Tuesday, May 3, 2011

Paul Krugman says "in the long run, Keynes is dead"

Yes, but:

1. Some of us just have an interest in history of thought and in Keynes himself, and that's OK. I'm one of those people.

2. Many people conflate Keynes and Keynesians, and so Keynesians are smeared by criticizing Keynes or vice versa - so setting people straight often requires going back to Keynes himself. If that's going to be what they do, that's how we'll have to respond.

3. A lot of the distinction between "Keynes" and "Keynesians" is very superficial or technical anyway. Economics has progressed a lot since Keynes - it's gotten a lot more technical. But Hicks and Samuelson were basically hitting on the same points Keynes did and despite Krugman's frustration with DSGE models and New Keynesianism, this work incorporates processes that function like the old Keynesian IS and LM curves that he likes. Krugman should be more like Mark Thoma and George Evans in this regard and realize that while it's true New Keynesians can slip into talking like pre-Keynesian Pigovians, there's a ton of common ground. If Keynes is still providing the fundamental foundation for modern Keynesians (I think he is) in the sense that he is providing the big picture and the motivating ideas, then it's more reasonable to stand up for Keynes against nonsense criticism.

You know what I think's going on? I think Krugman knows he's usually the one tagged as being "shrill" and he's taking this opportunity to be the guy that's playing it cool :)

Krugman also writes this: "modern Keynesianism is to be understood through the views of modern Keynesians, not by hunting through the original works for hidden meanings", and I think this is very true. I talk a lot about this sort of stuff on the blog because it's easier to talk about than other things, and it's a personal interest of mine. But you don't do economic science by browsing through dusty books. I'm figuring out a rough idea of what I'm going to write my dissertation on (a little ahead of the game, I know) - and I'm mostly thinking through work that Robert Shimer published just last year, and some stuff by Pissarides and Mortensen that they just got the Nobel Prize for last year (it's not brand new material, but the point is it is recognized as a very modern paradigm in the science, relative to the history of the discipline). The farthest back I'm even thinking about for my dissertation is some labor contract literature from the 1980s.


  1. Someone with your abilities to both grap a barely approximate fly-by understanding of a post on the one hand and delve into the atomic level of every curve of every letter to find what you need on the other should be able to find some middle ground and reach one simple conclusion about PK on this debate on the Keynes-Hayek video:

    PK is obviously not even making the slightest to comment on anything relevant or apt. What he has done in his posts is arguably not even sufficient to qualify as nibbling at the edges.

  2. BTW, my as-of-yet unposted comment to PK on that article:

    "To pretend that this amounts to an advocacy of Soviet-style planning — as some conservatives do — is to duck the real issues."

    To pretend that this is the charge in the wake of the recent music video by Russ Roberts and John Papola ---- is to duck the real issues.

  3. Lots of people make lots of charges even if Russ and John are careful with what they say. You comment at Cafe Hayek. You know people there tie Keynesianism to Soviet planning.

  4. Perhaps as hyperbole. But you also comment there and know full well that people have been clear when responding to the complaints about Central Planning.

  5. Paul Krugman is obviously not a central planner.

    He is, however, something...different.

    What bugs me is that he wrote a political manifesto on income inequality. At this point, I'd much rather that he be those bland, technocratic central planners of the Soviet Union. For his talk resembles that of a social engineer. And that's a bad direction for the economics profession.

    After reading several columns by Krugman, several blog posts, and some of the pieces from his books, I still don't understand why he as an **economist** cares that some people make more money than others. For him, that is an end itself that serves nothing other than being an end in itself. All he says about it is that not having equal incomes is "undemocratic" and stops there.

    If his values are against that, FINE! But why is he talking about income inequality as if it represents OUR values or what the rest of us want? Some people care how much money others earn. The rest of us have a sense of proportion about what is actually important.

    Or at least, why does he not give a value-free case for everybody earning the same income? At least Soviet central planners were value-free people who were told to bow their heads and do as they were told. This man has the job of both comparing values (economist) and deciding values (social philosopher and commentator)?

    So Daniel, I will apologize in advance and say that modern Keynesianism has grown into an all-encompassing, all-answering political philosophy movement rather than a branch of economic thought.

