This week marks the 70th anniversary of the publication of John Maynard Keynes’ General Theory of Employment, Interest and Money (which you can read online by following the link). Not being steeped in Keynesian theory, but recognising his importance both historical and contemporary, I’d planned to mark this anniversary by writing something about his life - in particular about his bohemianism and links with the Bloomsbury Set, which have always interested me.
To that end, I sat down just before to start reading Robert Skidelsky’s biography, but haven’t got past the fascinating Preface. It provides food enough for thought.
Skidelsky meditates on the nature of biography, which he thinks is regarded by the cognoscenti as an “impure form” of literature. What, he asks, can knowing something of the life and personality of a thinker tell us about his thought? On original publication in 1983, it was asked ‘Does a great economist’s life have anything to do with his economics?’. Skidelsky observes that Keyne’s first biographer, Sir Roy Harrod, entirely ommitted mention of Keynes’ homosexuality. It’s hard to see - perhaps now in 2005 - how to talk about this aspect of his life would “hand ammunition to critics of Keynesian economics”. But perhaps the key lies in the disjunction between sociology and economics Skidelsky discuss - on the questions of scientificity and epistemology. Skidelsky quotes sociologists and historians who view Keynes’ thought and method and his choice of topics as imbricated within his times and with his life, and even the odd economist or two, Schumpeter and Pareto (who was both sociologist and economist) most famous among them. Counterposed to this is the view that economics is a science, whose laws and methods are in principle separable from their authors or practitioners and their social, political and historical contexts.
Kant, proverbially, led an awfully orderly life, while Hobbes’ philosophy cannot be unrelated to his own fear of death in troubled times of civil war and strife, times overlapping with those of Descartes who sought a similarly mechanistic epistemology to construct a certain scientific world which would not fall prey to the disorders of war - and life. As Skidelsky argues, Keynes’ life can illuminate his thought. But surely there’s a deeper epistemological point - who, now, would defend the thesis that thought and times are separable? To assert this is not to fall into some sort of postmodern relativism, but to recognise something eternally true about the nature of human knowledge - its very humanity.
The greatest thinkers are remembered for their achievements because they somehow manage to transcend the limitations of their culture, time and place.
Most people are constrained by their historical context to think within certain boundaries, but ground-breakers, open to empiricisms just beyond the visible spectrum available to the majority of their community, advance our knowledge.
Knowledge, once gained, transmits easily: through the ages and across space. So yes, commonplace thought is inseparable from time and place, but new science is almost definitionally a departure from it.
Just a note to say I’ve taken the liberty of moving a comment which was about Keynes’ record as an economist to the other thread as it’s more on topic there than here - the idea behind this one being to discuss biography, history and epistemology with Keynes’ life as a jumping off point.
” Skidelsky quotes sociologists and historians who view Keynes’ thought and method and his choice of topics as imbricated within his times and with his life, and even the odd economist or two, Schumpeter and Pareto (who was both sociologist and economist) most famous among them. Counterposed to this is the view that economics is a science, whose laws and methods are in principle separable from their authors or practitioners and their social, political and historical contexts.”
This sets up a false impression in favour of Keynes. Had Keynes written in some scientific and objective way about economics there would be no need to investigate his life in order to explain his truly bizzare ideas. The above seems to suggest that Schumpeter and Pareto were pretty shallow folk who looked for some tendentious way to criticise Keynes ideas since they couldn’t fault them.
In fact it’s a classic leftist reversal. Since Pareto and Schumpeter were authentic social scientists and both highly original. Whereas Keynes economic thought was entirely tendentious. Keynes was doing what all millenarians do. Looking for a way to bring on a new age. A sort of heaven on earth. In order to do so he tried to show that you could increase both investment and consumption at the same time. Which you cannot. Since investment is equal to savings.
But there was a weakness in fractional reserve Gold. In that there were wide swings in aggregate demand because of fractional reserve. This was usually but not exclusively exacerbated by government action.
Keynes took the boom bust phenomenon that resulted from this weakness and used it as the bait for his implausible theories and the clearly wrong idea that you could take government action to increase both investment and consumption and produce a sort of wonderland of massive investment which would end the economic problem of scarcity.
His ideas failed in theory just as they have failed to bring on the new age in practice.
The above quote then puts Keynes in the position of objective and highly original social scientist (which he was not) in the place of Schumpeter and Pareto (who were). And it pushes Schumpeter and Pareto in the direction of the real Keynes.
Now it is true that the swings in demand that fractional reserve Gold produced (or at the very least encouraged by being a constant temptation to the authorities) had to be cleared up. But that does not excuse in the least the fraudulent theories that Keynes put about with the aid of this flaw in the system.
In fact Keynes downplayed the role of money in his General Theory. He once described monetary policy as akin to “pushing a string”. This is a virtually unbelievable contention and would be a mystery affording no explanation without reference to what it is he was trying to achieve. And earlier he had written eloquently on the consequences of inflation. In those days inflation was not defined as an increase in consumer prices but as an increase in the amount of money in the system. Only after the General Theory did a new meaning for what we now call inflation take hold.
So its not as if Keynes downplayed the role of money out of some sort of ignorance.
In the General Theory Keynes sets up a scheme by which money is just ignored. In the original draft I believe it was ignored totally but his publisher convinced him he had to say something about it.
What he did is present a model where spending is autonomous from the amount of money out there. And this enabled him to present the various categories of spending as being (at least in the first instance) autonomous from eachother.
Now no category of spending is autonomous from money. And none are autonomous from eachother. So what was he trying to achieve?
With his model he achieved two things.
