Another interview here with Steve Keen, conducted by the Institute for New Economic Thinking (INET). It is somewhat annoying that it is split up into so many videos. Also, I cannot seem to find Parts 5, 6, and 7, even though it is suppposed to be a 7 part interview. If anyone sees the other videos, let me know.
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It's been a good interview so far with Steve Keen. But out of curiosity Lord Keynes, have you seen Michael Emmmett Brady's Amazon.com review of the first edition of "Debunking Economics"?
ReplyDeletehttp://www.amazon.com/review/R7CKDCHY1QR34/
Brady grills Keen in much the same way Austrian School disciple Jonathan Finegold Catalan has grilled left-leaning economists like Paul Krugman and right-leaning economists like Alan Greenspan and Ben Bernanke...
I have just read this review. I'd hardly call it a "grilling". Most of his critique is devoted to Keynes's notion of uncertainty, the fundamental error supposedly being that we must distinguish between
ReplyDelete"different degrees of u, such as mild uncertainty, moderate uncertainty, acute uncertainty, great uncertainty or complete or total uncertainty in the limit as w approaches 0."
Let us suppose for the sake of argument that this is all true. The Post Keynesian idea of radical uncertainty is now merely the "complete or total uncertainty in the limit as w approaches 0."
How does this affect the Post Keynesian idea that capitalists often face radical uncertainty in this sense when making investment decisions, that investment is volatile, and that expectations are in an important way subjective? That fiscal policy is necessary? This clarification of Keynes's notion of uncertainty does not somehow undermine the foundations of Post Keynesian theory.
Moreover, does Brady have any policy recommendations, as a consequence of his clarification of degrees of uncertainty, that would be different from those of Post Keyensians?
I have read the first edition of Debunking Economics. There is a vast amount of material in it in addition to uncertainty theory. Keen's work on debt deflation and balance sheet recessions, for example.
Is there really nothing in the Post Keynesian program that Dr Brady finds constructive?
Furthermore, I am somewhat perplexed by Brady's claim that Post Keynesianism does not recognise different degrees of uncertainty. As far as I can see, even a quick look through the Post Keynesian literature does show Post Keynesians recognising degrees of uncertainty:
ReplyDeleteThe Elgar companion to radical political economy, p. 437.
John Edward King (ed.), The Elgar companion to post Keynesian economics, p. 13.
Jesper Jespersen, Macroeconomic methodology: a post-Keynesian perspective, p. 106.
Steven Pressman, A new guide to post Keynesian economics, p. 19.
In particular, I have read work by Jesper Jespersen (I can't remember where at the moment but will look it up) where he definitely talks about degress of uncertainty.
He has reviewed Hyman Minsky's writings and the Financial Instability Hypothesis well on Amazon.com. See his Amazon.com reviews of "Can 'It' Happen Again?" and "Stabilizing an Unstable Economy".
ReplyDeleteWhilst I can't speak for the man, his policy recommendations are conservative - curtail financial speculation and ensure the banking industry lends properly to the "sober people", as Adam Smith once said. Dr. Brady has also stated that the Post Keynesians are correct on a "general level", but they lack the technical aptitude to best the neoclassical economists. I suppose his academic training has shaped his view in this regard.
P.S. Check your e-mail please, LK.
Here is Jesper Jespersen:
ReplyDelete"Uncertainty is caused by lack of information. Therefore uncertainty might have different intensities or ‘stats of confidence’. You may feel(!) more or less uncertain, but except for rare cases all individual activities are characterized by (different degrees of) uncertainty, because one cannot know nor estimate the exact outcome. Hence, expectations are uncertain due to this inherent lack of information (and a constantly changing environment)."
Jesper Jespersen, "Post-Keynesian economics: uncertainty, effective demand & (un)sustainable development," Paper, Dijon-conference, Dijon, 10-12 December 2009. p. 8.
http://cemf.u-bourgogne.fr/z-outils/documents/communications%202009/Jesper.pdf
Here is Brady:
A decision maker would thus face different degrees of u, such as mild uncertainty, moderate uncertainty, acute uncertainty, great uncertainty or complete or total uncertainty in the limit as w approaches 0. Unfortunately, K follows the Shackle and Davidson definition of uncertainty, which is that there is only the case of total or complete uncertainty.
Is Brady saying Post Keyensians really think there is only ever "total or complete uncertainty"?
Yet Jespersen, an important Post Keyensian, is there on the record talking about degrees of uncertainty. Am I missing something?
Perhaps his problem is that they overstate their case of radical uncertainty and imply it can't be modelled, when it can be modelled as an interval. His mathematical training is better than mine, so you'd have to ask for an explanation from him. That's my best guess, really.
ReplyDeleteI attended a 1 hr talk by Steve on Friday. I think it is difficult to get from high level theorising to policy recommendations. But it needs to be done and fast. Steve is recommending a debt jubilee. But given that big banks aren't being allowed to go bankrupt how is cancelling the value of their assets going to happen?
ReplyDeleteIt ain't.
"But given that big banks aren't being allowed to go bankrupt how is cancelling the value of their assets going to happen?"
ReplyDeleteI imagine another major financial crisis and public outrage is likely to go someway towards the necessary policy steps, as Randall Wray has said.
LK,
ReplyDeleteWhat is your view on NGDP targeting? Do you think its possible?
My understanding is that NGDP targeting is a monetarist/neoclassical idea. To be honest, I'd need to look more careflly at it.
ReplyDeleteMy immediate reaction is that a CB cannot control NGDP but it sort of looks like they can, at least in normal' times:
ReplyDeletehttp://stumblingandmumbling.typepad.com/.a/6a00d83451cbef69e20162fc6c6fda970d-pi
It is a neoclassical idea but I think its main proponents are aware that M2+ are endogenous.
Winterspeak is not too optimistic about it, but as a target I don't see how it would be any less effective than our current setup. It basically monitors both sides of the dual mandate at once, in a sense, since NGDP includes inflation anyway.
ReplyDeleteI say we do both: switch to NGDP targeting AND recognize the limits of monetary policy to provide stimulus.
Yes you are probably right. I notice that the sheer size of debt is now becoming a discussion point. But people still equate "debt" with "public debt" and so still have not woken up to the real seriousness of the situation.
ReplyDelete