Noted neoclassical mainstream economist, Robert Mundell, has died at the age of 88 years.  Mundell won a Nobel (Riksbank) prize in economics for his extension of general equilibrium theory as applied to Keynesian macroeconomics into the international arena.  Whereas the neoclassical equilibrium version of Keynes’ macromodel (called ‘bastardised Keynesianism’ by Joan Robinson) described a ‘closed’ economy (i.e. no trade and cross border capital flows), Mundell and colleague Marcus Fleming developed an equilibrium model for an ‘open’ economy (that had international trade and cross-border money and capital flows).

The irony of the Mundell-Fleming equilibrium model is that it showed that there was no equilibrium possible!  A capitalist economy cannot simultaneously maintain a stable or fixed exchange rate with other currencies, as well as free movement of capital across borders and then expect that monetary policy can be used to control the level of interest rates and the money supply in…