Do you respect John Maynard Keynes?

Economics Economics Questions
21

@Student

I’ll concede. Clearly you are smarter and more well informed than anyone who posts in these forums. This is what you’re aiming to demonstrate, no?

I mean, why bother positing an argument when, by the veneer of intellectual superiority that you busily coat your posts with, you can avoid putting any substantive thought into the public record?

The answer, clearly, must be that the veracity of whatever argument you might choose to forward ought be taken for granted—for your authority and superiority precedes you after all.

Good grief, man. Get over yourself. Sack up and say something other than “Wow, don’t I look good in the mirror!” Say something worth saying.

Edit: The above is directed at Student. I’ve added an “@Student”. Sorry for any confusion. Not surprised, however, if people are thinking I was speaking to OP.

22

This is a very tough question. Keynes, like Mises and Hayek, began with Wicksell’s monetary framework, but seemed to ignore the fact that Wicksell employed Bohm-Bawerk’s capital theory. He accurately described one-half of the puzzle, namely the effects of an elevated market rate above the natural rate, and what Hayek called “secondary phenomena,” but he focused too much on the Wicksellian rot, and, again, entirely ignored capital. Essentially, he was a very confused Austrian economist who was trained in the Marshallian tradition. But he did highlight the fact that prices do not adjust instantaneously and that uncertainty is important.

That being said, the GT was crap, especially chapters 19 and 23, and his character was questionable.

23

And it’s not the first time. How unorigional. yawn

24

@Esuric

Sounds like you are quite steeped in a lot of this: a lot going on in your post—much of which I haven’t heard before. Not that I should have, necessarily…I’m by far no expert in either side of this.

For example, I’ve not heard before that Keynes, Mises, and Hayek begin with Wicksell’s “monetary framework” (whatever that means, exactly). And being no expert on Keynes, I’ve neither understood nor heard before that he “accurately described…the effects of an elevated market rate…”. This is news to me—the “accurately” part that is. Not saying I disagree—I can’t say definiatively either way.

I think it’s a bit much, however, to characterize Keynes as anything resembling an Austrian economist—to my knowledge, the essence of an Austrian economist is the employment of methodological individualism. Keynes, decidedly, did not do this.

I also think the merit given Keynes for “reminding the economic community that prices do not adjust instantanously” is an empty prize which overlooks the distinction that in free markets (which Keynes did not analyze) prices DO adjust instantaneously, for all practical purposes.

And the “uncertainty” argument—not clear what you mean here.

25

Animal spirits is the most ridiculous concept. Keynes had to come up with it to make his theory consistent with observed phenomena. Keynes and his follower would represent recessions caused by monetary phenomena by a left shift in LM curve. Since interest rates are on the vertical axis, a shift in LM curve results in a higher interest rate. This is inconsistent with the observed falling interest rate in the real world during recessions. On the other hand, if you shift IS curve to the left, the result is a lower interest rate. In order to make his bogus theory work, Keynes had to come up with a ridiculous concept such as animal spirits to explain leftward shifts in IS curve. He and his followers basically proclaimed that monetary phenomena are not nor have ever been causes of recessions. And they said this because it was convenient. This is a very dishonest action on his part that pushed mainstream economic theory back to 17th century. Because of this I have very little respect for him.

26

@ conza88

Yea, just look in the “Government is Efficient” thread. Same deal. You’re shocked, I know.

27

Please don’t give him any more ideas.

28

Well there he at least presented / alluded to some kind of argument.

The same cannot be said for this thread and the one I was referring to earlier. Notice anything similar? lol

29

Hahaha. That would be me. I have been meaning to change it to a different criminal or something. Just a thing I’m interested in.

Thumbs up.

30

When the market rate of interest rises above the natural rate, or the rate at which real capital would be exchanged in a theoretical barter economy (reflecting time preference). The effects are a contracted structure of production, where warranted economic activities are constricted, squeezing profits, ultimately causing deflation (an elevated demand for cash holdings). Individuals begin to decrease purchases and elevate sales (as well as sell bonds) in order to attain the cash balances they demand for transactions (or for safety). The structure of production, in such circumstances, does not reflect the true time preference of society–it is arbitrarily shortened (more direct methods) and prices fall faster than costs. Wicksell claimed that such a condition would yield a “rot,” or an uncontrollable deflationary spiral. But prices will eventually adjust, restoring cash balances.

Austrian in the sense that he employed the Wicksellian framework and stressed uncertainty. Wicksell’s Interest and Prices is the cornerstone of Austrian monetary and business cycle theory (later expanded upon by Mises and Hayek). Wicksell, like Keynes (until the GT), had an endogenous view of money, where he rejected the mechanical quantity theory of money, and showed that the interest rate is the indirect transmission mechanism. Keynes retreated from this position in the GT, thanks to Hayek (he treated money as an exogenously fixed policy variable).

Absolutely not. There are endogenous rigidities and imperfect/asymmetric information.

He wrote a lot about uncertainty, especially when it came to interest rates/investment. Not much more to say, really.

31

Conza88, you sure do like to whine.

My thread titles are entirely unambiguous; if you’re uninterested, don’t read them, Clearly, you cared enough to repeatedly reply to this thread.

