Steve Keen on Behavioral Finance, Lecture 11

This is lecture 11 on behavioral finance by Steve Keen. In this last lecture, Keen deals with the financial crisis of 2008 and subsequent crisis of debt deflation. A great lecture.

Jerry O’Driscoll on Chicago and Vienna

Jerry O’Driscoll has an interesting post here on the differences he sees between the Austrian school and Chicago school:

Jerry O’Driscoll, “Chicago and Vienna,” ThinkMarkets, October 30, 2011.

Of course, the Chicago school actually includes a number of different strands in economic thought, and one of the most interesting was the interwar school of the 1920s and 1930s, as follows:

First Chicago School of 1920–1945

Frank H. Knight (1885–1972)
Jacob Viner (1892–1970)
Henry C. Schultz (1893–1938)
Paul H. Douglas (1892–1976)
Oskar Lange (1904–1965)
Henry C. Simons (1899–1946)
Lloyd W. Mints (1888–).

For a short introduction to the Chicago School, see here (and for the Austrian school see here). A peculiar exception to the general free market temper of the interwar Chicago school was the market socialist Oskar Lange, who became a professor in 1938.

Jerry O’Driscoll makes the fascinating point that some viewed the interwar Chicago school as “leftwing” and some members of it were “‘Keynesian’ on fiscal policy before Keynes.” This should be related to Milton Friedman’s own description of the differences between the views of the London School of Economics (as influenced by Hayek) and the Chicago school on the depression of the 1930s:

“Lerner had been trained at the London School of Economics where the dominant view was that the depression was an inevitable result of the proceeding boom; that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt; that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it .... The intellectual climate at Chicago had been wholly different from that at the LSE. My teachers regarded the depression as largely the product of misguided government policy. They blamed the monetary and fiscal authorities for permitting banks to fail and the quantity of deposits to decline. Far from preaching the necessity of letting deflation and bankruptcy run their course, they issued repeated calls for government action to stem the deflation. There was nothing in these views to repel a student, or to make Keynes attractive. On the contrary, so far as policy was concerned, Keynes had nothing to offer those of us who had sat at the feet of Simons, Mints, Knight, and Viner.” (Friedman as quoted in Skidelsky 1992: 379).

Skidelsky also notes that Jacob Viner’s review of Keynes’s General Theory was on the whole constructive (more so than that of Frank Knight), even if differences remained (Skidelsky 1992: 378).

BIBLIOGRAPHY

Boettke, Peter J. “Austrian School of Economics,” Concise Encyclopedia of Economics (2nd edition).
http://www.econlib.org/library/Enc/AustrianSchoolofEconomics.html

Friedman, M. 1998. Two Lucky People: Memoirs, University of Chicago Press, Chicago and London.

Skidelsky, R. J. A. 1992. John Maynard Keynes: The Economist as Saviour, 1920–1937 (vol. 2), Macmillan, London.