1. Keynes model is set up so that if anything changes the whole system collapses. This therefore requires that one of the spending categories be increased or decreased depending on which way aggregate demand has lurched toward. That spending category is of course Government spending. Or G for short. So if the model was to be believed it would encourage… nay NECESSITATE …. an expanded role for Government.
Naturally enough this was sweet music to anyone who had their hands on the public purse or who dreamed of being in that position. But worse then that it was music to the ears of socialists who had been discouraged by the disaster of what had happened when socialism had actually been put into practice.
2. It enabled him to place a cleavage between Savings and Investment. And having done so he could them imply that you could have both more spending and more investment. And since you could have this ’something for nothing’ you would be able to usher in the new age of abundance.
It’s a terrible thing but to this day Economics 101 classes start with this highly tendentious model. The first formula you must write on your arm before going for your first exam is Y= C I G X-M (Where I is net investment rather then just investment that is to say Investment minus savings).
Because of this model Macroeconomics became a quasi-Mystical science. Cut off from Microeconomics.
Speaking of quasi-mystical science:
That seems to me to be a very idealised and indeed somewhat mystical view, wbb. It ignores, at a practical level, factors such as the observer effect, and the reasons why certain problems are selected and framed as they are. It seems to me that you’re positing a rather essentialised view both of “new science” and of its object. Can you come down to the ground and give examples of what you have in mind?
For instance, wbb, I’ve been reading more of Skidelsky tonight and he demonstrates very convincingly that Marshall’s marginalist economics was very much embedded in current cultural assumptions and had its origins in Marshall’s own way of making sense of the world through the prism of his own experience.
I’m not qualified to proffer an opinion on the validity of Marshall’s work, but this wouldn’t invalidate it by a long straw.
Similarly, Steve’s post demonstrates how Newton’s work grew out of his own personality, and historical and cultural context.
Marshall didn’t invent marginalist economics.
No, (was it Jevons?) but Marshall did set marginal economic analysis in the framework of the representative firm, so linking the actions of the enterprise with the behaviour of the industry.
Additionally, he applied the analogy of biological evolution to the transformation of markets through time, at a time when evolutionary theories were quite popular (reinforcing Skidelsky’s point).
Similarly, Keynes’ focus on the psychological aspects of economic activity (particularly the investment process) reflected his immersion in the popular psychologies of Jung and Freud and his association with the Bloomsbury Set, including Virginia Woolf.
Mark
be careful where you take this psychobiographical approach. as you may be aware, some conservative wingnuts take the opportunity to link Keynes’ homosexuality to his alleged propensity for fiscal profligacy! (i.e. homosexuals have no children so they don’t need to save). Ideas are best assessed on their merits and yes, taking into account the *intellectual* milieu of their originators but understanding Keynes the person can only go so far in understanding his ideas.
I agree with Jason.
Jason implies the fiscal profligacy is rubbish.
Anyone who was read Keynes would know that is rubbish.
One of the best writers on Keynes or economics was the late grate Joan Robinson.
She constantly showed the ‘left-wing’ Keynes was uneducated twaddle
Marhsall is relevant. Keynes fundamentally remained a liberal (in the sense of believing generally in free trade and market forces) because he was a Marshallian. There was a disconnect between some of his macro ideas and the Marshallian framework he imbibed which he was never able to reconcile. The IS/LM model we are all forced to study at uni was an attempt at such a reconciliation but it was at the expense of watering down Keynes.
“One of the best writers on Keynes or economics was the late grate Joan Robinson”
Did she grate because of her puns or her typos, Homer?
typo?
you are addressing the funniest person on the blogosphere.
Joan Robinson is one of my favourite economists.
although left-wing she never tolerates the usual left-wing shibboleths ( This is to old for you Jason but she was on a Monday conference with bob Moore as was Milton Friedman a little later.
She was a wonderful writer ,very easy to read as opposed to Keynes or Hayek.
I’m not trying to do psychobiography, Jason, and thanks for illuminating me as to the slurs - I wasn’t sure what Skidelsky was referring to. I’d also add that understanding where ideas come from doesn’t mean that they should not be assessed on their merits.
No, (was it Jevons?)
Jevons, Walras and Menger all working independently in the early 1870’s. Marshall’s book was about 1890. The hagiography of Keynes is so thourough-going that we only remember a single thread of economists going up to him. So we remember Smith, Ricardo, Marshall then Keynes but very few others.
“but Marshall did set marginal economic analysis in the framework of the representative firm, so linking the actions of the enterprise with the behaviour of the industry.”
Menger did all that and far more convincingly. Marshall came up with subjective ideas like consumer surplus. Since it is an idea of utility that is purely subjective BUT THAT CAN BE CALCULATED ON A GRAPH it was a dead-end intellectually. That is the irony of it. Its shonky assumptions tricked out to look like science in mimickry of the natural sciences.
“Additionally, he applied the analogy of biological evolution to the transformation of markets through time, at a time when evolutionary theories were quite popular (reinforcing Skidelsky’s point).”
But did he really? Sure its a novel idea to think of the processes of the environment and evolution as being akin to the economy. They should be parallel sciences. But Spencer had already done something similiar and Darwin himself had at least in part had been inspired by people like Malthus and Spencer. In fact Spencer’s career itself was a link between the two fields of thought. So the crossover in concepts had already been made to some extent.
And how further did he get other then just suggesting this rather compelling idea?
“Similarly, Keynes’ focus on the psychological aspects of economic activity (particularly the investment process) reflected his immersion in the popular psychologies of Jung and Freud and his association with the Bloomsbury Set, including Virginia Woolf.”
