Thursday, December 1, 2011

Keynes Repudiated Keynesianism?

This is a bizarre meme based on an anecdote about Keynes in his final days, recounted by Skidelsky:
“On Thursday 11 April he had lunch at the Bank after the regular meeting of the court. He sat next to Henry Clay; they discussed the American loan. Keynes said that he relied on Adam Smith’s ‘invisible hand’ to get Britain out of the mess it was in, and went on: ‘I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.’ ‘An interesting confession for our arch-planner,’ Henry Clay noted. The now-retired Montagu Norman, the recipient of Clay’s letter, wrote back: ‘About Keynes ... I think he relied on intellect, which perhaps means that he ignored the “invisible hand”, and I guess he was led astray by Harry White. But surely it is easy to arrange a loan if you ignore its repayment, and is there any hope of that, unless there is to be such an inflation across the Atlantic as will affect their claims and provide an easy way out?” (Skidelsky 2000: 470).
The following observations can be made:
(1) Was Keynes being a gracious and diplomatic lunch guest in making what was in fact a mere throw-away remark here?

(2) The context of this statement of Keynes is “the American loan.” That much is clear. The post war problems of the UK in its American loan and balance of payments difficulties were presumably also in Keynes’s mind.

(3) The idea that this statement shows Keynes clearly repudiating the ideas of the General Theory is absurd.

(4) I suspect that Keynes’s thinking in these days was influenced by the policy of the new Labour government and its more wide-ranging policies of economic intervention: on April 18, 1946, Keynes, in a private conversation, attacked the Labour government’s decision to “nationalise the road-hauliers, which he regarded as an unnecessary act of regimentation” (Skidelsky 2000: 471). Keynes was a lifelong liberal and had never supported the Labour party. It is not surprising that in his last days he was out of temper with the nationalisation program and other interventions of the Labour party. These programs were different from what he advocated in the General Theory, and went far beyond his own views.

(5) Let us say for the sake of argument that Keynes did repudiate the General Theory in his last days. Does this, then, provide good grounds in itself for dismissing the fundamental ideas of the General Theory or modern Keynesian economics? It would not.

The ideas of the General Theory stand or fall on their own merits, as do the theories of modern Post Keynesian economics. The attempt to dismiss Keynesian economics by appealing to this anecdote is as wrong-headed and foolish as Christian fundamentalists who try and discredit Darwinian evolution by invoking the fiction that Darwin repudiated his Origin of Species on his deathbed. We know, of course, that this story is a complete lie invented by a Christian apologist called Elizabeth Hope. But suppose it were true: that Darwin recanted the Origin of Species. Would such a thing provide good grounds for rejecting the modern theory of Darwinian evolution? Not in the least. Certainly not if Darwin provided no arguments refuting his original evidence. The theory presented in Origin of Species stands by itself and its truth depends on the cogency of the evidence and arguments. Modern science has reinforced the central ideas of the Origin of Species, and whatever the dying Darwin thought is irrelevant to the case that can be made for its truth. It is the same with the central ideas of the General Theory. In the end, it matters not one whit what Keynes thought in his last days or on his deathbed. Theories in the natural sciences, social sciences and economics stand and fall on their merits, not on what the original inventor of them thought about them in his last days.

(6) But as noted in (3), I see no evidence whatsoever that this comment of Keynes even shows any rejection of the General Theory. Keynes’s program of monetary and fiscal policy interventions to maintain aggregate demand is essentially compatible with private production of commodities and a capitalist economy. A greater concern for Adam Smith’s “invisible hand” does not require that Keynes rejected aggregate demand management.

(7) There are some interesting issues here relevant to my previous post about Jean-Baptiste Say’s later rejection of Say’s law. We should not reject Say’s law merely because Say came to disbelieve it. The fact that Say repudiated the original theory does not by itself constitute good grounds for us doing so, unless actual arguments are offered and we can evaluate them. Say’s law is false because it is flawed, and Say himself clearly worked out why it was flawed in his correspondence with Ricardo, giving arguments. Those arguments have merit.
As I have said in (5) above, it strikes me that this whole business is rather like Darwin’s mythical deathbed conversion, made light of here by Richard Dawkins in the video below.




BIBLIOGRAPHY

Skidelsky, R. J. A. 2000. John Maynard Keynes: Fighting for Britain 1937–1946 (vol. 3), Macmillan, London.

11 comments:

  1. What it does show though is that those opposing Keynesian views are operating in a religious mode rather than scientific mode.

    It's always what the man said that matters, not what the evidence shows to be the case.

    Keynes was not a prophet for some higher power. He's just a man who put forward some ideas.

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  2. "What it does show though is that those opposing Keynesian views are operating in a religious mode rather than scientific mode."

    Can you explain?

