Here and here.
It might be hard for a more casual reader to pick the Lucas Critique out of the Tract on Monetary Reform as Brad (rightly) does. But even a casual reader ought to understand that "the long run is not a good guide to current affairs" is not the same at all as "the long run doesn't matter". Which raises the obvious question: are the transgressors out there awful readers or is something else going on?
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awful readers or awful men?
ReplyDeleteawful readers or awful men?
ReplyDeleteI think DeLong is himself guilty of misrepresentation of Hayek when he says:
ReplyDelete'Hayek is simply a bad actor--knowingly dishonest. In what Nicholas Wapshott delicately calls "misappropriation", Hayek does not just quote "In the long run we are all dead" out of context but gives it a false context he makes up'
This passage ends "The Pure Theory of Capital". The last section of this work looks at monetary influences on the rate of interest and contains a very detailed critique of the Keynesian model - which Hayek thinks dangerously focuses on the short-term over the long-term. His use of the "in the long run we are all dead" quote must be seen in this context. It is not used just as a throwaway line to dismiss Keynes but only after going to some lengths to demonstrate the dangers that Hayek sees in the Keynesian approach. Even if Hayek is wrong in some parts of this analysis I do not think he is knowingly misrepresenting Keynes as DeLong claims.
By "This passage" I mean the passage DeLong quotes...
Delete"Are we not even told that, since 'in the long run we are all dead', policy should be guided entirely by short run considerations? I fear that these believers in the principle of apres nous le déluge may get what they have bargained for sooner than they wish."
NO. WE ARE NOT TOLD THAT!
DeleteWE ARE TOLD: Since in the long run we are all dead, economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again. In actual experience, a change in n is liable to have a reaction both on k and k' and on r. It will be enough to give a few typical instances...
If you really do believe that this is not a "knowing misrepresentation" of what Keynes meant by "in the long run we are all dead", I can only conclude that you do not know what the words "knowing" and "misrepresentation" mean.
Step up your game.
Brad DeLong
I am sure that a lawyer could demonstrate that Hayek was taking Keynes words out of context.
DeleteHowever in the wider context of a serious debate about short-term v long-term effects in economics then anyone who reads The Pure Theory of Capital would surely conclude that (even if one disagrees with it) Hayek is making a well researched and intelligent case against the Keynesian focus on the short-term. Perhaps Hayek was unwise to use that quotation but it clearly has very little relevance to the gist of Hayek's argument. To call this "knowingly dishonest" is a wild overstatement.