Right. But it was entirely dubious stuff. What’s really going on here is that fractional reserve banking is throwing instability into the system. Supposing if in a speculative boom bankers are caught up in it all and their Gold reserves go down to 5% on average compared to their on-call liabilities. Then when the comeuppance comes if by the end of the process they’ve leaked half their Gold reserves and now are so frightened that their holdings are now 35% we can see that the money supply stands to have fallen 2×7 ie. 14 times. As well this will be compounded by a grinding down of the velocity of circulation.
Compounding this will be investment asset price inflation that will have overshot and so will need to deflate by even more again. OK that’s a pretty extreme scenario. But in the face of this massive potential for instability coming out of the nature of fractional reserve Gold why on earth does he need to jerk around with ‘animal spirits’.
The guy just keeps on talking about ‘animal spirits’ over and over again in this hazy way at the same time as downplaying the role of money. We are stuck with this bogus theory to this day.
You see it with Greenspan. Talked about irrational exuberance. But neglected to mention that the money supply was expanding hand over fist which was feeding the Nasdaq boom.
“Menger did all that and far more convincingly. Marshall came up with subjective ideas like consumer surplus. Since it is an idea of utility that is purely subjective BUT THAT CAN BE CALCULATED ON A GRAPH ”
Sorry to break this to you Graeme but that’s what mainstream neoclassical economics still does. Pure Subjectivism can only go so far and would have consigned economics to the realm of theology. Some concrete imprecision is preferable to precise irrelevance, which is where the more hard core Austrians are.
I am surprised no-one has said Keynes was in favour of inflation.
remember inflation is essentially a post-war phenomen.
Previously deflation in a depression cancelled out the inflation in a boom.
some of Keynes’s other work was better.
His work on the Versailles treaty was entirely prescient unlike Hayek’s and Marx’s.
He wrote well on monetary economics and Probability theory as well.
also he wasn’t homosexual. He was bi-sexual.
A significant difference at a 5% margin of error!
Well said Jason, I am pleased to type, after getting back on my chair, from which I’d tumbled after reading praise for Joan Robinson from Adonis, err, Homer, err, BBEP
Joan is an easy writer compared to JMK; but the great man is the ‘wonderful’ writer of the two.
An intractable problem with Keynes’ legacy is that it is doomed to be assessed by lesser mortals.
CS,
GA knows more about economics than I. He never did like Kalecki or the ‘tripe’ in the journal of Post-Keynesian economics that I did.
Like a true treasury bureaucrat he was and is still a neoclassical man.
Can I just say if one didn’t like Harrod’s biography then it would Harrod’s disequilibrium model!
Jason sez:
Sorry to break this to you Graeme but that’s what mainstream neoclassical economics still does.”
I know. Why do you suppose you are revealing anything to me. The mainstream have not only accepted Keynes in order to deify the millenarian have gone further and accepted all the bad ideas of his predecessors. I remember being taught consumer surplus as a thirteen year old via some implausible story about some kid pigging out on pies because the pie seller kept dropping the price each time the kid bought and ate another pie. No incident like this has ever happens of course. But you have to go to these foolish lengths to even describe how such an unuseful idea could be applied in the real world.
“Pure Subjectivism can only go so far and would have consigned economics to the realm of theology. Some concrete imprecision is preferable to precise irrelevance, which is where the more hard core Austrians are.”
It’s utility theory and consumer surplus and concepts of this sort that are the subjective theories. Subjective assumptions transmuted into faux-quantitative form.
Take the parallel science of evolution just to give this some distance. The scientists there kept on assuming direct lineage and over-emphasising the importance of dating the fossil. But a fossil cannot tell you anything about lineage or direct ancestry. So since they were building on an unwarranted assumption everyone got distracted by some vain search for the ‘missing link’. And it produced very many holes in the thesis that the only people complaining about seemed to be creationists.
So finally they came up with the concepts of ‘Deep Time’ and ‘Cladistics’. Cladistics put all the cards on the table. And said that we cannot ever assume direct lineage at the outset. But we assume degrees of cousinship between all organisms on the planet. Which with any two organisms (say me and the next door neighbours cat) is a pretty good assumption since if this were not so it would mean that evolution had gone down the same track twice.
So then we assume an hypothetical common ancestor and describe what we think we know about it. Then we go through this process with all species extinct or extant and build up the tree without worrying about the time factor so much.
Now since this is based on reasonable assumptions when you work through it you find that the problems that evolution seem to have dissappear. And the creationist critique dissapears as well.
Now its the same here. No-one has to waste time calculating consumer surplus. The supply and demand curve cannot be drawn with precision anyway. And is only drawn in order to show certain generalisations and to see what they imply more easily. To take this and to start shading in regions and trying to calculate units of consumer surplus….. Well its all too silly.
Whatever you may think of individual Austrians they are at least on the right track from an epistemological point of view. Since they (as a rule) don’t try and build on such silly assumptions as the ones we describe here.
Graeme
I am not sure we can ever return to a gold standard simply because of the way economies are structured. Shit, I wouldn’t want to see that simply because it would ruin my day/night job and I am not qualified for anything else and far too old to be trained in… Brain surgery.
I think we are passed the point of no return as far as that goes. However gold targeting could be a way to go, but who would trust anyone to hold the target at the point of a recession as you win or lose elections depending on whether one party suggested a change in the target. Moreover unless the labor market was loosened even further than the Government is proposing I think it would be a disaster waiting to happen as Argentina proved recently. Argentina was on a dollar standard until a fee ago where one peso= US1. The problem for the Argys was that it would only be a matter of time when their little deck of cards fell because if you going to glue to the Dollar you had also better make sure your labor market looks the US. That’s why Argentina got nuked. Hong Kong on the other hand, has an open and free labor market and also fixed to the Dollar (slighted polluted now). But it has stayed fixed because the labor market was freer that the US.
