Colander, David wrote:

>James wonders why historians of thought who are also textbook writers (I
>wonder who he has in mind)  have not put this "theoretical fraud" to
>rest. The issues are complicated. First, IS/LM, while it has problems is
>not a theoretical fraud, and its history and derivation has been
>extensively studied. 
>

All the textbook writers out there who also are historians of economic 
thought know themselves without my naming them.  Surely, David is one.  
I have a copy of his 2002 /Macroeconomics/ text (with Edward Gamber), 
but I don't use it.  For example, in chapter 9, under "Fiscal Policy" 
they talk about increased government expenditure shifting the IS curve 
to the right and raising total output (income).  Now, if David had 
attempted to answer the questions I posed yesterday about the legitimacy 
of shifting the IS curve when government spending rises, he would have 
appreciated my calling that exercise at "theoretical fraud."  It is true 
that IS-LM model's "history and derivation (sic) has been extensively 
studied."  But that shouldn't stop anyone from pointing out what's still 
wrong with the model, does it?  (I write about the  "Persistent problems 
with the IS-LM model" in my /Classical Macroeconomics/ (2003, pp. 
185-90).   

David continues:

>Why does IS/LM persist? I've written about this in "The Strange
>Persistence of IS/LM" in HOPE which is reprinted in my collection of
>essays "The Stories Economists Tell". Essentially, my argument is that
>it serves as a graph to hang discussions of policy on, and that's what
>the focus is in the undergraduate macro theory course.  
>

This is not a saving argument for continuing with the theoretical 
fraud.  If the IS curve legitimately can not shift right when government 
spending increases, when investment spending increases, or when consumer 
spending increases (and the so-called AD is stuck in place), of what use 
is the model as a device "to hang discussions of policy on"?  Frankly, I 
don't see it.

Finally, David writes:

>In my texts I have tried to make clear what the issues are, but when I
>have developed them in full--reviewers said the presentations became too
>complicated for students. They are not interested in theory--just
>policy. I think it is important to see textbooks for what they are
>pedagogical devices to convey ideas to students.  They often differ from
>the way economists who are working in the subject see the issues.

With all due respect, I don't think it is possible to rescue the IS-LM 
model from its fundamental flaws.  Trying too hard to achieve that feat 
would legitimately prompt such reactions from book reviewers.  As 
Leijonhufvud (1981, 151) has noted the IS-LM model is "more a hindrance 
than help in coming to grips" with the substantive issues between Keynes 
and the classics that Hicks was trying to sort out.  Robert Barro (1983, 
vi) also acutely observes that the model "leaves students with a poor 
understanding of how the economy works."  Barro (2008, viii) also 
writes: "Undergraduate macro textbooks and courses seem frequently to 
compromise good economics for presentations that are breezy, closely 
linked to arguments found in the popular press, and not very 
intellectually challenging.  But sacrificing solid economics to capture 
student interest is not necessary --- sound theory can be clearly 
written with vivid examples to reinforce it."  So why create a 
pedagogical device which mainly solidifies myths and confusions in 
students' minds.  Remember that it is these students who would one day 
become "the ... economists ... working in the subject."  Why not give 
them the correct tools from the start?

Thus, if one wants to explain the price level, one could adapt Alfred 
Marshall's (1923) "Diagrammatic Note on a Metallic Currency," 
substituting paper currency for the metal to do that rather than the 
AS-AD diagram derived from some theoretical myths (see pp. 68-75of my 
/Classical Macroeconomics/.).  To repeat, I can understand current 
macroeconomists who have little acquaintance with the history of 
economic thought or who think doing the history of economic thought 
constitutes wasteful "detours" from the macroeconomics they want to 
teach (Robert Frank and Ben Bernanke, 2002, xii) not recognizing the 
errors of the IS-LM and AS-AD models.  It baffles me when those doing 
the history of economic thought fail to help bury the mess.

James Ahiakpor