Monday, December 19, 2016

A Lecture by Robert Skidelsky on Keynes’s General Theory

This is a video of Robert Skidelsky’s lecture on Keynes’s General Theory, given on 10th May, 2016 at Gdańsk University of Technology, Poland:

I have a few minor points:
(1) It is important not to let Keynes’ use of the expression “animal spirits” confuse people. Austrians and libertarians seize on this point, as I pointed out long ago here. Keynes used “animal spirits” in the sense of “a spontaneous [human] urge to action rather than inaction” as relevant to the actions of business people and economic agents. But this concept isn’t the important point in Keynes’ theory of business decision-making: the point was that business people are given over to waves of pessimism and optimism, and most of their decisions about investment are subject to varying degrees of qualitative uncertainty, and the probability of future events relevant to their decision-making cannot be given an objective probability score as in a priori probabilities.

The waves of business pessimism and optimism are a very great cause of the aggregate level of investment, and hence the booms and busts in a capitalist economy.

(2) George L. S. Shackle summed up the essence of Keynes’ theory as follows:
[sc. Keynes’s] ... theory of involuntary unemployment is perfectly simple and can be expressed in a paragraph, or in a sentence. If you express it in a sentence, you simply say that enterprise is the launching of resources upon a project whose outcome you do not, and cannot, know. The business of enterprise involves investment, the investing of large amounts of resources--huge sums of money--in things whose outcome you cannot be certain of, which could perfectly well turn into a disaster or a brilliant success.

The people who do this kind of investing are essentially gamblers and they can lose their nerve. And if they decide to withdraw from trade, they sweep their chips up from the table. If they decide it’s too risky, if their nerve gives out and they can’t bring themselves to go on investing, they cease to give employment and that is the explanation.
When business is at all unsettled--when there’s any sign at all of depression--or when there’s been a lot of investment and people have run out of ideas, or when their goods are not selling quite as fast as they have been, they no longer know what the marginal value product of an extra man is—it’s non-existent. How can you say that a certain number of men have a certain marginal productivity when you can’t know what the per unit value of the goods they would produce if you employed them would sell for?”
“An Interview with G.L.S. Shackle,” The Austrian Economics Newsletter, Spring 1983.
(3) the collapse of Keynesian theory and policy from the 1970s was the collapse of Neoclassical synthesis Keynesianism, not the heterodox Post Keynesian tradition that has been a far more accurate and realistic development of Keynes’ economic theory.

(4) An interesting point that Skidelsky makes from 1.18.14 is that Keynes’s General Theory did not use the more realistic imperfect competition model of his time (which had also been partly developed at Cambridge) but assumed competitive markets, and Keynes pointed out that all his arguments in the General Theory were fully valid in a world of competitive markets, not just in a world of imperfect competition.
Skidelsky has written some excellent introductory work on Keynes’ economics, as follows:
Skidelsky, R. J. A. 2010. Keynes: The Return of the Master (rev. and updated edn.). Penguin, London.

Skidelsky, Robert. 2011. “The Relevance of Keynes,” January 17
See also Skidelsky’s excellent three-volume biography of Keynes:
Skidelsky, R. J. A. 1983. John Maynard Keynes: Hopes Betrayed 1883–1920 (vol. 1). Macmillan, London.

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

Skidelsky, R. J. A. 2000. John Maynard Keynes: Fighting for Britain 1937–1946 (vol. 3), Macmillan, London.
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  1. Ahh the old good purely economic article i missed this type of articles.

  2. Reason magazine proves one of your claims LK.

    1. Currently reading "The Seduction of Unreason" by Richard Wolin (himself a leftist) and it's highly recommended as an early investigation into the kind of thinking that got us here. Wolin notes that the postmodern left actually borrows from the same philosophical cores as Fascism and when taken to its logical conclusion, ends up being a form of "Left Fascism", due to having the same Nietzschean, anti-rationalist and ethnonationalist cores as fascism but simple applies it to the inverse cultures as right-fascism does, treating historically non-dominant cultures as "purer" than more historically dominant cultures (whose members are subject to dehumanizing/scapegoating language). Check it out if you can.

      Also LK I think the members of the "Alt-Left" who are not racialists (such as Agent Commie) should consider changing their title to either "Realist Left" or perhaps "Old Left" due to Alt-Left being somewhat associated with racialism. It would likely be better for public relations if the group got larger.

    2. Sounds interesting, but very expensive.

  3. Hi LK,

    Point (4) is an important one. Davidson also made a similar point. Keynes was seeking to overthrow the view that the only reason for unemployment was sticky prices, wage rates, or interest rates which is a neoclassical view.

    Neo Keynesians and New Keynesians have adopted a neoclassical view and the NKs use the economics of imperfect competition, in the short run, to explain why prices and wages may be sticky in the downward direction.

    Keynes attempted to show that there are many equilibria of which full employment is the limiting case. In the real world, most equilibrium positions are at less than full employment. This is true whether you assume models of imperfect competition or the unrealistic view that perfect competition prevails.

    There are various fallacies of composition where inferring from micro to macro may be illegitimate. e.g. paradox of thrift, assumption that a cut in wages in one industry will have the same result if it occurs in most industries. A general fall in real wages will not only affect costs but also aggregate demand.


    John Arthur

  4. I did FINALLY arse myself to read a little of Keynes' General Theory a few weeks ago~! JMK is no light read, and I'm sure I missed a lot of what he was putting forth, but I did get about halfway through Ch. 19 on Wages. If I am getting what he says correctly, I agree with him: Lowering wages won't help because you cannot guarantee the whole economy will lower overhead to match that. IOW, I may take a job at $7.50 an hour instead of $15 and think I'm doing something, but that doesn't mean rent, utilities, food, etc are going to decrease to meet my lowered standard of living. Interesting thoughts~!

    I do find Ellis Winningham however, much better for a rudimentary, cut the BS explanation of how the Economy and the US Monetary system actually works. The simplicity of his message that's tailor-made to the Economics Novice like myself is something that we can use to get the truth out there beyond what the politicians are trying to keep us in the dark about:

    Real Progressives live with economics guru, Ellis Winningham:

    Basic breakdown of the money system and the US Economy: