I am making this thread to ask a few questions I have about Keynesian economics. I am a firm believer in the Austrian school and methodology of Mises and Rothbard. Now, having said this, I am also a college student majoring in economics and as a result almost always have either had a neo-classical or a Keynesian professor. This particular semester I have a Keynesian.
I have never had much problem understanding, as well as refuting, neo-classical economics. But Keynes is sometimes hard to find exactly where to begin, or even what he is trying to say for that matter. But, moving beyond the “general theory”, and more into the neo-Keynesian framework.
First, can someone tell me where is the best way to begin examining the “Keynesian Cross” – Where supposedly we find the equilibrium of planned expenditures and actual expenditures (E=C+I+G; Y=E)?
It seems imperative to combat the Keynesian Cross in order to dispute the government purchases multiplier. Since I believe everyone here is familiar with the multiplier, I won’t explain it.
I have more questions but I want to have this answered first. Thanks to anyone who responds.
Well, I am not going to start a “Keysian vs. Truth” discussion. Yet, given the Questions you raised regarding the Keysian Cross look through these Powerpoint presentations.
This is the best “graphical” rebuttal of the validity of the Keysian cross to represent economic events I am aware of.
I agree, 100%. Take the time to go through the presentations, or to download and listen to Garrison speak (while presenting the presentations) at one of the Mises U. seminars.
Keynesian economics has no consistent (none at all?) Capital theory, without which, macroeconomics is pretty useless, as reams of “aggregate” data are indecipherable.
When I was in grad school for Econ, we had the pleasure of reading W.H. Hutt’s The Keynesian Episode. Hutt attackes The General Theory, pretty much page by page and line by line, using much of Keynes’ own terminology. As an econ student, I’d recommend it for other econ students, but probably not for anyone else.
Keynes was a great Economist. He made great contributions to economics for his day and the future. Because of his preference of government intervention, he never saw central banks creating fictitious capital which he called excessive savings. A disequilibrium between investment and savings because of high volatility added to disruptions in the market place. To him, fiscal policy was the answer as he took monetary stability for granted.
I think he would be shock to see our economy having negative savings rate and still investment goes unchecked. I WONDER WHAT HE WOULD SAY ABOUT IT.
I dont think he anticipated anything. He interpreted central banks manipulation and monetary creation as real stuff. He called it excessive savings creating overinvestment and later on cyclical business practices as our economies became more complex. Government was his solution to prevent disequilibrium in the real economy and per se helping to balance investment and savings trough easing the so called excessive savings.
If someone does calculus denying that one and one equals two, we would not consider him a mathematician at all, less even a great mathematician.
In the field of economics that means that I would certainly not call Keynes a great economist. His economy is not wrong because of his preference for government intervention. His economic reasoning and theories are wrong because they are flawed by oversimplification, called aggregation, and do not correlate with the reality of human action and therefor of markets.
Maybe the same that another world renown expert said yesterday “I might have been wrong at one or another point…” And sure he would embrace the idea of a take-over of the whole economy by the governments. After all, common people are not able to take those actions that would make his theory work at all.
Great observation my friend. I consider him a great economist because of things like inflexibility of prices, multiplier effect, and above all his observation that the flow of money or spending or anything is better to come from the bottom up.
He’s still taught on macroeconomics courses. I learnt all that in my first year (a lot of which I have by now forgotten.) If just for academic reasons, Keynes is still relevant.
That powerpoint is great, thanks for that. I believe that answers most of my questions on the Keynesian cross.
Also, I am currently reading Hazlitt’s “The Failure of the New Economics” - while also going through his “The Critics of Keynesian Economics”. I have read Keynes’ “General Theory”, and can follow Hazlitt’s arguments completely. So my main concern is going on to understand the neo-keynesian position and theories (which mostly is trying to make sense out of a lot of equations and derivations).
Does any one know of any resources that directly adress someone like Alvin Hansen or Joan Robinson, or James Tobin (maybe, but he is an easy one)?
