Alan G Isaac wrote:
> I really do not understand this claim.  Surely you do not 
> mean that Keynes or "Keynesians" ignored considerations of 
> profitability?
> 


Surely I do. The Keynesians ignored considerations of profitability. The
best examples are when they considered fiscal policy. See the 
supply-sider critique either in Mundell or in Roberts.

  Roberts, Paul Craig (1984).  The Supply-Side Revolution. Cambridge, 
Mass.: Harvard University Press.


Another example is the idea that a solution to a macro problem is to 
stimulate investment with monetary policy. This suggests that the 
entrepreneurs who authorize borrowing to carry out the investment fail 
to account for the effects of the stimulus on the future prices of both 
the goods that they produce and sell and the resources they buy.

The Keynesians assumed a world in which such effects were disregarded. 
They assumed that resources are homogeneous, that resources are idle, 
and that the resource owners stand ready to have them employed at 
existing resource prices. In this event, there would be no effects of an 
increase in money on resource prices and consumer goods prices. Such 
assumptions ignore the profit reality that exists in a real economy. In 
a real economy, resources are of different grades. Other things equal, 
employers hire the high grade resources first. The unemployed resources, 
other things equal, are perceived to be of lower grade. Also, in 
anything but the imaginary unemployment economy of the Keynesians, 
conditions of profitability also play a role in decisions of workers to 
accept employment offers.

We can imagine a world in which (1) labor unions are so powerful that 
all employees come to be treated homogeneously by all employers and (2) 
unions force wages to be so high that workers are unemployed. But unions 
do not control the prices of other resources. Moreover, the proper 
utilitarian policy to reduce unemployment in such a world would seem to 
be to dissolve the unions.

It follows that the Keynesians either ignored profitability or they 
built models with little or no relevance to unemployment in a real 
market economy unencumbered by laws prohibiting free contracting among 
prospective employers and employees.

It is true that Keynesians targeted the entrepreneurs whose estimates of
profitability are slightly lower than a current market rate of interest.
But there is no credible reason to suppose that the projects started by 
people who borrow at the lower rate would, in fact, be profitable; given 
the effect of the additional money on prices. Moreover, a lower 
long-term rate tends to bias the borrowers in favor of long term 
projects. And there is certainly no reason to expect that, on the whole, 
long-term projects would be more profitable than shorter-term projects. 
To the contrary, the entrepreneurs who carry out longer-term projects 
are in a worse profit position, other things equal, than those who carry 
out shorter-term projects, if they misjudge future prices.

Regarding the idea that Keynesianism is devoted to the short-run or to 
special conditions, do you think that the linkages understood by Walras 
and the others would disappear in the short run or under the special 
conditions of the Great Depression? One might argue that other 
conditions that were present at the time are more important than the 
linkages. But the Keynesians did not explicitly make such an argument. 
They simply disregarded the linkages without explaining why. And so will 
the students who are taught this stuff.

A comment on Manuel Neto's remarks. I think that Clark's fundist view 
was more subtle that you give him credit for. My admittedly 
controversial reading sees him as a precursor of Knight for whom the 
fund was a surrogate for a simplifying assumption about the natural rate 
of growth of capitalism due to what we would today call increases or 
improvements in human capital. The critique of the Austrians by these 
writers was, in effect, a critique of Bohm Bawerk, who failed to follow 
Menger in emphasizing the importance of human capital in growth. On the 
other hand, Clark especially and sometimes Knight seemed to trivialize 
the revered time structure of production. Nevertheless, it would be 
wrong in my opinion to regard Knight as having disregarded the time 
structure. See for example:

Knight, F. H.  (1941) "The Business Cycle, Interest and Money: A 
Methodological Approach." Review of Economic Statistics. 23 (2). 
Reprinted in Knight (1956) On the History and Method of Economics.
Chicago: University of Chicago Press.

Clark, to my less than encyclopedic knowledge, wrote very little about 
the business cycle.

Best wishes and thanks for the comments on my opinion.

Pat Gunning