The point you made about CPI being the inflation indicator of choice these days is the biggest con job I have ever. In fact it isn’t a con job because nearly everyone believes in it. There must only be a dozen people in this country that would ever bother to look at the RBA stats for money supply and bank lending GROWTH these days, which is a good thing for speculators like myself as you don’t want that to be a crowded area.
Getting back to Keynes. Keynes polluted the entire discipline of economics from the very first letter written in General Theory. Ignoring money is about as logical as having a lung transplant attached to your anus.
We wouldn’t want to return to fractional reserve Gold. And it would (as you say) be too difficult to return to 100% backed Gold since it would imply an astronomical Gold price.
But what we can do is go to 100% backed fiat. There is no plausible excuse not to since it would make the central banks job easier in hitting its demand management targets. From there it would be possible to:
1. Deregulate banking (but for that one stipulation of having on-call liabilities fully backed).
2. Legally back loan contracts with metallic weights. And only tax the extra metal gained.
3. Get rid of legal tender.
You’d likely then have Palladium, Gold Platinum and silver coming in slowly. And if the government screwed up they’d grab market share.
The very first letter in The General Theory of Employment, Interest and Money is “T”, as in “This” … as in: “This book is addressed to my fellow economists. I hope it will be intelligible to others”, a sadly unrealised ambition in the case of Birdy and Joe.
An evident shortcoming of the blogosphere is that, when there is an impulse to remember and celebrate the anniversary of dead guy, who was one of the major figures of the 20th century and remains admired by many world over, that a small number of determined cranks without anything better to do can so easily and insensitively invade all a site’s threads in order to destroy the moment.
CS
If he was family to you I apologize. However if the thread is discussion about his legacy then I beg to differ.
According to you then we shouldn’t say anything about famous dead people because…. they are dead.
I’ll remember that next time someone attacks Nixon ( another failed Keysian).
Pertinently, as far as I can tell, I haven’t said anything about Keynes as a person, attacked his personal life or anything like that so your issue is simply spurious in the extreme. If you want to go on dreaming about what a fine economist he was ,go ahead, after all who am I to tell you otherwise. However if this blog is way of debating objective truth, well you are wrong.
I understand it central scrutinizer you fool. It is you who don’t. If you did you’d realise what a fraud it was.
…An intractable problem with Keynes’ legacy is that it is doomed to be assessed by lesser mortals…..
I doubt that we’ve once seen you go beyond your comfort zone of argumentum ad homenim. But tell me this. Why do you judge him to be a great economist in the first place?
He isn’t a great economist. I challenge you to come up with anything from Keynes that was an improvement on theory original to him. Anything at all.
That’s the challenge open to everyone out there. I have to split. But find anything at all that Keynes contributed to our understanding of economics. Find any original true knowledge of economics beginning with Keynes.
It can be said (without malice or exaggeration) that everything that Keynes brought to the subject was wrong unoriginal or both.
So how can he be a great economist?
Graeme
He did popularize analysis of aggregates. But now it has been taken to the extreme.
Take labor markets for instance. When we look at labor markets for an indication as to how the economy is preforming we simply look at the aggreg total. Higher employment means good. Lower means bad. Well the problem with that is that most people don’t go into the body of the numbers to look at waht is happening.
We can, like the recent past have a growing employment “base” but be heading into a recession. If you looked at the numebrs closely they would provide a wiff of that.
Retail employment growth growth could be going higher whereas employment at the deep end of the economy could be contracting.
That was what was happening in the US in 1998 and few peope saw it. Sure enough 18 months later almost to the day the bottom felt out.
He also helped establish the monetary standard that held for 25 odd years until the frogs turned up to Nixon’s office demanding their hoard on a Friday. Nixon broke the standard on the weekend. The best thing I have ever seen happen to the frogs.
As an aside. The frigging nerve of the frogs. They get protected from the Soviet menace and then go door knocking looking for their stash. 25 years before that hey got saved from the Germans. Thankless bastards.
Note the word ‘popularise’. You are talking about what others did in supposed response to him. Not any theory he contributed.
Keep them coming.
G says
But what we can do is go to 100% backed fiat. There is no plausible excuse not to since it would make the central banks job easier in hitting its demand management targets. From there it would be possible to:
Me says
Ok so you agree with a gold target. But short of making it constitutional law who’s going to believe it will hold. Would you have trusted Latham to keep the ratio (target). No, so would yuou expect anyone else to.
G says
1. Deregulate banking (but for that one stipulation of having on-call liabilities fully backed).
Me says
Can you imagine the contraction in bank lending as banks began to scramble to refit their ratios. It would make Japan’s leanding slump over the last 10 years look like a kindergarten.
G says
Legally back loan contracts with metallic weights. And only tax the extra metal gained.
Me says
Ok, but if you having backing it could be either, but I take your point.
G says
Get rid of legal tender
Me says
Don’t need to.
Jason
I recall recently you took great exception to Blair äccusing you of running a lefty site. I guess, seeing you wanted to discuss like coming out of the closet etc. as you did above, today would be a good time for you to hang a toe out of the leftist closet and scream out “ME TOO, I’M ONE OF YOU COMRADS.
Call me stupid, whatever you like, but it seems to me whenever you attack someone like you’ve just done with Graeme, your attack seems to always lead from the left side of the body towards the right side of the “victim”.
So, I guess, you’d have to agree that Blair is a pretty astute observer, don’t you think?
“Call me stupid, whatever you like, but it seems to me whenever you attack someone like you’ve just done with Graeme, your attack seems to always lead from the left side of the body towards the right side of the “victimâ€?.”
Sticking up for Marshall and consumer surplus, which is essential to cost-benefit analysis done by bodies such as the Productivity Commission and Treasury is left wing? OK, JC, if you say so.
