I say we’ll be arguing about this stuff for the next 100 years at least.
Comments
Is Keynes finished? — 18 Comments
Not me, but you stupids persons kan.
The coming debacle in Europe might add some urgency to the argument. It will be interesting to see who or what is reborn from the ashes.
“I say we’ll be arguing about this stuff for the next 100 years at least.”
You are a woman making an aggressive joke, correct?
Is Krugman finished?
Robert J. Samuelson says yes.
FWIW, I agree.
Question is: If Keynes were alive today would he be a “Keynesian” (as that term has come to be understood)? There is no way that Keynes would have supported the on-going deficit spending being done in his name. My understanding is that Keynes believed that government deficits resulting from government “stimulus-spending” would be repaid from the “surplus” in the subsequent rebound. He never factored in what politicians would do with such a surplus nor the endless spending “green-light” they saw. Looking at the economic mess here, and the bigger mess in Europe, I would say Keynesian “economics” is finished.
Keynesian-inspired policies are proving ineffective. But mainstream economics is still trapped in the Keynesian framework.
It is true, too, that neo-Keynesian policy has mutated significantly from what JMK himself suggested. What is not clearly defined cannot be contradicted.
I suggest we have run past the usefulness of the Keynesian models. They have no account for debt, and technology has made debt the primary means of economic exchange. It is like Newtonian mechanics, unable to comprehend the particles that advancing science revealed.
Why not? We’re still arguing about Marx over 100 years later. {/eyeroll} One would think that had been settled.
Keynesianism is naturally popular with political leaders because it gives the government more power over the economy. Austrian economics, not so much.
Once had a history teacher who asked the class, “what happened in 1776?” After, an uncomfortable minute, one student decided to get it over with and give the obvious answer. The teacher replied, “[t]hat was nothing! “What happened in 1776 was that Adam Smith’s ‘Wealth of Nations’ was published.” The Declaration of Independence and “The Wealth of Nations” represent the two essential pillars of freedom, the first, political; the second, economic.
effess:
Ooh, I like that teacher!
I didn’t address your earlier comment, where Keynes advocated running a deficit during economic downturns, and a surplus during boom times. Of course, politicians prefer to spend more than they take in all the time. That suggests to me that Keynes failed to understand human nature.
Krugman will never get it. (Once you get the Nobel for going down the wrong path, you can never turn around.)
His three points do not verify Keynes, they verify that we headed into a deep depression.
Governments are broke. Only “new wealth” will be able to pay off such massive debt, and communists/socialists/Keynesians do not know how to create new wealth, only how to tax old wealth.
Keynes and AGW, two peas in a contrived pod…
As long as their is afree state needing to be collapsed any moron providing a unfalsifiable position facilitating dictatorship to rescue thepeople frm such results he will be useful
Afer that, its not needed at all
In fact krugman should answer one question
In the absence of economy what usefulness is he?
Without a free press (or somewhat free) what need is there for a person that advocates its end and gives bad advice?
Tday he serves the point of a false cogent alternative, in a planned economy what use is there for an economist? Administration sans economy and servitude need nothing he can provide!
Could he explain politburo actions. And plans to people who have no choice or influence? Could he even speak his (wrong) mind? Who would listen? What if he then told the truth? What if he changed his mind?
What if the pragmatic thing would be to remove the burden of his existence for the good of the thankless many?
“I didn’t address your earlier comment, where Keynes advocated running a deficit during economic downturns, and a surplus during boom times. Of course, politicians prefer to spend more than they take in all the time.”
Exactly. The argument from a politician’s point of view (especially a left-leaning one) practically writes itself:
– When we’re in an economic downturn people need help so we have to spend more.
– When we’re in an economic boom we have a chance to fix every problem known to man so we really should spend more.
Of course, since needs are essentially infinite when you think you’re spending someone else’s money, there is no surplus in the boom times because it all gets spent. After all, there’s plenty of money, right?
“That suggests to me that Keynes failed to understand human nature.”
Bingo. As did Karl Marx.
Keynesianism is government central planning. When government is in the business of allocating economic resources, it inevitably leads to an inefficient, corrupt, mis-allocation of scarce resources.
A Democrat House, filibuster proof Democrat Senate and a Democrat President passed a nearly $1 trillion Keynesian stimulus bill. The result? About half the money went to state and local governments. That prevented the state and local governments from “right-sizing” to the new economic reality they faced. They avoided laying off state employees, so that the union bosses could keep collecting union dues which would then be funnelled to Democrat campaigns in the 2010 elections. (Fortunately, the Tea Party recognized this vile corruption and rose up).
