1. John Gray asks "what would Keynes do?", HT my lovely wifey. There's lots of great discussion of his evolution since Bloomsbury, but this was the real meat of the article: "It's hard to imagine Keynes sharing such a simple-minded view. As he would surely recognise, the problem isn't just a deepening recession, however serious. We face a conjunction of three large events - the implosion of the debt-based finance-capitalism that developed over the past twenty years or so, a fracturing of the euro resulting from fatal faults in its design, and the ongoing shift of economic power from the west to the fast-developing countries of the east and south.
Interacting with each other, these crises have created a
global crisis that old-fashioned Keynesian policies cannot deal with.
Yet it's still Keynes from whom we have most to learn. Not Keynes the
economic engineer, who is invoked by his disciples today. But Keynes the
sceptic, who understood that markets are as prone to fits of madness as
any other human institution and who tried to envisage a more
intelligent variety of capitalism."
I think this is right and important to consider. We have an aggregate demand problem because of the financial crisis, the eurozone problems, and probably some more secular savings glut/transitional issues too. The demand problem has a clear government response. But we should not forget the causes of the demand problem, and we should not expect demand management to fix a broken banking system or currency union. We have no reason to expect that out of demand management. That requires other solutions.
2. LK contrasts the economic system of Marx and that of Keynes. The two - obviously - are like night and day. A Keynesian social order is non-sensical without private property, decentralized ownership and decision making, and free citizens. Marx and Communism even before Stalinism, was adamantly opposed to all of this. Marx had some interesthing things to say. I've particularly enjoyed reading his thoughts on Jean Baptiste Say and general gluts. In a lot of ways he did better than Malthus on all that. He's an interesting guy, but he was still a theorist of brutality. This idea that Marxism was sanitary before Lenin and Stalin came along to muddy it up is complete hogwash. The totalitarianism is all there in the original. It's not that it had to wait for Lenin and Stalin - it was always there, it's just easier to turn a blind eye to when it's on paper. This is not to condemn all socialism (although I think it's a foolish thing to get caught up in). Strictly identifying Marxism with socialism writ more broadly is a mistake that unfortunately a lot of Americans make.