Joe, and especially Birdy, remind me of those Japanese soldiers found on pacific islands in the 1970s, who refused to believe that the war was over.
About as much as I could expect Jason. Rather than debate Bird on his points, quite valid I may add you choose to bring out the homosexual in the closet routine. All Throughout Bird’s discourse that’s where you found a opening. Jeesh, remind me again what did Blair say?
CS
What reference does that analogy have to all this? That only only places where Keynesianism has value is in the semi-sandstone uni further up north?
The ar is over thank God. Keynesian lost. I’m sure Keynes would have accepted that defeat gracefully as well. After all when it is all said and done he was a gentleman as well.
Jason again
“Sticking up for Marshall and consumer surplus, which is essential to cost-benefit analysis done by bodies such as the Productivity Commission and Treasury is left wing? OK, JC, if you say so”.
Treasury is not Keynsian? I guess that’s where costello is getting his good advice????
Remind me, what is a consumer surplus as I forgot that part of uni. Does it exist outside of faculty?
“Rather than debate Bird on his points, quite valid I may add you choose to bring out the homosexual in the closet routine. ”
???? I have no idea what you’re on about JC, and no idea what you’re on either. Is it the stuff I saw people ducking into the bathroom to once at an eastern suburbs party?
My comments about conservative wingnuts were not aimed at Birdman or anyone else in particular but to make a point about the dangers of psychohistory.
You know when and how economics works, Jason? It doesn’t come from the bloody books. Nor does it come from market type economists telling us which way they Aussie is going to go because the textbook tells them that a CA deficit is bad- surplus is good routine. It doesn’t come from listening to overpaid/underworked bank economists no matter what frigging unis they went to or which administration or Government the worked for.
I come from where you sit down in front of a screen with a bunch of other yobbos who also come from the school of hard knocks and you are expected to make money from speculation. I’m not talking about stocks and corporate bonds, which is more micro. I’m talking about the real macro stuff like currencies and Govys. When you sit down for a few years and you begin to ignore the shit being spewed out by “economistsâ€? and realize that the 3/ 4 years you spent listening to a dick tell you about deficits/bad, surpluses/bad ain’t worth shit. In other words it was a complete waste oflife and time. Even Keynes to his credit would have forgotten all that crap he was teaching and wrote about when he was trading. And according to reports he was a dam good trader as well. That’s why I kinda respect him. I also liked him because I know deep down he would have told us everything he wrote was worth shit anyway because he even said to people that he would change his opinion if something better came along. Keynes had the trader’s mentality that you never marry anything other than your wife or in his case another dude.
CS , got me thinking all day about what you said earlier.
So if you’re saying, CS, I was a bit stingy with my respect for a dead guy……..
Well here’s my testament to Keynes-not his economic theories but to the man. His economic views were mostly wrong, which I am sure he would recognize now. He was a trader first and foremost and for his time the best. This was the least known thing about him. He was prepared to change his mind if better information came along- always the trader’s instinct. This alone showed he had a first class mind.
He would want to be best remembered (I’m sure) for being a good and very profitable trader, working for him and on behalf of the university to make money out of speculation. He succeeded as he made money.
So despite your entire pretense about admiring him my bet is that he would have thought my testament was better than anything written about him here. I liked him and wish I could be half as good as he was..
David Friedman, son of Milton, defending Marshall. A Keynesian and lefty no doubt, according to JC.
http://www.daviddfriedman.com/Laws_Order_draft/laws_order_ch_2.htm
A little over a hundred years ago, an economist named Alfred Marshall proposed a solution to that problem. It is not a very good solution. It is merely, for many although not all purposes, better than any alternative that anyone has come up with since. The result is that economists, in both law schools and economics departments, continue to use Marshall’s solution, sometimes concealed behind later and (in my view) less satisfactory explanations and defenses
Jason
What conservative wingnuts refer to the guy’s homosexuality as though this fucking matters.
“Is it the stuff I saw people ducking into the bathroom to once at an eastern suburbs party”
What????
Jason
Why the hell would you bring up Marshall attributing some slur I made towards him when the only time I have used the name “Marshall” was to Holler for a Marshall” when I needed a car battery. Seriously now!
In the past you have even accused me of being “an old lefty”, which incidently is probably the worst abuse I have ever encountered.
I might add you your side wouldn’t be too happy with you if you accuse a RWDB of such a thing.
Joe, yes he was a successful trader, as you say. Good of you to drop the battle fatigues for a moment, for a change. Do you, incidentally, know any substantive corrections to Maynard’s brilliantly written chapter 12 on trading in The General Theory?
No CS
It was a lonnnnnggg time since I tried to read it and when i did I was too young and my eyes were glazing. I can always remember though there was a class about Keynes or whatever that I entirely missed (listening) because there was this goddess who I was in love with but couldn’t muster the courage to ever speak to her. Her questions in class were the most intelligent questions I had ever heard.
Saw her years and years later at some party bash or something and she told me she used to think I was cute!!!! She had a boyfriend/husband at the time. Talk about the biggest screw up ever.
You’re sounding like my friend RH’s sock puppet, Joe.
That particular chapter is one of two in The General Theory that are written in an exceptionally accessible way, such that they have long and famously appealed to readers of all backgrounds and economic varieties. But Chapter 12 is not only a real joy to read, it is also still frequently referenced in scholarly articles (of many varieties) on capital markets. Hence, I would recommend that you get across it; and, if you ever do, I’d be interested in (non-polemical) feedback from a practitioner.
I’ll get it from Amazon. General Theory etc. no problems with editions, right?