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  3. Can you explain?

    It shows gross ignorance of reason and logic, also characteristic of the worst elements of religious irrationality, to say that just because the author of an idea later rejected it that you have necessarily or seriously underminded the actual idea in any way.

    The libertarian obsession with trying to discredit Keynesianism by saying "Keynes recanted in his last days!!" is as ridiculous as the Christian fudamentalist saying Darwinian evolution is false because "Darwin recanted it and become a Christian on his deathbed!".

    Well, Darwin didn't, and even if he did, that is irrelevant to the truth of modern Darwinian evolution by natural selection.

    I see no evidence Keynes ever "recanted," and again, even if he did, that is irrelevant to the truth or falsity of modern Post Keyensian, neoclassical synthesis or New Keynesian economics.

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  4. Neil:

    "What it does show though is that those opposing Keynesian views are operating in a religious mode rather than scientific mode."

    Spoken like a true religious believer. It's the other way around. It shows that those in favor of Keynesian views are operating in a religious mode rather than a scientific mode.

    There is no science behind Keynesianism. There is only violent power and control. That's it. That's not scientific.

    LK:

    "It shows gross ignorance of reason and logic"

    That fallaciously presumes Keynesianism is reasonable and logical, which Austrians have proven it is not.

    "also characteristic of the worst elements of religious irrationality, to say that just because the author of an idea later rejected it that you have necessarily or seriously underminded the actual idea in any way."

    Then why did you do precisely that with Say's law in your last post?

    You only got upset by this tactic AFTER it was used against Keynes. Using it against Say? Permitted. Using it against Keynes! BANNED! LOL

    "The libertarian obsession with trying to discredit Keynesianism by saying "Keynes recanted in his last days!!" is as ridiculous as the Christian fudamentalist saying Darwinian evolution is false because "Darwin recanted it and become a Christian on his deathbed!"."

    The Keynesian wannabe obsession of trying to discredit Say by saying "Say qualified his own law in his latter days!" is as ridiculous as a Keynesian fundamentalist saying Austrianism is false because "Say qualified his own law and became a state interventionist on his death bed!"

    "I see no evidence Keynes ever "recanted," and again, even if he did, that is irrelevant to the truth or falsity of modern Post Keyensian, neoclassical synthesis or New Keynesian economics."

    I see no evidence Say ever "repudiated", and again, even if he did, that is irrelevant to the truth or falsity of Say's law.

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  5. Lk,

    I get that and I am in general agreement with your post but what i do not get is the comment i was responding to... how is opposing Keynesianism only through a religious mode than by other means?

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  6. Is that not in line with the comment in "General Theory" that once state intervention had got the overall economy fixed then market forces could work? From Chapter 24:

    "But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards."

    This seems consistent with the quote recounted by Skidelsky.

    In terms of the "eject" comment, this seems strange as Keynes NEVER ejected the market. For example, in Chapter 24 Keynes goes on to argue:

    "If we suppose the volume of output to be given, i.e. to be determined by forces outside the classical scheme of thought, then there is no objection to be raised against the classical analysis of the manner in which private self-interest will determine what in particular is produced, in what proportions the factors of production will be combined to produce it, and how the value of the final product will be distributed between them."

    So, given this, I would suggest that the issue is Henry Clay and HIS perceptions of Keynes and his ideas, rather than Keynes recanting.

    Iain
    An Anarchist FAQ

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  7. "But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards."

    That is an excellent quotation from the GT.
    Yes, I agree with your comments.

    Regards

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  8. And, as you imply, there is clearly the possibility that Henry Clay has exaggerated/ grossly distorted what Keynes said.

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  9. This is pathetic. He clearly refers to his economic thinking, not the American loan, not the UK, not the nationalizations, not even The General Theory. Economic thinking, as is self-explanatory, means his mode of reasoning about economics, whatever the topic. You're clutching at straws here trying to defend Keynesianism and to interpret Keyne's own clear words differently. Obviously, this is not your first post appearing as a dogmatic court scientist of social democracy and Keynesianism.

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  10. "He clearly refers to his economic thinking, not the American loan,"

    The context of their conversation:

    “On Thursday 11 April he had lunch at the Bank after the regular meeting of the court. He sat next to Henry Clay; **they discussed the American loan**. Keynes said that he relied on Adam Smith’s ‘invisible hand’ to get Britain out of the mess it was in, and went on: ‘I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.’ "...

    The context was the American
    loan. And a reading of Keynes' two major biographies confirms this.

    But, then, perhaps you're the sort Austrian/libertarian halfwit who thinks that empirical evidence can never prove anything?

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    Replies
    1. Have some empirical evidence, on me:
      http://www.youtube.com/watch?v=s4Ju0N0WJvo

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