Some Defunct Economist - 7/14/2010

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist" - JMK

I've been thinking of ways to force myself to limit my blogging activity without stopping blogging, and one of the things that has helped in the past is my link farm - my "assault of thoughts" posts. Given the amount of Keynes material I cycle through here, I thought a link farm dedicated to Keynes would mix it up and allow me to shorten my commentary on any given thing I see that interests me. So I was looking through primarily blog, but also news references to Keynes and realized that there are a lot of bloggers unsympathetic to Keynes out there (and a lot of libertarian blogs on the internet). Here's what I think is going on. Explaining the libertarians is easy - but I think Keynesians themselves (who aren't that uncommon, obviously), rarely advocate Keynes by name the way I often advocate and reference him. I'm not sure if that's due to my interest in intellectual history, history in general, the interwar period specifically, or what. Anyway - so there are big Keynesian bloggers that never talk about Keynes - it's just a system they adhere to (which is fine), and a lot of other liberal bloggers who could like Keynes but never spent much time thinking carefully about the economy. So, since a lot of these links may be critical (I'll try to search positive ones out to balance), I figured the title "some defunct economist" was eminently appropriate. The nice thing is I can also dedicate issues of "some defunct economist" to other economists, since it is sufficiently vague.

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- Megan McArdle asks the question "is Keynes still right?" and considers the possibility that even if Keynes was right, he is simply not politically feasible right now in the way he was in 1932. I have a hard time comprehending where she's coming from. For all guys like Krugman (and me) bitch about the paucity of the fiscal stimulus, it's a hell of a lot better than what happened in the thirties. Monetary policy is also following Keynes closer than it was in the thirties. It doesn't seem to be enough, but I'd trade 2009 for 1932 any day (the verdict is still out on 2010... it's not looking good). Political feasibility is always an important thing to talk about, but (1.) it doesn't change the economic realities, and (2.) I'm not even sure I'd conclude the same thing that McArdle does about Keynes in this case.

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- Robert Skidelsky, well known Keynes biographer who occasionally forgets the name of Keynes's magnum opus, outlines how Keynes would react to Britain's budget. Out of curiosity - have any readers ever read Skidelsky's biography? Recently I've toyed with the idea of reading it. It's very long, and would take a considerable investment of my time while teaching me very little additional economics - so if it's not that great anyway it would be nice to know before starting.

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- Jerry O'Driscoll, in a rare internet appearance that doesn't make steam blow out of my ears, talks about an Amity Shlaes article on Keynes's views on market confidence and his critique of Roosevelt's attempt to take utilities companies out to the woodshed. This really shouldn't be surprising to people. The guy who put so much stock in animal spirits and liquidity fetishes is obviously going to put a lot of importance on investor confidence. I think we need to be careful, though - keeping investors confident is different from giving investors precisely what they want. I'd read O'Driscoll here more for the historical reference than necessarily for modern commentary on Geithner. That would require a little more exposition than he provides.

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- Russ Roberts ponders Keynesian stimulus. What jumps off the page at you is that he's really not talking about Keynesian stimulus, strictly speaking, even though he thinks he is. The key quote from Roberts is: "If the government persists in printing money at a faster rate than people want to hold it, some businesses may expand and hire workers but eventually, the impact of higher rates of money creation is also neutral–you get inflation but no extra stuff." The analysis goes on from there, suggesting that you're going to get inflation without any impact on real output. It's not a very cutting critique of Keynesian stimulus since as far as I can tell Keynes agrees that this is what's going to happen. The whole point of fiscal and monetary stimulus is that you do it when there is excess demand for money (also known as a "general glut"). In other words, when Roberts starts off by assuming that more money is being printed than people want to hold he is assuming that we're in non-depressionary conditions where Keynes wouldn't advocate a lot of this sort of stuff. This is why I say over and over that liquidity preference is largely the key to getting what's different about Keynesianism. Roberts also raises the confidence question - I'll only add that he's simply asserting that large deficits in a recession hurt confidence. That assumes that investors and businessmen agree with Roberts that deficits are bad and not Keynes that deficits are good at this time. I'd assert that austerity is bad for confidence. Since we're both just making assertions at this point, it doesn't really get us that far.

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- I'll also take this opportunity to link to my recent post on Keynes's preface to the German edition of The General Theory, which argues that it's not as salacious as you might have been told it is.