The paperback edition is long consolidated (since 1974), and includes rather fascinating prefaces by JMK to the english, german, japanese and french editions. The famous (and, as I said, still frequently cited) chapter 12 is colloquially known, I suspect you’ll be particularly pleased to know, as Keynes’ “beauty contest” theory: no doubt one of your favourite topics!
JC says
Ok so you agree with a gold target. But short of making it constitutional law who’s going to believe it will hold.
No no. I don’t agree with Gold targeting. And you are right. I wouldn’t trust them to stick to the targets. I can’t see the point of Gold targeting. It would have the weaknesses of fractional reserve Gold. I’d leave the government money pure fiat. I’d just establish a level playing field in the same way that the productivity commision might.
G says
1. Deregulate banking (but for that one stipulation of having on-call liabilities fully backed).
JC says
Can you imagine the contraction in bank lending as banks began to scramble to refit their ratios. It would make Japan’s leanding slump over the last 10 years look like a kindergarten.
Yeah I didn’t take the time to explain this one as I had to split. Here is how you would do it:
You wouldn’t ask the government, or the Reserve Bank to change their monetary goals in the slightest. All you would do is restrict them as to the way they go about hitting them. When they want to increase demand they wouldn’t do so by dropping the lending rate to the banking sector. In fact you’d put that rate up high so that they’d only use it in an emergency.
1. When they wanted to increase demand they would monetise debt.
2. When they wanted to decrease demand they would up the Reserve Asset Ratio. I wouldn’t have them depositing these Reserves with the Reserve bank though. Just talking about how much they would keep on-hand to cover their on-call liabilities.
So the reserves they must hold in comparison to their on-call liabilities would just creep up. I wouldn’t be pushing for more then that.
G says
Legally back loan contracts with metallic weights. And only tax the extra metal gained.
JC says
Ok, but if you having backing it could be either, but I take your point.
Well I don’t want government cash links to metals. I just want a level playing field and we see what happens.
G says
Get rid of legal tender
JC
Don’t need to.
G says.
Well we don’t need to do anything now do we. What I’m saying is we don’t predjudice one money over the other or holders of banking licenses over other potential financiers.
Once the use and holdings of private metallic money reaches a certain level the Reserve bank and the government will have to be very disciplined indeed if their fiat money is to retain market share.
There is no need under this scheme to even go through a recession in the changeover. Its just a smooth evolution.
Jason. I’m not dirty on Marshall. He seems to have been a good economist. And I’m in no way putting him on the same level of infamy as Keynes. Far from it.
I guess I was just making a minor point as to how things have gone since Keynes. The deification is so great you have to crowd almost everyone else out except for a few brits. To make it look like things that Keynes said were some sort of great leap forward.
You see this habit with the Keynes biographer that Mark mentioned. You get the idea that only the guys who influenced Keynes were even the slightest bit worthwhile.
Consumer surplus is OK as far as it goes. But its a bit of a dead end. You might invoke it as a didactic tool or using to compare various public goods investments or something.
You know you could compare DeWitt Clintons canal to the Post civil war trains. And you might conclude that the trains didn’t have much in the way of consumer surplus (in this case for the other businesses relying on it) whereas these canals which could handle many small carriers probably were a better deal for the taxpayer.
But there are other ways to do the same thing. Building unwarranted assumptions on top of eachother can be dangerous. If you are going to make speculative assumptions it probably ought to be at one step. Its just that if you take a wider view of what economic thought was around at the time this sort of thing was no great leap forward.
But they want to pump up the millenarian Keynes. So they will block out all these other guys and elevate Marshall, Ricardo and Smith in order to hold up Keynes.
GB
Could you please explain a few things I want to understand about the system.If you don’t have gold targeting or a gold standard why would the system be that differnet to what we have now.
What I mean is this: since gold was liberalized we can if we choose deal in gold as there is nothing to stop us. If I have a liabiltiy to you and we both choose an agreed weight of gold as repayment, there it’s done we have bypassed the legal tender and we are dealing in another currency that could be enforced in a court of law.
Would you mind explaining how it works; in the sense how it would stop thse central bank bloating up the money supply and then wondering a few years later what the fuck happaned.
Graeme
I read it again and I think I got you. You would be targeting reserves, right?
and in addition, make loan repayments in gold as “legal tender” is that right?
Ok I want to think about that because it seems pretty good to me and never heard of such a suggestion before.
I saw reserves targeting by Mexico in the late 90’s interest rates were everwhere for a while but they basically seetled down and they started to to well or at least the currecy has fallen since then.
Seeya
Actually I correct myself.
You wouldn’t use reserve targeting at all would you. You would be telling the banks how much reserves would be needed at a given point in time.
I suppose the banks would also be hold deposits in gold, correct, because that is the big stick the public would hold over governments?
“What I mean is this: since gold was liberalized we can if we choose deal in gold as there is nothing to stop us. If I have a liabiltiy to you and we both choose an agreed weight of gold as repayment, there it’s done we have bypassed the legal tender and we are dealing in another currency that could be enforced in a court of law.”
It is not going to happen. Because the playing field is weighted in favour of fiat banking. The government can print money and lend it at bargain basement price to those who hold a bank license. How could I open up a bank using Palladium and compete with that?
The Americans have this clause about ‘equal protection’. The discount rate ought to be seen as a violation of that.
And look at the psychology of that. You will lend your fiat currency to a bank. They will keep absolutely mimimal cash on hand and lend out the rest. But they have someone to come to the rescue if they get in trouble. Since they can always borrow at the counterfeit rate. And the money is dropping in value all the time.
If I open up a little outfit and call myself “mom and pops 4 metals banking”. Supposing I take a ton each in deposits of the four metals. But only keep 50 kilos on hand. You going to lend me your coins on that basis? And if I get in trouble is the government going to rush metal coins to me in a helicoptor like they would for the other banks?
