A quick post. Counterpunch has a quite good article by Mike Whitney about Keynes and Keynesian economics:
Mike Whitney, “Hating Keynes, The Problem of Unemployment,” Counterpunch.org, April 11, 2011.
Most of his comments seem right to me, especially his emphasis on the role of uncertainty in modern free market systems. Whitney, however, does not mention the development of Keynes’ work in Post Keynesian economics, the macrotheory which should be mainstream economics.
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Typical. After pathetic swipe at "principled Libertarianism" (and when have Republicans ever been that?), there is no attempt to refute the complete evisceration of Keynes by the Austrians. Whitney, like you LK, hasn’t the slightest familiarity with even basic Austrian concepts. If you had such familiarity, you’d show it. You don’t because you don’t.
ReplyDelete"hasn’t the slightest familiarity with even basic Austrian concepts"
ReplyDeleteI disagree - totally.
I am perfectly familiar with the concept of human action, the trivial observation that human action is purposeful, and the concept of economic scarcity etc.
Well, Mike Whitney should understand that very few people in this world have bothered to read and finish General Theory. Internet posters' hate of Keynes (or often even love of Keynes) is often just pure political posturing and talking from the butt.
ReplyDeleteI can place seven categories of people that I have seen in the blogosphere and in the internet.
1) People who claim to be adherents of Keynes without having read a single page of General Theory. Found typically in Huffington Post and American political news sites.
2) People who claim Keynes is wrong and easily refuted without having read a single page of General Theory. Found typically among YouTube scholars.
3) People who have not read General Theory in its entirety or have yet to finish it, and say they know all of Keynes' ideas and claim themselves to be his disciples. Slightly more erudite columnists and academics, who still can only give a vague description of Keynes' ideas.
4) People who have not read General Theory in its entirety or have yet to finish it, and say Keynes is wrong about everything. Again, slightly more erudite columnists and writers.
5) People who have read General Theory cover to cover and agree with it fully. A small segment of young economists back when General Theory was released and the few true believers today.
6) People who have read General Theory cover to cover and disagree with it or regard its ideas as not particularly original or relevant. VERY tiny group.
7) People who know not to give an opinion on the book or the author until they damn well finish it to the last page.
Till date, I am the only one I know who falls into the last group.
I will not give an opinion on the Bible until I read it in the original Koine. I will not give an opinion on the Talmud without reading it in the original Hebrew. I will not give an opinion on the Koran until I read it in the original ancient Arabic. And I will least of all give an opinion on a simple economics treatise without having read it first.
I have noticed the same happening with Hayek. You see, if you go to sites like Revolutionary Left, people, who have not read Hayek, are curious if there any refutations of Hayek. Or they will say he is not worth reading, because some biased biography showed him to be an evil person. See, they must be coated from dangerous thinkers, lest they be exposed to their ideas and melt in fright! It would be a Raiders of the Lost Ark situation. Hayek was evil! He was a reactionary! A Rockefeller-Rothschild puppet and a conductor of the Illuminati's Satanic rituals! Aaaargh!
I am sure you know exactly what I am talking about.
It is very discouraging to find Counterpunch, which has presented so many great antiwar articles, fall into the “government can see long term” line of non-thinking. The reason there are so many wars is because government officials cannot see past the next election and they start wars to distract and mislead not-so-bright voters (and to pay off supporters). A main purpose of the fiat money regime is allow the current funding of wars without the public catching on that they are being fleeced in the form of diluted currency. Basically, we have the wars which Counterpunch opposes for the same reasons we have the fiat money regime: The short term vision and the desire to loot on the part of government officials.
ReplyDeleteHere's Keynes again from Chapter 12 of The General Theory:
"For my own part I am now somewhat skeptical of the success of a merely monetary policy..... I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment."
The idea the that the government either can and/or does calculate long term is total nonsense without any basis in fact, history or experience.
"The idea the that the government either can and/or does calculate long term is total nonsense without any basis in fact, history or experience."
ReplyDeletePatent nonsense.
If that were even remotely true, there would be no functioning roads, bridges, highways, etc.
Bob's point was a somewhat legitimate one.
ReplyDeleteThe government can not calculate long term.
Why?