Other Democrat constituencies were also favored with much of he remaining stimulus. I read that only about 5% of the total stimulus went to fund “infrastructure”, which is what Keynes himself recommended.
The other way to do fiscal stimulus is the much maligned Bush tax cuts. Contrary to popular Democratic demagoguery, EVERYBODY who drew a paycheck at the time the tax cuts were enacted got a tax cut, not just the rich as we heard endlessly for 8 years. Even the staunchest of Democrats, like George Soros, got a tax cut. The person who received the tax cut then gets to decide based on his unique circumstances how best to spend, save, or invest the extra money he took home each pay period. Which is more fair, letting the people who earn the money decide how to save, spend or invest it, or let politicians borrow money on your behalf and decide how they want to spend it – and stick you and your kids with the bill.
The answer seems obvious to me.
I do not have comprehensive knowledge of Keynes’ philosophy; but, from what I have read, his policy prescriptions are compatible with Conservatism.
First, he recognized that the market, as the singular democratic process, is superior to central planning by individuals and groups with limited knowledge and perspective.
Second, he recognized that some enterprises were naturally and effectively predisposed to, at minimum, central coordination. This is entirely in line with the wisdom of America’s founders.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
The key to constraining the establishment of a de facto authoritarian monopoly is the phrase “general Welfare”. The founders recognized that involuntary exploitation, whether for reason of redistribution or retribution, is a principal cause of progressive corruption of individuals and society.
In “The General Theory of Employment, Interest and Money”, he identified at least one example of where central authority is desirable and strictly within the purview of the authority granted to civil servants. The notable example is the promotion of policies which promote full employment of the eligible population.
Third, apparently, he advocated for “stimulus” in the form of government spending with previous surplus revenue (e.g. “rainy day fund”). He did not, again from a limited review, advocate for the creation of a virtual economy (e.g. premeditated creation of false demand signals through the accumulation of debt).
The process and means followed by the current administration which are, ostensibly, contingent upon recommendation by his advisers, would therefore be considered incompatible with Keynes’ advice.
Dreams of physical, material, and ego instant gratification will not be denied.
n.n:
Full employment is a political goal. It is an invented target. How can we know how many workers working how many hours for how much pay under which conditions is the optimal solution?
The weather influences how much work is worth. Until we can predict the weather, we cannot know the terms of full employment.
Not me, but you stupids persons kan.
The coming debacle in Europe might add some urgency to the argument. It will be interesting to see who or what is reborn from the ashes.
“I say we’ll be arguing about this stuff for the next 100 years at least.”
You are a woman making an aggressive joke, correct?
Is Krugman finished?
Robert J. Samuelson says yes.
FWIW, I agree.
Question is: If Keynes were alive today would he be a “Keynesian” (as that term has come to be understood)? There is no way that Keynes would have supported the on-going deficit spending being done in his name. My understanding is that Keynes believed that government deficits resulting from government “stimulus-spending” would be repaid from the “surplus” in the subsequent rebound. He never factored in what politicians would do with such a surplus nor the endless spending “green-light” they saw. Looking at the economic mess here, and the bigger mess in Europe, I would say Keynesian “economics” is finished.
Keynesian-inspired policies are proving ineffective. But mainstream economics is still trapped in the Keynesian framework.
It is true, too, that neo-Keynesian policy has mutated significantly from what JMK himself suggested. What is not clearly defined cannot be contradicted.
I suggest we have run past the usefulness of the Keynesian models. They have no account for debt, and technology has made debt the primary means of economic exchange. It is like Newtonian mechanics, unable to comprehend the particles that advancing science revealed.
Why not? We’re still arguing about Marx over 100 years later. {/eyeroll} One would think that had been settled.
Keynesianism is naturally popular with political leaders because it gives the government more power over the economy. Austrian economics, not so much.
Once had a history teacher who asked the class, “what happened in 1776?” After, an uncomfortable minute, one student decided to get it over with and give the obvious answer. The teacher replied, “[t]hat was nothing! “What happened in 1776 was that Adam Smith’s ‘Wealth of Nations’ was published.” The Declaration of Independence and “The Wealth of Nations” represent the two essential pillars of freedom, the first, political; the second, economic.
effess:
Ooh, I like that teacher!
I didn’t address your earlier comment, where Keynes advocated running a deficit during economic downturns, and a surplus during boom times. Of course, politicians prefer to spend more than they take in all the time. That suggests to me that Keynes failed to understand human nature.
Krugman will never get it. (Once you get the Nobel for going down the wrong path, you can never turn around.)
His three points do not verify Keynes, they verify that we headed into a deep depression.
