Peter Boettke has been interested in a topic that has also interested me: why and how was Keynesianism so successful in the United States. We've come to very different conclusions, some more thinking on his are here.
I think there are major blindspots to his approach, and one of the big one is a lot of problems with his take on what Keynesianism is exactly. Some of that is fleshed out in this interview that he also posted recently where he suggested that Keynesianism is outside of the "mainline" of economic thought that emphasizes the price mechanism, market efficiency, etc. If that's your starting point, then I can see why the history of American economic thought in the early twentieth century can be somewhat puzzling!
The understanding that has been stewing in my head for a while is that proto-Keynesianism economics has been American economics for quite a long time. It's been in both our popular and our academic understanding of economic science. One of the best examples of this is Jefferson himself in his letters to J.B. Say, and also to Madison. Benjamin Franklin and Irving Fisher both anticipated the liquidity preference theory of interest. What Grampp called the "liberal elements of English mercantilism" pervaded the economic thought of the colonial period and the early republic (this is covered well by Joseph Dorfman). Opening the West was all about lowering the marginal efficiency of capital (albeit not through the interest rate or fiscal policy) and Keynesian concerns about effective demand pervaded that effort. Bimetallists and populists of the late twentieth century all understood this too. Most of this tradition even managed to avoid the crudeness of "underconsumptionism" because it recognized that the real concern is investment demand, not consumption. America was fertile for Keynesianism long before modern progressivism and it would have done well here even if progressivism never came to pass, I think. This isn't to say that progressivism wasn't particularly consistent with Keynesianism - certainly it was. But I don't think it's the ultimate facilitator that Boettke seems to think it was. The roots go considerably deeper.
This is what living in a frontier society does. A frontier society has a strong disposition to embrace Smithian-Keynesian economics, which understands that the world is dynamic, that the division of labor is limited by the extent of the market, that we are neither pinned down to a production possibilities frontier (Smith) nor are we guaranteed to reach our full potential (Keynes).
Thursday, June 23, 2011
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You sort of sound like a Marxist trying to make Sir Thomas More's Utopia into a proto-Marxist work. I could play the same game; find all sorts of proto-libertarians (including the same people you mention) in the past, but it would merely be cherrypicking.
ReplyDelete1. First, Jefferson said that Malthus made more sense than Say (at least for the case of America). We have the letter. Malthus is a widely recognized proto-Keynesian. This is not something I just made up.
ReplyDelete2. Lots of the founders associated with mercantilism, which is widely recognized as proto-Keynesian.
3. Read Franklin or Fisher on the interest rate. I did not just invent this. A version of liquidity preference theory is there.
4. Back through the late 19th century the underconsumptionism was well documented. Read, for example, Norman Pollack if you're curious about the extent to which a lot of it was investment- rather than consumption-centric.
Rather than just make an analogy, do you have an actual argument you're interested in challenging me on? American economic thought is obviously ridiculously broad. There are well known Ricardians too that you might point to, for example. But it comes up in prominent places and has obviously informed certain policies.
"Opening the West was all about lowering the marginal efficiency of capital..."
ReplyDeleteAnd killin' Injuns! Don't forget the killin' Injuns part.
Your claim is that "American economics" is proto-Keynesian. It is a very, very strong claim. My claim is that yes, you could tell such a tale, but it wouldn't be a terribly convincing (no more than a tale I could tell about "American economics" being proto-Austrian or proto-libertarian). On its face, it is a claim to be skeptical of in other words (for a lot of different reasons) and I don't have to read the aforementioned works in order to be skeptical in this way given the vast experience historians have with similar claims about one period of history being proto this or proto that.
ReplyDeleteWhen you study history you soon realize that the past is actually a different, hmm, well, country. There are linkages and connections, but the past eras have their own logic, etc., and trying to cast back to find some pre-history of your particular ideology is I think silly and a waste of time. Better to treat the past on its own terms as best as one can.
Gene,
ReplyDeleteAnd taking slaves to the "West," and lynching hispanics in droves in the "West," etc.
Gene,
ReplyDelete"But little worked out quite as the Founders expected. Not only did their belief in the Revolution’s enlightened and liberty-loving principles, including their dedication to equality and popular government, contain within itself the source of its own disillusionment, but their high-minded promise to end slavery and respect the rights of the native peoples were no match for the surging demographic forces accelerated by the Revolution."
Wood, Gordon S. (2009). Empire of Liberty: A History of the Early Republic, 1789-1815 (Oxford History of the United States) (Kindle Locations 255-258)
Daniel,
ReplyDeleteSo I've started reading the chapter and I can tell you right off the bat that Keynes is burdened with some very outdated historiography. We know now that probably not the case that an influx of precious metals burdened the Spanish economy. That is, the "Price Revolution" is not easily explained anymore as the result of gold/silver from the Americas. I figured Keynes would dip into the historiography of the time and that a lot of his "scientific" analysis would be flawed as a result of such.