32

I don’t believe “animals spirits” is a useless concept; in the presence of Knightian uncertainty, individuals are still compelled to act, relying upon animal inclinations in addition to pure reason. If individuals are investing due to social contagion (e.g., like individuals that gain weight when surrounded by fatter persons) rather than a calcuated risk assessment, then that needs to be addressed.

33

Pointing out your terrible attempts at quasi-postering isn’t whining.

The only value I see from having you, a neoclassical here on the boards - is to get a neoclassical perspective.

And when you don’t even provide that… beyond an “I do”, well then I think to myself - “wow, what a let down. How completely useless. Why are you even here?” (besides the obvious).

34

The point of this thread (which I created, not you) was simply to test the waters: to see what others here thought of Keynes.

I was curious, particularly due to another thread wherein a cartoon was immediately compared to Keynesian follies, even though the connection was weak (if even existent).

If you’d like a thread debating the merits of Keynes, then create one. This has already evolved into one, but–once again–I was content with simple one-word responses. Frankly, there has been some interesting dicussion raised, so your bitter complaints seem unnecessary and unproductive. Not to mention just plain silly.

35

“Frankly, there has been some interesting dicussion raised”

Yep, thanks to the quality of the users in this forum.. others notwithstanding.

36

Yes, you’ve brought nothing to the table, except fruitless criticism.

37

Conza, if you have a problem with StrangeLoop’s style of posting, bring it up in the Issues Forum. Any more posts in this thread not actually about the merits and demerits of Keynes will be deleted.

38

I read it. I didn’t have very high hopes going in, since my professor told me that no one is really a Keynsian anymore. After the latest recession I think it is safe to say that he was completely wrong. There are Keynsians all over the MSM.

When I read it I was under the impression that Keynes basically invented GDP accounting and that he was the first to come up with the paradox of thrift. Also, I actually fell for his interpretaion of classical economics (which is little more than a straw man). After reading the secondary literature I learned that none of those are original with Keynes.

39

“The structure of production, in such circumstances, does not reflect the true time preference of society–it is arbitrarily shortened (more direct methods) and prices fall faster than costs. Wicksell claimed that such a condition would yield a “rot,” or an uncontrollable deflationary spiral. But prices will eventually adjust, restoring cash balances.”

By “price” I take your meaning to be “selling price”. Is not one’s price is another’s cost? If so, how can prices fall faster than costs? I’m not trying to be difficult here. I do not follow the argument on this. Is Wicksell analyzing a free market economy?

“Wicksell, like Keynes (until the GT), had an endogenous view of money, where he rejected the mechanical quantity theory of money, and showed that the interest rate is the indirect transmission mechanism. Keynes retreated from this position in the GT, thanks to Hayek (he treated money as an exogenously fixed policy variable).”

This is interesting. So Hayek expands upon Wicksell’s endogenous view of money, by treating money as exogenous? Could you please elaborate a bit on this seeming contradiction?

“Absolutely not. There are endogenous rigidities and imperfect/asymmetric information.”

To be clear, sounds like you argue for special recognition for Keynes/the validity of certain of his ideas on this basis (i.e. That he was unique in empasizing imperfect information—I’ll discuss endogenous rigidities below). However, regarding imperfect information (i.e. “asymmetric” information) I fail to see how Austrian economics fails to acount for it. And I don’t see how Keynes “reminded the economic community” of its existence. Indeed, in the Austrian story of economic growth, the very basis of entrepreneurial action is the fact of asymmetric information—that is, the wellspring of growth is the fact that successful entrepreneurs successfully exploit their specialized knowledge.

Further, again to your implication that Austrian economics somehow fails to account for the fact of imperfect information, Hayek’s great contribution (to my inexpert and incomplete knowledge) was precisely in demonstrating how free markets reconcile the important fact of imperfect information—not perfectly so, but for all intents and purposes sufficiently so; nevertheless, in a manner superior to any alternative.

And re: Endogenous rigidities (which, presumably, sustain in free markets for a materially important length of time, in your estimation). We’ll have to agree to disagree.

“He wrote a lot about uncertainty, especially when it came to interest rates/investment.”

How does the “uncertainty” you refer to here relate as you see it to the “imperfect/assymetric information” you refer to above? It almost sounds like you reserve a special category for “uncertainty”, and that it deserves some sort of special theoretical attention and/or separate theoretical analysis.

40

personally, i respect keynes as both an economist and as a person.

as an economist, its hard to argue that keynes work did not revolutionize the study of economic fluctuations. i know a lot of people have noted that many of keynes’ individual ideas can be found in other works, but i would say the same is true for the work of most economists (how much of human action is original to mises?). the important thing is that keynes pulled together many different threads to weave a coherent story of economic fluctuations that many people found convincing. you can argue that some threads were unoriginal to keynes, but the “big” thing is what keynes did with them (if keynes added nothing new, we would call that “malthusian revolution” or something else). was keynes theory perfect? no. but if perfection is your criteria for respect, then i imagine you must be a lonely person.

as a person, keynes was at least a very interesting person with a variety of admirable traits. cultured, curious, scholarly, witty. i doubt he was perfect, in fact he seems to actlike an arrogrant prick at times, but i certainly don’t know of anything about him that would lead me disrespect him anywyas. (btw: here is a good video on keynes and bloomsbury: http://www.youtube.com/watch?v=lspGtRXKVNA)