Governments are broke. Only “new wealth” will be able to pay off such massive debt, and communists/socialists/Keynesians do not know how to create new wealth, only how to tax old wealth.
Keynes and AGW, two peas in a contrived pod…
As long as their is afree state needing to be collapsed any moron providing a unfalsifiable position facilitating dictatorship to rescue thepeople frm such results he will be useful
Afer that, its not needed at all
In fact krugman should answer one question
In the absence of economy what usefulness is he?
Without a free press (or somewhat free) what need is there for a person that advocates its end and gives bad advice?
Tday he serves the point of a false cogent alternative, in a planned economy what use is there for an economist? Administration sans economy and servitude need nothing he can provide!
Could he explain politburo actions. And plans to people who have no choice or influence? Could he even speak his (wrong) mind? Who would listen? What if he then told the truth? What if he changed his mind?
What if the pragmatic thing would be to remove the burden of his existence for the good of the thankless many?
“I didn’t address your earlier comment, where Keynes advocated running a deficit during economic downturns, and a surplus during boom times. Of course, politicians prefer to spend more than they take in all the time.”
Exactly. The argument from a politician’s point of view (especially a left-leaning one) practically writes itself:
– When we’re in an economic downturn people need help so we have to spend more.
– When we’re in an economic boom we have a chance to fix every problem known to man so we really should spend more.
Of course, since needs are essentially infinite when you think you’re spending someone else’s money, there is no surplus in the boom times because it all gets spent. After all, there’s plenty of money, right?
“That suggests to me that Keynes failed to understand human nature.”
Bingo. As did Karl Marx.
Keynesianism is government central planning. When government is in the business of allocating economic resources, it inevitably leads to an inefficient, corrupt, mis-allocation of scarce resources.
A Democrat House, filibuster proof Democrat Senate and a Democrat President passed a nearly $1 trillion Keynesian stimulus bill. The result? About half the money went to state and local governments. That prevented the state and local governments from “right-sizing” to the new economic reality they faced. They avoided laying off state employees, so that the union bosses could keep collecting union dues which would then be funnelled to Democrat campaigns in the 2010 elections. (Fortunately, the Tea Party recognized this vile corruption and rose up).
Other Democrat constituencies were also favored with much of he remaining stimulus. I read that only about 5% of the total stimulus went to fund “infrastructure”, which is what Keynes himself recommended.
The other way to do fiscal stimulus is the much maligned Bush tax cuts. Contrary to popular Democratic demagoguery, EVERYBODY who drew a paycheck at the time the tax cuts were enacted got a tax cut, not just the rich as we heard endlessly for 8 years. Even the staunchest of Democrats, like George Soros, got a tax cut. The person who received the tax cut then gets to decide based on his unique circumstances how best to spend, save, or invest the extra money he took home each pay period. Which is more fair, letting the people who earn the money decide how to save, spend or invest it, or let politicians borrow money on your behalf and decide how they want to spend it – and stick you and your kids with the bill.
The answer seems obvious to me.
I do not have comprehensive knowledge of Keynes’ philosophy; but, from what I have read, his policy prescriptions are compatible with Conservatism.
First, he recognized that the market, as the singular democratic process, is superior to central planning by individuals and groups with limited knowledge and perspective.
Second, he recognized that some enterprises were naturally and effectively predisposed to, at minimum, central coordination. This is entirely in line with the wisdom of America’s founders.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
The key to constraining the establishment of a de facto authoritarian monopoly is the phrase “general Welfare”. The founders recognized that involuntary exploitation, whether for reason of redistribution or retribution, is a principal cause of progressive corruption of individuals and society.
In “The General Theory of Employment, Interest and Money”, he identified at least one example of where central authority is desirable and strictly within the purview of the authority granted to civil servants. The notable example is the promotion of policies which promote full employment of the eligible population.
Third, apparently, he advocated for “stimulus” in the form of government spending with previous surplus revenue (e.g. “rainy day fund”). He did not, again from a limited review, advocate for the creation of a virtual economy (e.g. premeditated creation of false demand signals through the accumulation of debt).
The process and means followed by the current administration which are, ostensibly, contingent upon recommendation by his advisers, would therefore be considered incompatible with Keynes’ advice.
Dreams of physical, material, and ego instant gratification will not be denied.
n.n:
Full employment is a political goal. It is an invented target. How can we know how many workers working how many hours for how much pay under which conditions is the optimal solution?
The weather influences how much work is worth. Until we can predict the weather, we cannot know the terms of full employment.
Friedman on Keynes:
http://www.youtube.com/watch?v=_9DH07MBG_w
Short video: Friedman on Keynes:
http://www.youtube.com/watch?v=_9DH07MBG_w