The Keynes Solution
This is a response to the review of my book THE KEYNES SOLUTION (“The Keynes Comeback” October 3)
Today’s economic problems involves the largest global downturn since the Great Depression. Ultimately, however, the reviewer declares that the policies I developed for the 21 century global economy from Keynes’s ideas and philosophy for ending the Great Depression and creating a full employment global economy after the second world war are “to most others[ mainstream economists? politicians? powerful interest groups?] …. solutions that are outmoded and unworkable”.
Aren’t these “most others” the same people who for the past three decades have advocated government de-regulation of financial markets, no constraints on international capital flows (which led to the contagion of a U.S. sub-prime market collapse to threaten the global banking community), free trade with flexible exchange rates, and perfectly flexible prices and wages so that any unemployment problem can always be eliminated by removing any social safety net that protects the unemployed and thereby force unemployed workers to choose to accept lower wages or see their family starve to death? These classical policies are ultimately based on the ideas espoused by 18th century Adam Smith and 19th century classical economists such as David Ricardo and Leon Walras.
The reviewer argues that “the world economy may have changed beyond recognition since 1944 but to a true disciple of Keynes…[his] policies make sense” while most (mainstream economists?) think them “outmoded”. Since the world economy has changed much more since the 18th and 19th century of classical economists, does the reviewer really believe these ideas of 18th and 19th century economists are not “outmoded” and unfounded or worse merely because “most ” mainstream economists and policymakers still cling to such failed ideas and policies rather than face the reality of Keynes’s analysis of how modern market oriented, money using economies actual operate?
Paul Davidson
The active role of the public economic policy was sustained in a contradictory fashion(we don’t know to save the general system or some big financial subjects, as in the Moore’s film)even by the lasting President Bush.The problem is if this role is limited to a desperate situation of fall or it can prevent the situation.
We are for the last one even if we must have the humbleness to recognize the impact of extraeconomic factors.
I like your letter – some time there is no arguing with the Economist.
I get a little upset with the whole debate. Keynes is so grossly misinterpreted and apart from anything what we lack is not his theories but his genius.
He was able to repeatedly offer solutions to the pressing problems of his day. He would not have been reaching for his predecessors but was purely innovative. He was also supported by the (policy-wise) courageous post-war governments.
Today we do not have the same benefit.
Fluffy
With respect, I feel that Keynes is somewhat over-rated. Undoubtedly, he had the right idea that you cannot leave everything to the markets. However, there are many dimensions to all this, and what is required is a very advanced form of “Neo-Keynesian Economics” Here I suggest my project of Transfinancial Economics (p2pfoundation entry) which arguably represents a real breakthrough in understanding though it may be “too advanced” for its time.
With respect Robert.
TFE has been around for years as The Fluffy Economist. Please use another acronym :P
I had a read of the TFE, though have yet to take it fully in. At first brush it requires systems radically different to our ones now, and a level of scrutiny and morality not currently found in any government I can think of, but…
there’s some damn fine thinking there. It’s hard to dismiss and it’s so completely different to anything I have come across. I’l stay tuned.
Thanks!
Simon
“Where Keynes Went Wrong” was excellent; thanks.
I always enjoy Paul Davidson’s expositions about the place of the great J.M. Keynes in the history of Economic thought & policy.He was not only a great & civilized man.But a chronic worrier about “la condition humane” and just how easily the fabric of civilized restraint can be torn asunder by prolonged periods of economic distress & frustration of our natural Promethean energies. Keynes understood clearly that the need to work goes beyond the basic necessities of putting food on our tables, a roof over our heads & clothes on our backs. It’s the core of our human dignity. But Keynes worried just as much about the threats to the thin fabric of our civilization posed by the maniacal conspiratorial panaceas for “curing all that ails us”; That stalked his own times..and ours.For this reason alone, all you born-again-”progressives” who now seem to be groping for one more “hair of the dog that bit yeh”,(Old time boozers’ expression for an early morning gulp of the amber fluid)) should refresh yourselves with Keynes ‘feelings’ about DAS KAPITAL & its author.
A few samples:[1]“I know that it is historically important.And I know that many people,not all of whom are idiots, find it a sort of “rock of ages” and containing ‘inspiration’.Yet,when I look into it,it is to me inexplicable that it can have this effect.It’s dreary,out-of-date academic controversializing seems so unsuited for this purpose..”It beats me. Clearly there is some defect in my understanding”. [2]“What is the sociological value of DAS KAPITAL ? I am sure that the contemporary economic value….is NIL.” My personal favorite?..From a man who often rivaled Oscar Wilde with his style of incisive wit:”I prefer Engels of the two.I can see that they ‘invented’ a certain method of carrying-on; And a vile manner of writing style..Both of which their successors have maintained with fidelity. But if you tell me that they have discovered a clue to the economic riddle ?..Still, it beats me”.Not to mention the mountains of corpses & rivers of blood that these ‘successors’ have caused…with the same ‘fidelity’.For more about Keynes’ frequent ad-hoc insights & the limitations imposed by the historical era he lived & worked in, Please consult TELOS & TECHNOS:The Teleology of Economic Activity & the Origins of Markets.And GOOGLE on the WEB(chrome)[1] Norman Roth, Technos, or [2]Norman Roth, Markets
Norman, Great stuff. Thanks. However, it would be nice to see some of your thinking on how to implement an effectively pragmatic (semi-pure) solution for this impure impure socioeconomic melee/maelstrom of ours (the ecocidal market economy), before it’s too late to mount an effective Exit Strategy. Sincerely, M
Re Merijnknibbe and others ,i am not an economist or an academic but a simple uneducated pensioner whos lifes experience has tought me that the moment any organisation or individual excludes excludes further discussion discussion and observation of the subject matter the former knowledge becomes irrelevant. Therefore from my point of view this highlights the very reason why main stream economists are powerless to deal with the economic chaos theyhave created Here Paul Davidsons quotation of C S Lewis’”aptly describes mainstream economists attitude “do not argue that something is true or not but wether it is outmoded since this is practicalpropaganda that is more difficult to counteract.Edward K Ross
Bravo, kudos & sincere thanks. Spot on rebuttal. Hope they print it, online at least. Hope you’ll take a look at my Greenbook project & join the heroic “fun” at > mm-greenbook.blogspot.com or EcotectureNOW.wordpress.com < your critical comments & suggestions will be warmly welcomed. M