Because even private business or private individuals can not calculate long term. No human can easily envision and then act on what is going to happen 30 years later.
Look at all the renewable energy projects across the world. If, in the distant future, some new discovery out of nowhere comes to optimize the energy production from a single gallon of oil to 10 times of what it is now, every one of these projects will see net present values fall sharply into the negative. Yes, it is an unlikely, unexpected breakthrough. But are such energy project managers really going to think they will be safely insulated from unlikely, unexpected breakthroughs? Even across the span of 20 years or 30 years? They don't even know what will happen next year!
"Because even private business or private individuals can not calculate long term."
ReplyDeleteIn other words, fundamental uncertainty affects private investment decisions, destroying any tendency to "pattern/plan coordination" (Hayek/O'Driscoll and Rizzo) or neoclassical full employment equilibrium.
Prateek,
ReplyDeleteI don't agree that one should not comment unless one has read original works - in the original language.
Hardly any physicists would consider it necessary to read the original Newton, Maxwell or Einstein, yet they understand and use their theories all the time.
I don't need to read neo-liberal economics in the original to realize that it is incredible that it has any intellectual respectability.
"I don't need to read neo-liberal economics in the original to realize that it is incredible that it has any intellectual respectability."
ReplyDeleteThis statement tells me everything I need to know.
1) Usage of an empty insubstantial political rhetoric, such as the word "Neo-Liberal".
2) Rejection of economics on basis of above mentioned partisan political rhetoric.
3) Deciding that certain economics is wrong on the basis of second-hand sources, as is typical of Wikipedia scholars and people miserly with textbooks.
4) Taking the position of refuting a work, without knowing the actual work.
I think Ed Milliband may have a job for you, since you are such a dedicated and loyal party worker, Anonymous.
Sorry for the snark, but what you say is pure politics and has nothing to do with economics.
Remember, Catholics read works of atheists like Christopher Hitchens and other dangerous thinkers all the time. Seemingly narrow-minded religious folk are ahead of the curve compared to economics students and teachers today. You are merely part of a trend, not an exceptionally bad case.
PS: You damn well better read Einstein before claiming to use Einstein's theories, because Einstein's ideas have been strawmanned and misrepresented over and over. Indeed, when Einstein published his work, very few claimed to understand it. And somehow, people will understand Einstein before ever having read him. Such nonsense!
"Usage of an empty insubstantial political rhetoric, such as the word "Neo-Liberal".
ReplyDeleteThe term "neoliberal" has a perfectly clear meaning: it refers to the New Consensus macroeconomics, and more particularly to the more extreme neoclassical version of it called "New Classical economics".
Such policies have been implmented via various governments and by the IMF and World Bank over the 30 years under the name "globalization" or the "Washington consensus".
If it refers to economics developed in the past 30 years, why was Anonymous talking about it in reference to Hayek? I am assuming he was referring to Hayek, because that's one example I chose in the point I was making, and he replied to that point.
ReplyDeleteEven if Neo-Liberal has perfectly clear meaning, it is thrown around carelessly these days. Alexander Coburn once called the 1890s a time of neoliberalism. Heh. So when was neoliberalism just plain liberalism? Indian journalists writing for Frontline or otherwise will say it is neoliberalism to build an airport (where there already was an airport), neoliberalism to charge tolls on congested highways, neoliberalism to increase public sector pay, neoliberalism to decrease public sector pay,.etc,.etc,.etc.
This soup is too hot! Neoliberalism! Kids these days have no respect! Neoliberalism!
And another thing.
ReplyDeleteIMF and World Bank don't implement policies.
Robert McNamara once said that his goal was to raise a certain amount of money and spend a certain amount of money. When that target was reached years later, he said he achieved his goals. Rinse and repeat.
The World Bank doesn't worry about how it uses money. They are using other people's money, so they don't have to economize it. They spend it on other people, so they don't have to seek highest value for it. The governments that give the World Bank money also use other people's money, and are unconcerned about economizing or seeking highest value for it. The governments that receive World Bank money are unconcerned about economizing it or using it for any meaningful purpose. Those governments don't have to implement a damn thing.