    PS: I felt the same way, when I read this post by Robert Skidelsky. http://www.project-syndicate.org/commentary/skidelsky40/English

  6. Prateek Sanjay,

    If Krugman (or Daniel) had read "The Road To Serfdom" they would quickly realize that one of the main points of Hayek is that in a liberal society everyone gets to keep their hobby-horse without getting to forcibly make another person ride it.

  7. Gary:

    1. That didn't take long.

    2. I do realize that is Hayek's point about a liberal society and it's an excellent, if somewhat incomplete point.

    3. I'm a little unclear on what that point has to do with this post and the comments... perhaps you intended to post it somewhere else?

  8. What I find interesting out of this whole brouhaha is the notion that the Popala and Roberts should have been "more careful." You see this line of argument out of the American right or left all the time; the idea that one should self-censor so that someone, somewhere will not get the "wrong impression" or otherwise be offended, etc.

  9. Daniel,

    The point is complete in and of itself.

    It is a direct response to Prateek's point.

  10. "The farthest back I'm even thinking about for my dissertation is some labor contract literature from the 1980s."

    When I was in graduate school I often the same of the secondary sources I was using; then I realized somewhere along the way that those secondary sources depended in large part on others said before them going back to Ulrich B. Phillips and beyond (not that anyone countenanced anymore most of what Phillips had to say, but still, his discussion of the average number of slaves per slave-holding remained valid, as did other observations). So yeah, whether you like it or not, good or bad, notions from Keynesians and Keynesians from the 1940s, 1950s and 1960s are still alive, even if they are not openly discussed that way. Anyway intellectual field operates based on a large amount undiscussed material in other words - a bit like the underside of an iceberg in other words.

  11. I really do need to preview my work. :)

  12. Daniel,

    I'm glad you are distancing yourself from Krugman's post, because I immediately thought of you (and your 1920/21 alleged smackdown of me) when I read it. :)

    Another point is that Krugman & Co. are the ones who have been resurrecting Keynes. Ever since 2008, he and others have been telling us we need to remember all the great stuff that Keynes taught us, that has been squandered by the amnesiacs at the freshwater schools etc. I can't remember if it was Krugman himself saying this, but I know for sure that left-wing economists were lauding Keynes as the man of the hour or whatever 18 months ago.

    So yes, it's not correct to say, "Keynes was a central planner." (That's not what the rap video even says, incidentally.) But it's as correct as DeLong and Krugman saying that Herbert Hoover was a liquidationist, and Russ Roberts and John Popola certainly aren't the only ones saying that Keynes is once again relevant and needs to be either refuted or praised.

  13. "That's not what the rap video even says, incidentally"

    Who has said they said it? It seems to me some people have been concerned about - and have responded to - the impression given by talk of "top down", "central plan", cronies and payoffs. People seem to have overreacted to that response and acted like we've actually accused Russ or John of directly saying these things. Nobody - to my knowledge - has accused Russ and John of that. But we do say that the impression of Keynes and Keynesianism is misleading.

    Subsequent sloppy excavation of the German foreword is frustrating too, but of course Russ and John didn't bring that one up.

  14. "It seems to me some people have been concerned about - and have responded to - the impression given by talk of "top down", "central plan", cronies and payoffs."

    Well, that is Hayek's argument, is it not? It is right there in black and white in "The Road To Serfdom." I re-read it yesterday so I think my memory is pretty good on the matter.

    Whether you agree with Hayek or not, the video is in essence talking about a lot of what of what Hayek and those that followed him argued. That fact is what gets lost in the complaints about the video; that it does get lost that way tells me that those who are criticising probably haven't read "The Road To Serfdom" or any of Hayek's other works.

  15. re: "Well, that is Hayek's argument, is it not?"

    It is Hayek's argument in real life, but in the video it's also the ref's words and it's what you see Chairman Papola/Bernanke doing in the background, all with no rebuttal from Keynes.

    Come on, Gary. You have to admit it gives a certain impression of Keynes to people. That's sort of the whole point of the exercise, is it not? We can acknowledge that we disagree on the accuracy of the image, but it is clearly the message of the video and not just the opinion of the Hayek character in the video.

