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Krugman's introduction to Keynes's General Theory
Brad DeLong reproduces a big chunk of it. I do have a few caveats...
Krugman writes:
A reasonable man might well have concluded that capitalism had failed, and that only...the nationalization of the means of production - could restore economic sanity....Keynes argued that these failures had surprisingly narrow, technical causes...
It is well-known that Keynes called for the socialization of investment and euthanasia of the rentier. Although I do not think he meant it by the 1940s (for background read this paper, or Keynes's preface to the German-language edition of GT, which is Department of Uh-Oh material), it is odd for Krugman to ignore these passages and present Keynes as an outright enemy of government control or ownership of investment. Next, Krugman writes:
- Economies can and often do suffer from an overall lack of demand, which leads to involuntary unemployment
- The economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully
- Government policies to increase demand, by contrast, can reduce unemployment quickly
- Sometimes increasing the money supply won’t be enough to persuade the private sector to spend more, and government spending must step into the breach
To a modern practitioner of economic policy, none of this - except, possibly, the last point - sounds startling or even especially controversial. But these ideas weren’t just radical when Keynes proposed them; they were very nearly unthinkable. And the great achievement of The General Theory was precisely to make them thinkable....
Arthur Marget and other historians of thought have shown that such ideas were commonplace in pre-1936 macroeconomics, albeit not in Hayek and Robbins. The American tradition in particular pushed for activist fiscal policy, read for instance Jacob Viner. Several books document the popularity of this approach, again before the General Theory.
Posted by Tyler Cowen on March 7, 2006 at 05:36 PM in Books | Permalink
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Comments
I was going to say, that last point where Krugman says those ideas were "unthinkable" sounds like a howler to me; though I don't have the knowledge of economic history, according to von Mises much of what he reccommended was already being put into practice (in the UK at least) before the book was published. Keynes just provided a more rigorous theoretical justification.
Wow, thanks for the pointer to the preface to the German edition. Straight from the horse's mouth: "Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire."
Posted by: Matt McIntosh at Mar 7, 2006 6:24:37 PM
I find few things as tiring as discussions along the lines of "Keynes said and believed X" - "No, Keynes said and believed Y". The point as almost always that Keynes said and believed both, and that he argued both viewpoints, often applied in slightly different settings, but sometimes even applied to the same setting at different points in time.
One can either reject much of Keynes's writings because of these contradictions, or one can realize that he was struggling with incredibly difficult and complex problems and simply didn't have much prior work of others to build on, at least compared to today. The truth, to the extent that we know it today, is almost always somewhere between "X" and "Y", and Keynes did more for identifying the relevant tradeoffs in Macroeconomics than any other economist.
Posted by: Commenterlein at Mar 7, 2006 7:15:51 PM
welcome to Keynes Banana Plantation;
http://truckandbarter.com/mt/archives/2006/03/bananas_and_pot.html
http://truckandbarter.com/mt/archives/2006/03/weekend_economi.html
Posted by: paul at Mar 7, 2006 9:42:25 PM
I went to the link that you posted. Keynes says we should try to have lower interest rates as a incentive to consume. This is because he thinks things will get better with more consumption. He says an interesting (and to him beneficial) effect of this is to make life harder and eventually impossible for rentiers.
You are seeing things through ideological blinders if you can describe that as calling for the euthanasia of the rentier.
It is as if you say in class; "there is a paper due on Monday"
and a student replies; "you are calling for the euthenasia of the saturday night party"
Posted by: Robb lutton at Mar 8, 2006 7:12:47 AM
I would suggest that, rather than "ideological blinders," that would be more of a direct quote. Try Googling ["euthanasia of the rentier" Keynes] and see what you get. I am, of course, open to the proposition that there are 286 instances of ideological blinders, ranging from EconLog to the Socialist Review, that produce identical results.
