Tuesday, July 19, 2011

Klein on Keynes

Mark Thoma shares an interesting article by Ezra Klein on Keynes in the United States today. It's not entirely satisfying - it's very much a savings-leakage sort of Keynesianism and says nothing about money and the interest rate (don't think you can lop off two thirds of Keynes's title and still come out with Keynes). I think that's more forgivable from media and policy type people. The fact is, savings-leakage/"lean against the wind" Keynesianism may just be underconsumptionism and that may not be up to snuff for people who are interested in the history of ideas, but it'll result in good policy and in a public that is at least closer to understanding what's going on than before. To a large extent I think this is why Keynes was so sympathetic to the "underworld economics" of his day. They may have missed some major theoretical points, but a bunch of underconsumptionist policymakers would still come out with better results than a bunch of pro-austerity policymakers.

One of the more interesting things about the article was the stuff he shared on various major players. Eric Cantor's understanding of Keynesianism was abysmal. He said that Keynesianism was the theory "that government can be counted on to spend more wisely than the people". This is Keynes vs. Hayek Rap talk and this is the sort of talk that makes me think that those videos did more harm than good in educating public. They roused people politically, and they spread ideas just like this.

The admission from Romer that she had no idea how hard it would be to implement additional stimulus, if necessary, was interesting too. Summers had an interesting line about "shovel-ready" projects. He doesn't sound like he was surprised about how hard shovel-ready work would be, and I think this is an important point to make. In the run up to the stimulus I heard and read a lot about how hard that would be. This wasn't really a matter of naivete or biting off more than we could chew.

The article is a good read - let me know what you think.


  1. "that government can be counted on to spend more wisely than the people"

    What is your understanding of Keynesianism, in under 13 words or 72 characters (with spaces)?

  2. "demand, which is lowered by liquidity preference, drives output fluctuations and underemployment equilibria"

    I'm not going to take the time to count characters for you. I'm guessing I'm over.

    1. Why under 13 words?

    2. Even if there was a reason to do it under three words, does that justify Cantor being completely wrong? It's not like I'm criticizing him for not producing a thesis here. His brevity isn't his main problem. His problem is that his statement has absolutely nothing to do with Keynesianism or what Keynesians claim.

  3. Also - please at least use a pseudonym.


All anonymous comments will be deleted. Consistent pseudonyms are fine.