  16. re: "that it does get lost that way tells me that those who are criticising probably haven't read "The Road To Serfdom" or any of Hayek's other works."

    You really need to stop this nasty habit of assuming that because people disagree with you they are ignorant of the argument.

  17. And it gives a certain impression of Hayek to people.

    "Look at this guy, he is questioning the empiricism of economics - that sounds sort of loony. What a nutter."


    "Doesn't he give a flying leap about the unemployed and the loss of their skills during this downturn?"

    Keynes gets in his licks in the video in other words. I could in fact complain about the half-dozen things in the video which I think are unfair to Hayek, but I'm not going to do that because I realize that they are presented from the POV of Keynes and those that followed him.

    Indeed, given the level of hatred and acrimony Hayek had to face from the broad community of economists until he won his Nobel it is sort of cool to see Hayek's resurgence since then, so that may also explain my perspective. Kind of just glad he gets into the room these days.

  18. What would you say to Russ and John if the ref said Hayek didn't care about the unemployed and if in the background you saw Hayek turn up his nose at the unemployed?

  19. Daniel,

    When "The Road To Serfdom" came out it was viewed as reactionary by so many economists that it was generally ignored by them; and that has been the beef against it since then. This is something I get from the biographers, etc. of Hayek. So yeah, it remains a work which gets a lot of derision from people who have never read it.

  20. Bob Murphy: "Ever since 2008, he and others have been telling us we need to remember all the great stuff that Keynes taught us, that has been squandered by the amnesiacs at the freshwater schools etc. I can't remember if it was Krugman himself saying this,"

    Yeah, it was Krugman: http://krugman.blogs.nytimes.com/2009/09/14/freshwater-rage/

    "When freshwater macro came in, there was an active purge of competing views: students were not exposed, at all, to any alternatives. People like Prescott boasted that Keynes was never mentioned in their graduate programs."

  21. Daniel,

    The problem is that you have a problem with Hayek's argument.

    * Right before the "backroom deal" portion of the video you see Keynes positively portrayed with people building cars in the background because government got things going by spending lots of money. Hayek says no, things are not that rosy or neat, you're naive to think they are Keynes and this is why, etc.

    * The ref doesn't do anything like that; I just watched the video with the English subtitles.

  22. Ummm... the ref talks about "top down" approaches, does he not? Do you think it wasn't clearly intended to characterize Keynes?

    There are ways in which Keynes is more "top down" than Hayek is, because he countenances action by the state (although some contend Hayek did too), but if you had to characterize Keynesianism as "bottom up" or "top down" I would call it "bottom up".

  23. Video with English subtitles; I don't see the ref say anything about employment; he repeats the same chorus over and over again and talks about them as "the greats" as if they are equal. It seems to me that most Keynesians would not see them as equals, whereas as most Hayekians have no problem viewing them as equals.

  24. W/ English subtitles: http://www.youtube.com/watch?v=GTQnarzmTOc

    No, he says "more bottom up or more top down."

  25. I really think that the complaints about the video are making mountains out of molehills. In fact, there seems to be a lot of seeing what you want to see re: the video. That's the last thing I have to say on the subject.

  26. "No, he says "more bottom up or more top down."


    Do you think "bottom up" refers to both Hayek and Keynes and that "top down" refers to some unnamed economist?

  27. Keynes is more top down than Hayek; Hayek isn't an anarchist by any stretch of the imagination of course, still he is always pushing back against the notion that the state ought to be expanded beyond areas where there is "agreement" (he uses terminology like that a lot in "The Road To Serfdom"). And by that he means more than just 50% plus 1 and he means more than just elite opinion on a matter.

    Hayek also talks about people being dependent on the state, that is their lives, future plans, etc. depend on some act by the state. I do not get the impression that Keynes ever concerned himself with a matter like that.

  28. Daniel is arguing that the chorus begs the question.

    Daniel can you write a separate post on why you think Keynes is bottom up, or more bottom up, if forced to pick between the two?

  29. Krugman is spot on--forget about Keynes.


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