Keynesianism, if you add its flexible, muscular form during the Depression to its more rigid postwar version, lasted 45 years.
One of the reasons I'm such a huge fan of Keynes is because people in economics say this to me all the time, and they don't even realize the incredible degree to which this is false. Everyone is a Keynesian, today -- more so than ever before. Even people who have never studied economics, and who know nothing about economics, are Keynesians. When a Wall Streeter says, "Consumer confidence is slipping, and that poses a problem," he's demonstrating that he is a Keynesian, whether he realizes it or not. When a so-called "Supply-Sider" tells you that he's going to cut taxes, so that it will put money in your pocket to spend, he's being a Keynesian.
When citizens say that WWII ended the Great Depression, what they don't recognize is that WWII, from the standpoint of economics, was simply a giant worker program.
(As I've said in the past, Keynes had Supply-Side economics figured out when Artie Laffer was still in diapers, and he had Monetarism figured out while Milton Friedman was still writing his dissertation. A Monetary History of the US is simply an extension of Keynes's A Tract on Monetary Reform.)
When the media talkingheads and the citizens say that the rebuilding of New Orleans will provide a small boost to the economy -- as an alleged anti-Keynesian professor of mine said last year -- they're talking about Keynesian principles, even when they refuse to admit it. When Bill Clinton said he was going to raise taxes in order to balance the budget, as the economy left the recovery phase and began its expansion, so that pressure on interest rates would be relieved, he was, in an odd way, being a Keynesian.
So, while the rest of the article is interesting (though wrong, in my opinion), Saul has a very poor understanding of just how dominant Keynes has become in our daily lives. I could fill, I'm guessing, two diaries with examples of his ideas at work in today's world. What's so interesting about the man, to me, is that he was able to destroy Classicalist economics in a matter of twenty pages at the beginning of The General Theory. And the Classicalists, along with the Austrians, have hobbled along ever since.
Saul, like most others who make that statement, has probably never read Keynes -- or, if he has, he probably only read Book I of The General Theory, and was frustrated by the fact that he had no idea as to what Keynes was talking about. If you want to know just how wrong Saul is, read this and (as Krugman says) marvel.
I'll respond to the rest later. Need coffee first. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
So, I don't know, maybe capitalism is due for the next Keynes, because right now it ain't working. guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
Keynes said many times that demand could easily be too high, causing inflation. It just wasn't the case at the time he was writing his magnum opus. Demand had collapsed. And he knew that lowering interest rates more would do absolutely nothing, except cause more money to be stashed in coffee tins under citizens' beds.
You have to look at both sides. People get caught up in what Keynes was saying about aggregate demand, but he was only saying it because a boost to aggregate demand was what the economy needed, desperately, at the time. If you ever get a chance to read A Tract on Monetary Reform or The Economic Consequences of the Peace, I highly recommend both, because they'll give you a much better picture of how Keynes thought about inflation and deflation. (As I recall, he even discusses asset bubbles, though that's not what he calls them.)
They're also much easier reads than The General Theory, which can seem like torture at times, because Keynes was explaining everything in such detail.
Another myth is that people will tell you Keynes believed recessions were caused by a fall in demand. That may be true, but it's not what I got from him. My interpretation is like Krugman's. Keynes didn't give a damn about what caused a recession. Recessions were, and are, a fact of life, even in non-capitalist countries, so asking what caused them was the wrong question. He cared about how to combat them.
I think he probably would've advocated a greater emphasis on fiscal policy in the aftermath of the 2001 recession, especially once housing prices began taking off. But, more than anything, I think the key understandings to take from him are those on inflation and deflation, and especially the fact that they do not produce simply the reverse effects of each other.
A critical point that I think you're getting at is that he's not the end-all, be-all of economics, but rather an important turning point -- away from myths like the idea that money is neutral; that prices and wages adjust instantly; and (most importantly) the idea of the "moral economy" (read: Austrian) where recessions are the result of past excesses and, therefore, cannot be fought. There is a great deal more to work out, but questions, like those surrounding (say) asset bubbles, are small, relative to those he was working with. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
I am not particularly interested in reviewing Adam Smith, but I'd definitely go for a review of John Stuart Mill's Principles of Political Economy and Chapters on Socialism.
I should probably also review 50 major economists, which I read a few months ago.
You keep giving me more and more ET work.. Poor Barbara. guaranteed to evoke a violent reaction from police is to challenge their right to "define the situation." --- David Graeber citing Marc Cooper