We know how this sort of thing is done from a sterile efficiency side of things.
You know……
Sans all this rude, offensive and shameful talk of justice and liberty and so forth.
From a productivity commision way of thinking. We know how to do this because we have experience in many countries breaking up the Telecom or the A T&T into a number of units that put competitive pressure on eachother.
So you do need some enabling legislation. You need 100% backing although the process would likely be safe to get going once you’ve hit 40% or so. You need to get rid of legal tender. Since you don’t want to predjudice on money over the other and so forth. You might even want the government to launch each metal by accepting taxes only in that metal for one year and swapping to another metal the next year. Just to get each money type off the ground.
You might want many government offices and Police stations to be able to verify the purity of the coins by some technology or other.
And you may want them issuing a bunch of coins not by value just by weight to kick things off a little.
E-gold is working and its convenient and so forth. And its 100% backed. But it won’t be taken up to any great degree when you have mountains of legislation, licensing, guarantess to the banks. and cheap loans to them and so forth….. all ithat favour fiat.
Think ‘competition policy’ rather then Austrian school. And you’ll see what I’m driving at.
But one more thing. Imagine you are now at 100%. So now even for fiat the banks will charge you to hold it for you. They won’t pay you any interest on call in fact they will charge a warehousing fee. They will give you high interest on term loans no question but they won’t give you interest on on-call deposits and will charge you instead.
What are you going to do?
Well you will invest in better locks and stronger doors and security technology and you will withdraw most of your cash, leaving enough for credit card transactions, and you will take the cash home.
But having done so which type of money will have the advantage when it comes to holding all that money at home?
The government will have to keep very tight money for its market share NOT to be eaten up under this scenario.
GB
There’s only one problem with our musings. The only way they give up the monopoly is by putting a gun to their head.
The libs are just as bad in a way. What the fuck is the future fund as a policy coming from the the conservative side of the bench. Costello ought to be given 30 lashes for that suggestion. Can you imagine the boondoggle the other side will turn that into when they ever gain power!!!
Gb
Pkease email me so we can discuss off this post if you like joeca12345@yahoo.com.
It’s not my regualar email, but I look at it once a day or so.
I’m getting all choked up in witnessing this budding relationship.
You’re an idiot central scrutinizer no question. But tell me this. Why is it that you think Keynes is a great economist?
“There’s only one problem with our musings. The only way they give up the monopoly is by putting a gun to their head.”
They sold off Telstra didn’t they? I suppose the ability to counterfeit is a bit different but one doesn’t want to be too pessimistic about it. Like I say they don’t have a plausible excuse not to move in the way I suggest. Since the higher the RAR the easier it is to hit their monetary targets, prevent recessions, prevent bubbles and so forth.
They certainly had a good excuse not to go back on Gold. Since the changeover would risk a depression.
Why is it that you think Keynes is a great economist?
There have been more than a few books written to explain this Birdy (including, I humbly mention, one by the feared ‘central scutinizer’ [sic]). In fact, beyond your angry little island, it’s a commonly settled historical view, world over. You need to get out more.
CS
Gb is one of the few people I have read whoi is able to articulate why Glob. warm is a dangerous hoax. I respect that.
“There have been more than a few books written to explain this Birdy (including, I humbly mention, one by the feared ‘central scutinizer’ [sic]).”
Right. Then you have no excuse NO EXCUSE not to be able to explain why you think he is a great economist.
So here I have gotten a dumb-left-winger cornered.
1. You’ve got no exuse to be lifting him and his ideas up to Great Economist level. But you do so because of your own sicko leftist millenarianist tendencies.
2. However supposing I was wrong? Then you have no excuse NOT to furnish us with an explanation as to his alleged greatness. Because you’ve written a book on him. And if he was in any way a good economist and you could show it, you’d have the information right there at your fingertips.
Its a case of fraudsters of the world holding hands. So lets see you come out with it Central Scrutinizer.
Spit it out.
And Don’t YOU be setting ME homework. If that happens it will be happening the other way round.
Heh. Delusions of grandeur, Mr Birdy. What colour comes after blue, again?
If you wish to commission professional advice, commercial rates apply under private arrangement. Otherwise, you can buy my book.
This is what is going on here. You are a mindless cringing bully-boy advocate of the intellectual status quo. Your own qualifications are a fraud as shown by the argument free zone of your posts. And you have held up the fiscal crank Keynes who was influenced by the the monetary crank Gesell as some sort of Great Economist.
Now he isn’t a Great Economist but we now know that you are an intellectual fraud as well. Since you have admitted to writing a book on him but yet cannot meet my challenge of showing anything in economics from Keynes that was both original and valid.
Now let’s get this straight. I wouldn’t purchase any intellectual work from you in a million years. You have nothing to teach me and you cannot meet my challenge and you’re basically dead wood. One hopes that you aren’t receiving public tit money.
Redeem yourself and admit I’m right or come up with something both valid and original to Keynes in the field of economics.
……………………………………….
Here’s an article on the crankery of Gesell and his influence on the crankery of Keynes.
http://www.findarticles.com/p/articles/mi_m0254/is_4_57/ai_53449308
“What colour comes after blue, again?”
What on earth is that all about dopey?
Where do you think you are Birdy? The Collège de France?
I hate to break this to you pal, but this is a blog. Why don’t you set up your own anti-Keynes blog, where you can happily type yourself to death?
