I rightfully disagree. It appears that a lot of the measures and policies being taken are being taken straight from the original writings and teachings of Keynes himself. I’m curious; did you even read the book?
Anyone have any comments on this?
Mises was offered a job at a major German bank in 1928, he declined. When asked why, he replied “a great crash is coming and I don’t want my name associated with it in any way.” Hayek, Peter Schiff, Austrians from this site, correctly predict crises frequently.
That broken clock analogy gets old. It’s better to be right twice a day then be wrong all day.
They’re not. Neo-classical production functions have homogeneous capital, they use cardinal measurements (especially for inter-temporal choice), there models don’t consider the fact that preferences change over time. They’re just extremely unrealistic, like perfect substitute production functions. They use perfectly competitive models, and when they don’t, they always assume inefficiency and or collusion. The methodology is entirely different. They’ll toss out statements like, “we know that value isn’t really calculated cardinally” but then proceed to use cardinal measurements. Their functions depend on constant values–which don’t exist in economics. I could go on… Ptolemy and Capernicus could both tell you where the moon would be at any specific date–doesn’t mean they were the same, or even similar.
That’s true, and it’s sad. I don’t understand the third point.
haha I wouldn’t respond if you were not so rude. This is honestly my last post for the week.
There is a world of difference between policy perscriptions and the theoretical structure underneath them.
It is true that some of the policy prescriptions floated today are similar to ones Keynes might have supported, but they are really not based on a close reading of the General Theory. Heck, Keynesian models of 50 years ago were not based directly on The General Theory. As I stated before, the way the world came to know Keynes was through IS-LM, which left many elements of the General Theory out. For a summary of the differences, try googling Axel Leijonhufvud (spell check? he used to be at UCLA), he has written a great deal on the subject.
Honestly, trust me, you will not get more understanding about modern policy debates by reading The General Theory than you would from reading a Intermediate Macro textbook. And I can say that because I have read both the general theory and many different intermediate macro textbooks. 
Thanks for the response. Did you read the book?
I agree that to get a good understanding of modern Keynesian economics, you are better off reading a macroeconomics textbook (or taking the various macroeconomic classes you have to take to complete an undergraduate degree). Not just because it covers all the modernization of Keynesian thought, economic models, but because textbooks also tend to be easier to read. But, reading The General Theory is not useful for getting an understanding of Keynesian economics, it’s useful for getting an understanding of how Keynes though. Obviously, if I want to read Where Keynes Went Wrong it’s not to understand where modern Keynesian economics has gone wrong, because that’s not what the book is about.
He’s right, there’s a reason why Post-Keynesians call neo-Keynesians “Bastardized Keynesians.” They reject IS-LM, Philips Curve, Solow Model, and practically everything else. They also have an endogenous view of money (something they got from his Treatise on Money). Post-Keynesians are the next big threat.
Please bother reading the entire post carefully before you respond.
bloomj31,
Theses can have credence lent or taken away by historical events. But theories, in the sense in which Austrians use the term, cannot. Theory is prior to history. We don’t know the Pythagorean Theorem because we went around measuring triangular objects with tape. The Pythagorean Theorem is necessarily implied in the very notion of a right triangle. Such is the nature of Austrian economic theories: they are necessarily implied in the very notion of purposive action. Keynes’ theories have already been disproved-- not by the post-WWII recovery or the 1970s stagflation, both of which baffled Keynesians-- but by the logical contradictions they contain (see Snowflake’s comment about “C” and “G”).
Say some charismatic fellow, lets call him “Geynes” shoots to the top of the academic math world, and say the respect for truth is even more debased in universities than it is now, so Geynes wins everyone over with his bold ideas and daring ways. Say, in a Geynesian Revolution, through convoluted, deceptive writing, Geynes convinces everyone that the Pythagorean Theorem is “orthodoxy” and that, A squared plus B squared actually equals C CUBED.
Let’s say both Geynes and an “orthodox” geometer each inspect different bridges. The orthodox geometer says his bridge is sound as is, because it was constructed according to sound geometric principles. But Geynes thinks all the right triangles in his bridge are off, because their hypotenuses are of the wrong length, according to his inane theory; so he has the engineers “fix” it accordingly.
Which bridge is LIKELY to hold up better? Of course the one constructed according to sound geometric theory (which, remember, is PURE theory). If it DOES hold up better than Geynes’ bridge, is THAT HISTORICAL FACT the reason why we know Geynes’ theory is wrong? No. Any good high school geometry student can tell you it’s wrong, simply because it necessarily implies logical contradictions. Let’s say through some freak series of occurrences, GEYNES’ bridge actually holds up better. Would that prove that A squared plus B squared really is C cubed? Of course not.
Please take your own advice. I never asked him if he read "the general theory and many different intermediate macro textbooks." [:P]
Thank you!
