Chapter dzDz: Hutt and Keynes ȀȆȆeconomists as Donald Tucker (ȀȈȆȀ) and Robert Barro and Herschel Gross-
man (ȀȈȆȀ,ȀȈȆȅ). Ļeir approach features such concepts as absence of
the (supposed) Walrasian auctioneer, incomplete and costly and imper-
fect information, false price signals, sluggish price adjustments, quantity
changes as well as price adjustments, the duality of people’s decisions
about particular transactions according to whether they do or do not meet
frustration in accomplishing other desired transactions, and the income-
constrained process (the counterpart of Hutt’s infectiousness of disequi-
librium and recovery).
Clower and Leijonhufvud offered their approach as spelling out what
Keynes “really meant” or “had at the back of his mind” while writing the
General Ļeory.In this they were wrong, in my opinion. Actually, they
were independently resurrecting an older approach from which the Key-
nesian revolution had diverted attention (YeagerȀȈȆȂ; cf. GrossmanȀȈȆȁ).
Hutt believes that his own remarkably similar doctrine stands poles apart
from what he considers the crudities of Keynes. In a thesis onĻeories
of Disequilibrium: Clower and Leijonhufvud Compared to Hutt, Mrs. Eve-
lyn Marr Glazier notes but does not actually tackle the question of who
more correctly understands what Keynes really meant. She does, however,
show that the three economists named in her title “agree more on some
of the fundamental issues of disequilibrium than they do on the history
of doctrines” (p.Ȃ).
Hutt differs from Clower and Leijonhufvud more in emphasis than
on substance. He puts less emphasis than they do on reasons why a consid-
erable degree of price and wage stickiness is understandable and rational.
He does not recognize why, after a disturbance, it naturally takes time to
achieve a new equilibrium level and coordinated pattern of prices because
of incompleteness and costliness of and delays in obtaining up-to-date
knowledge of market conditions and the interdependence yet separate
and sequential setting and revision of individual prices and wages. (On
this latter point, see CaganȀȈȇǿand YeagerȀȈȇȅ.)
Hutt notes that Clower and Leijonhufvud stress “the imperfections of
the information and communication process as a cause of thehiatus” that
money poses between desires to sell and desires to buy.
But the kind of communication or information required for the coor-
dination of the economy takes the form of market pressures; and these
pressures are exerted through loss-avoidance, profit-seeking incentives.
Faced with such market signals as shrinking or accumulating invento-
ries, entrepreneurs react by changing the rates of liquidation of different