Is Keynesianism a philosophy of the short run? Brad DeLong reprints a piece of his from a few years ago in which he excoriates Niall Ferguson, and before him Hayek and Schumpeter, for pushing the calumny that Keynes didn't care about the future, perhaps (as Schumpeter wrote) because he didn't have any children. (Wink, wink.) You know, "In the long run we are all dead." Etc. DeLong cites chapter and verse to show there is nothing to this, and that Keynes was looking as far ahead as any free market obsessive. Good job.
Now I'll quote myself in the comments:
You are right to call out this trail of dishonesty, but I think there are two other factors. First, Keynes does (esp in his later writings) advocate the promotion of spending in various forms to counteract shortfalls in income. From an economic viewpoint this should be self-evident, but it challenges the the cultural biases that many conservatives harbor. Keynes was perfectly clear in including investment in that spending imperative, but he also saw moral as well as intellectual worth in pure consumption. From a political standpoint, the flashpoint is savings, which loses its intrinsic virtue in a world where I (largely) determines S rather than the other way around.
The second issue is that the theory wars of the 1970s led to a partition in the 1980s: Keynesians were given the short run (when prices were sticky and money illusion ruled) and classicals the long run. From this arrangement, which has little to do with the thought of Keynes himself (representing him as if he were a proponent of the Treasury View), many people read backward and assumed it stemmed from JMK's short run fixation.
In fact, the problem of time horizons is perhaps greater than ever before. Climate change is all about this, and at the same time our flexibilized economy is in a permanent short run. Right issue, wrong theory.
JMK did write a famous essay entitled "Economic Possibilities of our Grandchildren." Even for those playing gay-outing games with him, this essay alone should make them be ashamed of this nonsense about him not caring about the future or descendants of currently living people (not to say that everything in that essay turned out right).
ReplyDeletehttp://www.econ.yale.edu/smith/econ116a/keynes1.pdf
ReplyDeleteis a link to the Economic Possibilities of our Grandchildren.
I think DeLong is somewhat unfair to Schumpeter, whose elegant essay on Keynes acknowledges Keynes's long-term vision.
ReplyDeleteRe: "In fact, the problem of time horizons is perhaps greater than ever before. Climate change is all about this, and at the same time our flexibilized economy is in a permanent short run."
ReplyDeleteNot just 'time horizons' but the sheer scale of (what Lewis Mumford describes as) 'negative abundance'. The means of death has outpaced the means of life.
A radically different economic model is needed writes Mumford:
"...the chief properties of a power economy - the magnification and over-expansion of power alone, and the lack of qualifications, limits, and boundaries - are antithetic to those of an organic system. In organisms power is always related to function and purpose. Life does not flourish under a regime of compulsive dynamism, where uncontrolled change - change only for the sake of further change such as megatechnics now imposes - removes the possibility of maintaining a dynamic equilibrium or going on with an autonomous development..." Page 397 "The Myth of the Machine"