IMF lended money to Indonesia's corrupt regime over and over and over again. They requested reforms, but as pure suggestions. None of them was accepted. And IMF continued lending money. And then Indonesia went bust. Because its corrupt leaders were subsidised for failure by IMF. Russia too never had to reform anything while it was generously getting dumped with loans, and only after things got too bad did they consider dramatic changes; changes that would have been less dramatic if they accepted reforms earlier.
"Liberalization" and "globalization", which only have happened less than partially in the Third World, only happened because those countries were bankrupted and had no choice. Nothing was never imposed. Suharto doesn't willingly reform or privatize industries that he distributed to his friends and family. He doesn't stop priority sector lending in banking to his friends and family, because he embraced any Washington Consensus. Else, why would he refuse to do so over and over?
"Usage of an empty insubstantial political rhetoric, such as the word "Neo-Liberal"
ReplyDeleteOne does not need to know the full body of literature to reject obviously and blatantly false ideas. For instance money multiplier. Or loanable funds. Or even hole-digging-and-filling.
Prateek Sanjay is giving us a classic Courtier's Reply.
ReplyDeleteMike,
ReplyDeleteAnd most insulting of all is the bizarre claim that no one else but them is familiar with ideas such as economic scarcity and that human action is purposeful, etc. etc.
Regards
It probably is a Courtier's Reply, except a Courtier's Reply, among other things, involves avoiding the argument in order to rebut it, and my post had no other argument to make than itself.
ReplyDeleteAnd I wasn't even rebutting anything. Quite ironically, my post was a simple agreement with the original writer Mike Whitney that people should read Keynes before deciding Keynes was wrong.
I don't understand LK's response, since it has more to do with Bob Roddis' post than mine. I think he makes the mistake of lumping me in with him?
"I don't understand LK's response, since it has more to do with Bob Roddis' post than mine"
ReplyDeleteYes, that comment was directed at Bob Roddis.
There is certainly something to be said for reading things in the original, especially the General Theory, though that
has its limitations.
For example, you can have a highly advanced understanding of Newtonian/classical mechanics, without reading Newton's Philosophiae Naturalis Principia Mathematica (1687), a work which is also written in Latin, and which would be inaccessible to all but people knowing that dead language.
What do you think about the fact that the critics of Keynes (to whom you often respond in this blog) have probably not read Keynes properly? Shouldn't that be a convincing reason that those people read Keynes first?
ReplyDeleteBut of course, I am guessing that, even after General Theory, one is expected to read the various follow-up books of the same theories or the commentaries on it, in order to get the right idea?
I've just watched the great Keynes documentary. It claims that prior to Keynes, NO ONE could possibly explain how the market might run off the tracks nor had anyone allegedly managed to explain the causes of the Great Depression.
ReplyDeleteThe essence of the Austrian theory is that most everything we experience as horrible in the world of economics can be attributed to Keynesian-style policies in the broad sense that government spending and money dilution are at the root of most evil. In other world, it’s all your fault. (I refuse to get into a pissing contest of guessing whether Keynes would have or would not have supported money dilution and/or unpayable debt as a solution to a particular Keynesian-induced boom/bust situation).
The Austrian critique existed in its almost full fledged glory PRIOR to the anything Keynes ever wrote. Except for two off-handed paragraphs that do not identify the Austrian theory (and which demonstrate a complete lack of comprehension by Keynes), there is no mention of the Austrian theory in “The General Theory”. Neither Keynes nor his acolytes EVER bother to identify, much less refute, basic Austrian concepts which are axiomatic to human existence. For starters, the entire Keynesian scheme is defective ab initio due to THE KNOWLEDGE PROBLEM.
Further, the essence of the Keynesian theory is that no prior economic theory could nor did explain depressions such as the Great Depression and therefore markets need the guiding hand of the omniscient magic bureaucrat. That is a lie and a complete falsehood because the Austrian theory explained the cause of depressions (whether one agrees with it or not). The Austrian explanation was purposefully and meticulously ignored by Keynes. That Keynesian dog and pony show continues to this day as exemplified by this “documentary”.
Prateek Sanjay,
ReplyDelete"What do you think about the fact that the critics of Keynes (to whom you often respond in this blog) have probably not read Keynes properly? Shouldn't that be a convincing reason that those people read Keynes first?"
