Patinkin on IS-LM: an Alternative to Modigliani

This paper studies Patinkin's contribution to the development of IS-LM, mostly Money Interest and Prices (1956), by comparing it to Modigliani's (1944, 1963). Patinkin's originality, it is claimed, lies in his analyzing the IS-LM model with a Walrasian methodology. Whereas Modigliani lacked an adequate method to deal with general equilibrium, his Walrasian approach allowed Patinkin to complete, to correct and to clarify the IS-LM model. However, in spite of its superiority, Patinkin's Walrasian recasting of the IS-LM model did not replace Modigliani's model as the referential version of IS-LM. To explain this fate, it is contended that Patinkin's work marked a methodological bifurcation in the history of IS-LM, opening a route departing from the original conception of IS-LM associated with Hicks and Modigliani and which was Marshallian in spirit.