Posted by: Zubon at Mar 8, 2006 8:03:27 AM
Keynes was not an innovator and champion of new methods of managing economic affairs. His contribution consisted rather in providing an apparent justification for the policies which were popular with those in power in spite of the fact that all economists viewed them as disastrous. His achievement was a rationalization of the policies already practiced. He was not a "revolutionary," as some of his adepts called him. The "Keynesian revolution" took place long before Keynes approved of it and fabricated a pseudo-scientific justification for it. What he really did was to write an apology for the prevailing policies of governments.
Posted by: von Mises at Mar 8, 2006 9:11:25 AM
"...in spite of the fact that all economists
viewed them as disastrous. "
That's a strong statement, if you get my drift.
Perhaps all Austrian economists, or all fanatically
laissez-faire economists, or some other subset of
economists.
Posted by: Barry at Mar 8, 2006 9:57:03 AM
Sheesh, Zubon, you could've followed that advice a half-step further and just provided the original source of the quote: Chapter 24 of _The General Theory_, section II. Now we can all enjoy it in context. Yay!
Posted by: neil at Mar 8, 2006 11:51:50 AM
Although upon posting that comment I noticed that Tyler linked 'euthanasia of the renter' to the same e-text. Shame on Robb, Zubon and me!
Posted by: neil at Mar 8, 2006 11:52:55 AM
Agree with Commenterlein that Keynes wrote so much at so many times on so many topics that stray quotes are misleading. Yet, I must contribute a stray quote or two in response to the assertion that Keynes was just rationalizing the government policies. See his open letter to FDR written in 1933. http://newdeal.feri.org/misc/keynes2.htm Keynes specifically rejected in paragraph 6 the Depression Era policies of enforcing cartels to cut output to try to raise prices. Paraphrasing another Keynes quote, saying that 6 percent of the people are unnecessarily unemployed does not imply that the other 94 percent are inefficiently employed. He really did distinguish between Macro variables and Micro level industrial policy. Right or wrong on the specifics, Keynes made a major theoretical contribution that laid the foundation for half of the Economics discipline.
Posted by: tedm at Mar 8, 2006 11:55:45 AM
JK Galbraith points out that some of Laughlin Currie's work also anticipated Keynes. Apparently, Canadian's had this Keynesian stuff underway before Keynes got around to writing it down. Galbraith also describes Currie as a Keynes' disciple, so Currie must have thought more of Keynes work on Keynesian theory than of his own.
Posted by: kharris at Mar 8, 2006 12:33:02 PM
All as untrue today as the day it was written. Yet I doubt that this will finally be consigned to the dustbin of history before I die.
No wonder natural scientists think so little of economists. You don't see chemists talking about phlogiston in the 21st century...
Posted by: Noah Yetter at Mar 8, 2006 12:37:28 PM
Pointing to Keynes' "rentier" quote in a review of Krugman's review of Keynes as somehow evidence against Krugman's view isn't quite fair, if you fail to mention that Krugman's review also includes the "rentier" line. Bad on two counts. Shouldn't pretend Krugman was all one way on Keynes' views on private ownership. Shouldn't pretend you dug the quote out memory for your own argument when Krugman dug it out first. "It is well known that..." No. "As Krugman himself notes..."
Posted by: kharris at Mar 8, 2006 12:54:07 PM
Keynesian "pump-priming" CAN work, but has hidden as well as obvious costs as does all other Government action. I believe that the recent history of low taxes, low tariffs, and monetary policy to adjust for recessions has proven itself to be a far better instument.
Posted by: Kyle N at Mar 8, 2006 6:36:28 PM
"Keynesian "pump-priming" CAN work, but has hidden as well as obvious costs as does all other Government action. I believe that the recent history of low taxes, low tariffs, and monetary policy to adjust for recessions has proven itself to be a far better instument."
>>>
Right, because the only costs with that so far are massive budget and trade deficits. No biggie.
Posted by: Dean Moriarity at Mar 9, 2006 8:37:55 AM
following the links ..
"...there are no intrinsic reasons for the scarcity of capital..."
Somehow, I find this pretty much... "unthinkable"
Have anyone, already, compared Keynes to Mao?
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