You are entirely correct in these comments and the one following. We can agree on this.
"The Austrian explanation was purposefully and meticulously ignored by Keynes."
ReplyDeleteSadly, your reading of history is wrong.
Hayek and Keynes debated each other many times.
Hayek's pupils at the LSE like Kaldor - who knew his theories perfectly well - abandoned Austrian economics after Hayek and the Austrians were roundly defeated in the intellectual battles of the 1930s.
Austrians had their "moment". They failed totally to convince people of their theories.
And as for your Keynes bashing, there are actually quite a few similarities between Keynes' and Hayek' thought in some important areas of economics.
ReplyDeleteYou might care to read this:
http://thinkmarkets.wordpress.com/2009/03/31/lord-keynes-a-hayekian-appreciation/
"Neither Keynes nor his acolytes EVER bother to identify, much less refute, basic Austrian concepts which are axiomatic to human existence."
ReplyDeleteWhat?
You mean the idea that all human action is purposeful?
That there is a difference between "free goods" and "economic goods", in terms of the scarcity of the latter.
That we have potentially unlimited human needs and wants, but limited commodities to satisfy those needs and wants?
These ideas require no "refutation" because they are perfectly compatible with Keynesian economics.
On the hordes of Austrian nonsense about the human action axiom, see here:
http://socialdemocracy21stcentury.blogspot.com/2011/02/limits-of-human-action-axiom.html
""The idea the that the government either can and/or does calculate long term is total nonsense without any basis in fact, history or experience."
ReplyDeletePatent nonsense.
If that were even remotely true, there would be no functioning roads, bridges, highways, etc."
Lord Keynes, I don't exactly see how governments can calculate the long term total whatever that is. Governments are made up of people. Businesses are made up of people. All people face fundamental uncertainty.
Planning of roads, highways and freeways requires long time planning.
ReplyDeleteThat we face fundamental uncertainty does not mean certain long term planning cannot work, either by the state or private business.
As a matter of fact, long-term planning has much higher chances of success compared to any short-term planning over long-term horizon. Well, some of long-term trends are obvious even to primary school kids. Private business can do long-term planning as well but it is not really interested in carrying those plans out.
ReplyDeleteAnd by the way, there is another way to argue about it. If private business can do profitable things better than the government (in general true), then the government has to leave all profitable activities to the private sector. This also implies that the government should engage only in non-profitable activities or activities were profits can not be easily quantified or measured. Like any long-term stuff.
ReplyDeleteSomething something, have you actually considered that if something was not profitable, it was not worth doing in the first place?
ReplyDeleteYou are basically arguing that it's a good idea to create a deficit of wealth by putting your scarce capital into an activity that will reduce the amount of capital you have left afterwards.
The high cost of such an activity is merely a reflection of reality - too many resources have to be diverted from other uses to put to that task.
The low gain of that activity is merely a reflection of another reality - other people are not willing to divert their resources from other uses in order make use of the fruits of this activity.
Let's remember that even nonprofits have to show a surplus in order to get money for reinvestment and replacement in their assets.
Prateek, by scarce capital you obviously mean real resources and not financial ones. There is no such thing as scarce financial resources in the fiat non-convertible system with floating exchange rates. Neither for the government nor for the private sector.
ReplyDeleteBy saying that if something is not profitable it is not worth doing you obviously assume a monetary measure of profitability. “Profitability” is never an issue for a monetary independent government. There is no reason to expect government to make a profit. Let’s remember that monetary profit on one side of equation means a monetary loss on another side. By requiring government to make a profit you require that the private sector bears a monetary loss. Is it really what you want?
But it is a completely different story on the real side of economy. Yes, government by spending engages real resources in certain activities. But government is just a tool of society. It does not eat wheat and it does not drink milk. So your argument that government diverts too many resources from the use by others is pure ideology. Government is just a tool of all “others” in the country. Some “others” can clearly have different opinions then other “others”. But if first “others” lost in the last elections they have zero right to realize their claims on resources for their “others” tasks.
Besides this, given persistently high unemployment during the last several decades it is hard to argue about the lack of real resources which government “steals” from the ever-profitable private sector.