We also know now that this is a fantasy; Britain did not have anything remotely approaching a complete freedom of trade in the 19th century. So there go your "special circumstances."
ReplyDelete"It is, indeed, arguable that in the special circumstances of mid-nineteenth-century Great Britain an almost complete freedom of trade was the policy most conducive to the development of a favourable balance."
Keynes, John Maynard (2007). The General Theory of Employment, Interest and Money (Kindle Locations 5318-5319).
re: "Your claim is that "American economics" is proto-Keynesian."
ReplyDeleteMy claim was that proto-Keynesianism (ie - Malthusianism and mercantilism) has been prominent in American thought. Not that that's all there was to it. It's not a particularly radical claim, Gary. I'm curious why you think it is. Why do you think this is so outlandish. Again - do you have any arguments against the fairly non-controversial points I've raised?
re: "I don't have to read the aforementioned works in order to be skeptical in this way given the vast experience historians have with similar claims about one period of history being proto this or proto that"
It's not that a period of history "is" something. There was a lot of proto-Keynesian mercantilism. There was an enthusiasm for Malthusianism that you did not have as strongly in Europe. I haven't claimed all American economists through history have always anticipated Keynes. All I'm saying is that all the widely recognized proto-Keynesian strains have played an important role in American thought. Do you have other arguments or are you just going to keep repeating your skepticism in vague terms?
re: "When you study history you soon realize that the past is actually a different, hmm, well, country. There are linkages and connections, but the past eras have their own logic, etc., and trying to cast back to find some pre-history of your particular ideology is I think silly and a waste of time. Better to treat the past on its own terms as best as one can."
ReplyDeleteI can't believe this is you saying this, Gary.
You cast for deep nefarious roots and guilt by association in everything. You pontificate regularly on people and ideas you have no careful, detailed knowledge of and proclaim all sorts of ties between people and to other more sinister movements.
Furnish me with an actual claim for once, please.
I think Boettke is wrong but at least Boettke lifts a finger to make an argument. Make an argument, Gary.
Read your Spanish coin article on facebook.
ReplyDeleteInteresting.
What does it have to do with this?
So what did these geochemists look at? They looked at the composition of minted coins from Spain, right? Silver coin from the New World was imported, melted down, and reminted at some point. It was just never clear when, and it turns out they were reminted later than previously thought.
So? Who cares if the silver was circulating? Money is fungible, Gary. You don't think a King that defaulted four times within a century might find some use for silver? Why would you think they needed to be coined and circulated to have the sort of effect on interest rates that Keynes talks about?
The geochemistry of the article is fascinating. The economics is not so good.
This is what you wrote:
ReplyDelete"The understanding that has been stewing in my head for a while is that proto-Keynesianism economics has been American economics for quite a long time."
If you had said "has been partly" then your claim would be much less strong.
Now imagine if I wrote this:
"The understanding that has been stewing in my head for a while is that proto-Institutional economics has been American economics for quite a long time."
I'd assume most people would go, wow, that is a very strong, universalistic claim.
"You cast for deep nefarious roots and guilt by association in everything. You pontificate regularly on people and ideas you have no careful, detailed knowledge of and proclaim all sorts of ties between people and to other more sinister movements."
ReplyDeleteI must disagree.
As for the silver article that was something I merely found today.
Since the 1960s other explanations - including demographic shifts generally, urbanisation, velocity of goods transfer, etc. have been found to be more convincing than the influx of silver. Or so I read and was taught in my early modern history courses in graduate school. There's a pretty big body of work on the subject regarding this reappraisal of the issue.
Here's something of the population and velocity argument from Jack Goldstone (no paywell or anything): http://sgtbkhalsadu.ac.in/colleges/tutorial/112706112009205452.pdf.pdf
If you are taking a graduate level course on say early modern France or early modern Britain or early modern Europe you can't avoid the topic.
The point is that the monetary explanation has really fallen out of favor with a lot of folks; Keynes never got to see that.
"There was a lot of proto-Keynesian mercantilism."
ReplyDeleteDo you realize why this sort of statement doesn't make any sense at all? You're basically saying that they are ancestors of Keynes, which, is well, non-sense on stilts. Just as the "Utopia" was no ancestor of "Capital." And I am not being vague in the least.
Anyway, if anything what one should be saying is that Keynes was a neo-protectionist/mercantilist.
ReplyDelete