Keynes on Gesell:
The incompleteness of his theory is doubtless the explanation of his work having suffered neglect at the hands of the academic world. Nevertheless he had carried his theory far enough to lead him to a practical recommendation, which may carry with it the essence of what is needed, though it is not feasible in the form in which he proposed it. He argues that the growth of real capital is held back by the money-rate of interest, and that if this brake were removed the growth of real capital would be, in the modern world, so rapid that a zero money-rate of interest would probably be justified, not indeed forthwith, but within a comparatively short period of time. Thus the prime necessity is to reduce the money-rate of interest, and this, he pointed out, can be effected by causing money to incur carrying-costs just like other stocks of barren goods. This led him to the famous prescription of ’stamped’ money, with which his name is chiefly associated and which has received the blessing of Professor Irving Fisher.
…
The idea behind stamped money is sound. It is, indeed, possible that means might be found to apply it in practice on a modest scale. But there are many difficulties which Gesell did not face. In particular, he was unaware that money was not unique in having a liquidity-premium attached to it, but differed only in degree from many other articles, deriving its importance from having a greater liquidity-premium than any other article. Thus if currency notes were to be deprived of their liquidity-premium by the stamping system, a long series of substitutes would step into their shoes - bank-money, debts at call, foreign money, jewellery and the precious metals generally, and so forth. As I have mentioned above, there have been times when it was probably the craving for the ownership of land, independently of its yield, which served to keep up the rate of interest; - though under Gesell’s system this possibility would have been eliminated by land nationalisation. [my emphasis]
Hardly what I’d call a ringing endorsement of Gesell’s theory and economic proposals.
“Where do you think you are Birdy? The Collège de France?
I hate to break this to you pal, but this is a blog. Why don’t you set up your own anti-Keynes blog, where you can happily type yourself to death?”
Stop running you gutless fraud. Do it or admit that I am right.
And hurry up about it. I’m getting sick of your tendentious lying insulting crap.
Birdy, what’s the difference between “tendentious lying” and, say, ordinary common or garden variety lying?
Sure enough former proffessional student know-nothing parasite. You still are dodging the issue.
I myself like to line up words and phrases which overlap in their meaning for emphasis and couldn’t give a toss about the redundancy.
“She was a fast machine, she kept here motor clean, she was the best damn….”
three phrases emphasising the same qualities. Another example might be:
“As I walk through the VALLEY of the SHADOW of DEATH…..”
But in any case. You can’t do it. You’re a fraud. I’ve found you out. But prove I’m wrong about Keynes or admit I’m right.
Birdy, do you find people avoid you at parties?
Have to go. Who are you backing? Tahs or Reds?
Trotsky….
Not only IS this a ringing endorsement of Gesell. AND an extended set of excuses for Gesell. It is also proof positive, over the protestations of Jason Soon, that Keynes was indeed an inflationist.
It shows him to be as much of a monetary crank as Gesell and a total Macro mystic.
“He argues that the growth of real capital is held back by the money-rate of interest, and that if this brake were removed the growth of real capital would be, in the modern world, so rapid that a zero money-rate of interest would probably be justified, not indeed forthwith, but within a comparatively short period of time. Thus the prime necessity is to reduce the money-rate of interest, and this, he pointed out, can be effected by causing money to incur carrying-costs just like other stocks of barren goods.”
You read the whole thing it shows he agrees with this but suggests that the specific schemes of the crank might not be practical. But the thesis is ridiculous from the getgo.
The amount of real capital is NOT held back by the money-rate of interest. In practice it can be held back by wide swings in aggregate demand due to fractional reserve banking and government action. But there is no inherent problem with high interest rates which hold back real capital. This is Keynes the mystic.
You are going to use REAL RESOURCES for current consumption or you will use REAL RESOURCES for the production of goodies to be used in FUTURE production. REAL CAPITAL is the latter and extra amounts of it cannot be created by counterfeiting and artificially bringing down the interest rate……
(Quite the contrary. WITH A LOWER REAL INTEREST RATE PEOPLE WILL SAVE LESS AND SO THERE WILL BE LESS AND NOT MORE INVESTMENT CAPITAL.)
………But here Keynes agrees with Gesell and suggests that you can indeed expand Real Capital in this way. The two of them have it exactly ass-backwards.
Then the other thing is the problem that both Keynes and Gesell both have with liquidity preference. This is Keynes own term and a confusing one and I will drop it and instead say “The demand for cash for holding”
Keynes and Gesell want the money to be working hard for them. They don’t want it sitting around doing nothing. But money doesn’t work hard people do. Having all this velocity of circulation isn’t a desirable thing in the least. Its a waste of effort and if velocity is high it means that it stands to drop precipitously. So Keynes is encouraging instablilty and not stablility.
But you don’t want any of this nonsense. You want high savings rates, plenty of liquidity (money for holding) and stable aggregate demand. That is all you want and all you should expect. Not any of this other hocus pocus.
When I’m talking about these subjects on the net you always find some monetary crank talking about how you want the money out there working hard for you. In this way you see that they are precisely the same sort of nutballs as Keynes and Gesell. What distinguishes Keynes above Gesell and the others is his ability to hide and dress these things up. But he’s really just an airbrushed Major Douglas.
He hides his crank nature by swinging it over to fiscal policy. You end up with an entirely irrational result. Since fiscal policy cannot be used for demand management. But since Keynes is making up all his own phrases and tweaking the meaning of words you get a sort of L. Ron Hubbard effect. In that weak-minded people who try hard to understand all the stuff will in the end mistake partial understanding for believing once they have absorbed some of the new gear and think they understand it.
What the Utopian leftists who read it will get before they realise the crank nature of it is that UTOPIAN HIT. That possibility of a new age wonderland. Of infinite investment resources. And of the necessity for government depredation and expanded compulsion. They get that clear enough. Scum like that will get that point of the story every time.
Oh right!. So you have to run hey. And fair enough too since it is Saturday night.
But you’ve been running for about three days now and in fact you never contribute any