, tensions and disagreements among most economists were notable, as well as strong criticisms, referring to the futility or little meaning of the theories that were raised. However, there seems to have been progress towards a convergence in the way of conceptualizing macroeconomics and this has happened because the facts of the real world cannot be ignored. The beliefs shared by the majority of orthodox economists, have given rise to what today is the way of considering economic science from the perspective of the so-called New Keynesian Macroeconomics and its extension, the New Consensus Macroeconomics, which seems to have unified criteria and has allowed a useful convergence. The key to such convergence would be to accept, among other things, t...

The mainstream in macroeconomics and economic policy establishes an inverse relationship between the price level and the interest rate and income. To reduce inflation, an interest rate increase is used in order to depress consumption and investment, consequently reducing effective demand and inflationary pressures. If the unemployment rate is high, a reduction in the interest rate can be used to stimulate consumption and investment, which increases production and reduces unemployment. However, from the empirical work of A. H. Gibson (1922), it has been documented that in certain cases there is rather a positive relationship between the interest rate and the price level. This discovery was baptized by J. M. Keynes as the “Gibson Paradox”. This article makes an analytical demonstration of the conditions under which the Gibson Paradox can occur, which can be very useful to theoretically...

A fundamental aspect of the confrontation between Neoclassical orthodoxy and Post-Keynesianism is the Theory of Production. Post Keynesianism, in particular the Sraffians, have criticized the basis on which orthodoxy analyzes production (and, in fact, they criticize its fundamental vision of the economic system) that remains virtually unchanged in the new Neoclassical orthodoxy. Two important pillars of this critique that would give rise to what is known as the Controversy around the Theory of Capital are the Reversion of Capital and the Double Reversion Theorem, Sraffianos. Sraffa undermines the foundations of the Neoclassical theory of production in such a way that his criticisms of the coherence of the Neoclassical orthodoxy approach to the way factors of production are combined have not been strongly refuted to this day. Whether a given approach to the behavior of economics is incons...

Since the appearance of the Rational Expectations Hypothesis introduced in macroeconomics in the late 1970s and until the late twentieth century, tensions and disagreements among most economists were notable, as well as strong criticisms, referring to the futility or little meaning of the theories that were raised. However, there seems to have been progress towards a convergence in the way of conceptualizing macroeconomics and this has happened because the facts of the real world cannot be ignored. The beliefs shared by the majority of orthodox economists, have given rise to what today is the way of considering economic science from the perspective of the so-called New Keynesian Macroeconomics and its extension, the New Consensus Macroeconomics, which seems to have unified criteria and has allowed a useful convergence. The key to such convergence would be to accept, among other things, t...