This is really bad. My comment:
"I think a key to your mystification is that every Keynesian would agree
fervently with you that these are not "incidental doohickies". In fact
people have been telling you this for years now, Don. For some reason
you insist on supplying both the argument and the counter-argument in
this "discussion".
Keynes has several pages on periods of
production, referencing Bohm-Bawerk in fact, in the section on capital
theory. He does not disagree at all with Bohm-Bawerk on the importance
of periods of production. What he says is that this alone is not
sufficient for a capital theory.
I'm also confused by the
claims about a capital stock. Please people - don't take Don's word for
it. Read up on the determinants of the marginal efficiency of capital.
It has everything to do with the capital stock and then the MEC
(together with the interest rate) determines the flow of investment
(which of course has ramifications for aggregate demand).
Don -
if nobody has ever responded to you "you're right, we do say this, and
we can safely ignore all this microeconomics stuff", maybe it would be
worth considering an alternative - that you've misdiagnosed the point of
contention."
Don is quoting White's new book, too, and it makes me worried about the text. Jonathan - I'd be very interested in your thoughts when you get to reading it.
I will address a lot of these points in my Critical Review article. I also have an outline of a "Keynesian public choice theory" - what he thought about how political institutions constrained the economy (he said a lot, and I don't think these points are lost on modern Keynesians either just because they aren't buddies with those who label themselves "public choice theorists") - but my outlines often just stay outlines.
You guys don't always agree with what I have to say about what some Austrians thought (Jonathan recently took issue with my spin on ABCT, but I think others of you thought it was reasonable), but I think I try to defend it pretty well. I also don't think I put absurd claims in Austrians' or libertarians' mouths. If I ever do - please bring it to my attention forcefully.
That White quote is amazing in how wrong it is.
ReplyDeleteIt's quite bad. This was supposed to be "the serious book on history of economic thought", and I've been told by many that we can expect White to be fair. It's one passage, no context, but it does have me worried.
DeleteYou should comment on Cafe Hayek (you have to friend them on facebook to do it now... strange system). He needs push-back. The man hasn't touched Keynes in a while - I always figured it was because he got such a heated reaction every time (lots from me, to be fair!).
You already said everything I would have said and I lack the patience you have for fighting against the intellectual dishonesty most of these Austrian guys perpetrate.
ReplyDeletebtw - anyone willing to counter any of these claims (Don listed A LOT) in a blog post is very welcome to guest post here. I'll look it over first, but you all know what sort of stuff does and doesn't get posted here.
ReplyDeleteFun fact: White is descended through dissertation advisers from Keynes: Keynes -> Clower -> Leijonhuvfud -> White.
ReplyDeleteI actually have a question regarding the MEC. Bare with me for a moment.
ReplyDeleteSuppose you have full-employment, and suppose that the interest rate is fixed by the monetary authority. Now suppose there's a rise in consumption spending. If I understand correctly, this implies a rise in the MEC, and in turn a rise in investment. Is that right?
The MEC is a subjective factor; it's the expected proceeds he will earn once completing the investment. So, I think it would be okay to assume that an increase in consumption would lead to an increase in proceeds and an increase in the MEC as long as the entrepreneur expects this increase to occur and to exist in future.
DeleteAlright. I ask because the MEC makes sense at an individual level, but I'm a bit unclear about it when it gets aggregated.
DeleteWhat I have in mind is an increase of spending on non-durable consumables. From what I understand, this would increase the aggregate MEC and in turn aggregate investment (assuming the interest rate did not rise in proportion). In a system of full-employment, though, it's hard to make sense of what that means. More investment in the Hayekian sense means employing relatively more labor towards the production of future output (and hence more future output). So if you get a rise in spending on non-durable consumables in a full-employment system, you're going to get less investment, simply because you've got to employ more labor to make near-term output. I should think you would get that too in Keynes system (at least when there's no slack), but at the moment, I'm not seeing how.
If all resources are fully utilized, you get inflation, right? Growth, to be sure - more resources are pulled in over time.
DeleteSounds like a lovely problem to have, doesn't it? Full employment, inflation, and demand lead growth.
This is the rest of the paragraph that Don didn't post: "As Keynes summarized his new conception in the preface to the 1939 French edition: 'It is shown that, generally speaking, the actual level of output and employment depends, not on the capacity to produce or on the pre-existing level of incomes, but on the current decisions to produce which depend in turn on current decisions to invest and on present expectations of current and prospective consumption.'"
ReplyDelete