I am such a liar. haha I am taking a 5 minute break from studying (at work 
) to reply…
First, Esuric repeats criticisms offered by Rothbard that simply do match the way mainstream economics is conducted. Since I don’t have much time, here is Bryan Caplan, Princeton educated economist teaching at GMU, on why at least the first criticism gets modern econ dead wrong…
On the Value Scales v. Utility Functions and the Use of Cardinality in Modern Micro
http://economics.gmu.edu/bcaplan/whyaust.htm
As far as the rest go, I simply can’t name a single economist that “believes” that markets are perfectly competitive. Indeed, I would say that half of the Nobels awarded in the past have been to people that actively poked holes in the cometitive model: Joe Stiglitz, Vernon Smith, George Akerlof, hey even Hayek just to name a few. So why use a model you know isn’t “true”? For the same reason you’re you learn Newtonian physics in PHY101–its a simplified model of reality that can actually be quite useful in understanding the world, even when it isn’t technically “true”.
But what really blows my mind about these types of criticisms is that Rothbard pretended like he wasn’t subject to them. When he drew smooth supply and demand curves–ones exactly like the ones neoclassicals use to represent a perfectly competitive market for a homogenous good–what sort of assumptions was he making? What assumptions was he making about and consumer preferences and continuity (those graphs look pretty continious to me)??? What assumptions was he making with regards to makret structure (funny how his graphs look just like the ones neoclassicals use to decribe a perfectly competitive market)??? Where is the “dynamic” dimension he claims is absent from the neoclassical approach (these graphs look static to me)???
“Oh well, that’s different!!” haha it always is. 
Now, that’s all I can say. Not looking for discussion, just wanted to drop in my two scents. Back to studying!!!
First of all, it’s not just Rothbard who holds this view, all of the Austrians became frightfully aware of the neoclassical misconceptions once the they sided with the Socialists in the calculation debate. And again, Caplan gives us only the, “well, we know value is not really measured cardinally.” But if that’s the case, and if you accept that there are no constants when it comes to value, why are you using mathematical equations? Why are we using the mechanical approach to quantity theory? Caplans statements are to be thrown away. If he believes it, then he should drop the facade and become an Austrian. I don’t want to get into inter-temporal choice–it’s too annoying.Caplan also doesn’t understand traditional Neo-classical economics, i.e,. Walrasian general equilibrium, where prices are set before the fact, that is, before anyone enters the market! By an all powerful “auctioneer” (central planner). I watched Caplan’s debate with Boettke, and it’s clear that Caplan doesn’t know the history behind the calculation debate (and Boettke is very weak).
Yes, this is true. But where they don’t see perfect competition they see exploitation and inefficiency. Cournot and Stacklebery models.
Well, you’re going to get it.[6]
Actually, no. What Caplan stating is that utility functions do, in fact, measure value through ordinal means. Anyone who has taken an intermediate Neoclassical micro class should know that even if U(x’)=1,000 and U(x")=1, all that one can claim from these two facts is that U(x’)>U(x"). The difference between the two utility functions is irrelevant, and contains no information about how much the individual in question values the two other that he values the former more than the later. This aspect of utility functions is a basic fact about Neoclassical economics that anyone who critiques it should know.
Student’s quote of Caplan is a sound analysis, there is no need to attack this statement because of other beliefs Caplan holds.
Student, thank you for that clarification. It seems that Caplan is saying that Rothbard strawmanned the neoclassical theorists as far as ordinal vs. cardinal. Fair enough. [Edit: Based on what Esuric wrote above, perhaps Rothbard wasn’t strawmanning them - why, indeed, use math functions if it is really only a ranking? I don’t know enough about the theories to be able to tell, but I am very curious.]
It seems, though, that on more simple/obvious issues like value scales, it’s not implausible that the Austrian praxeological methods would produce identical results to other schools. I guess the questions is, if we assume the Austrian methodology to be superior, at what level of complexity or non-obviousness would we expect the results of the Austrian methodology to diverge from the others?
I’m aware of positive monotonic transformations, thanks. They do indeed use cardinal utility when it comes to inter-temporal choice; one utility function for two periods of time–absurd. Value is never constant, thus, math fails. The problem here is your ignorance, not mine.
Sound, and true to Caplan, but ultimately untenable. For the reason’s I’ve stated. I’m not even going to mention the differences in capital theory, the fact that they ignore the time preference theory of interest and the capital structure (it’s the Mises institute for god sakes).
They don’t produce identical results. Neoclassical economics can justify welfare through surplus analysis, which leads to compensating and equivalent variations. They believe that socialism is possible (real socialism, 100% public ownership of means of production), while Austrians realize that it’s totally impossible. They also don’t focus on the entrepreneur, and try to avoid uncertainty with probability theory (an illusion).
Boetkke has a strategy, and that’s fine, but Austrian economics is not mainsteam neo-keynesian neoclassical economics.
In other words, neoclassical theorists fail to account for the fact that preferences change over time (are they really that foolish?)? So Caplan’s statement was accurate in the narrow sense, but misleading as to the general theory?
Isn’t there also the issue that preferences can only be measured after action has taken place? Not prior? So how is value measured before action has taken place? This may be just a reword of the temporal issue. I’m enjoying this debate amongst you guys. Some real education for me. 