The Recession Spectator
Keynes’ Uncertainty Principle
Neoclassical economists and the financial crisis: an interview with the distinguished Keynes biographer, Robert Skidelsky.
Robert Skidelsky is the author of a definitive three-volume biography of the economist John Maynard Keynes and a professor emeritus of economics at the University of Warwick. Skidelsky’s most recent book, Keynes: The Return of the Master, draws upon his earlier work to address the renewed interest in Keynes’s ideas the economic crisis has sparked, and updates Keynes’s status in the intellectual history of economics.
In The Return of the Master, Skidelsky lays out the argument that neoclassical economics, ascendant since the early 1980s under the leadership of economists at the University of Chicago, bears most of the responsibility for the financial crash and economic recession. He pinpoints three neoclassical concepts that led academics and policymakers astray: the rational expectations hypothesis, the real business cycle theory, and the efficient financial market theory. The misguided conclusion yielded from these premises is that “all risk can be correctly priced and that therefore financial markets are optimally self-regulating,” Skidelsky writes. He believes that Keynes, on the other hand, adequately incorporated the effects of uncertainty into his models.
The Return of the Master bookends an August 1981 Spectator essay by Skidelsky that noted the decline of Keynesian ideas in economics and lamented the academy’s loss of Keynes’s most important contributions to economic knowledge. To understand the full circle of his historical narrative, I asked Prof. Skidelsky a few questions about his new book and his thoughts on the current state of macroeconomics, and he graciously fielded them.
JL: In your August 1981 Spectator article, you wrote that Keynes’s original, narrow prescriptions were “turned into a pseudo-Keynesian pseudo-solution to the much more fundamental problems of governing divided societies, thereby bringing the inevitable crisis and reaction.” Do you see hope for a Keynesianism that is more politically sensible and modest in its approach? Also, if the Washington Consensus has now reached its own “inevitable crisis,” do you worry that economists will similarly forget lessons about technical economics learned from the neoclassicists?
RS: What I really meant by “pseudo-Keynesian pseudo-solution” was the attempt to prop up demand-management by controls over wages and prices. Keynes would not have approved of this extension of his ideas. What was needed — and lacking — in the Keynesian tool kit of the 1960s was any notion of the “natural rate of unemployment.” This was supplied by Milton Friedman, and is his greatest contribution to economics. Naturally we should learn from Friedman. I don’t think, on the other hand, there is much to learn from Robert Lucas and the new classical economists.
JL: In your book, you favorably contrast the “Keynesian” regime era in the United States, from the postwar period to the mid- to late-'70s, with the “Washington Consensus” years that followed. If you count the late-'70s stagflation era as under the Keynesian regime, however, that comparison might not reflect as well on Keynes. What is the logic behind absolving Keynes from those bad economic policies but crediting him with the growth of the 1950s and '60s?
RS: As I write in chapter 5, most comparisons between the Keynesian and the new classical era simply compare pre- and post-1973 — the time of the first OPEC shock — so in a sense I’m being more lenient in favour of the latter period than convention. The Keynesian era effectively ended in the early 1970s with the breakdown of the Bretton Woods system and the OPEC oil shock. Government failure to secure a coordinated reaction to the oil shock of 1973 meant, as one commentator — Stuart Holland — has said, that “within months it was hard to find an avowed Keynesian in any Chancellery or Treasury.” I’m not denying that the Keynesian regime was deteriorating by the end of the 1960s, but the two main triggers of “stagflation” — the Vietnam War and OPEC — can’t be blamed on Keynesian policy advisers. The mid-and late-1970s were tumultuous both theoretically and empirically and are therefore better not lumped together with any broad school of policy.
JL: In closing your narrative, you make the unusual proposal that students of economics should be required to master different and complementary fields, such as history or political science, when pursuing economics doctorates. But so far economics departments seem entirely unrepentant in their ways, despite the recent failures of their profession. Do you see your suggestion gaining traction in any schools or with any other economic thinkers?
RS: I don’t think that we can expect this kind of structural change to occur quickly. Remember that only a bit more than a year ago most people still did not see the end of the boom. Commodity prices had peaked and there was definitely a sense of anxiety amongst those who followed the movements of asset prices but the night before Lehman collapsed most economists were sleeping blissfully ignorant. It was not until the 24th of October — roughly six weeks later — that Alan Greenspan admitted to a “flaw” in the “intellectual edifice” and that the economic crisis became accepted as a crisis for economics. There has only been one academic year in between then and now. Universities move slowly. We have yet to see the full impact of the current crisis on the way economics is done. But there are many straws in the wind. Even if my specific suggestions are not acted on, there is agreement among many economists that economics is over-burdened with maths, and that realism is sacrificed for the sake of mathematical tractability. In his review of my new book, Paul Krugman supported the general idea of restructuring economics although he might have thought my actual proposal too extreme. However, I maintain that the seemingly extreme attraction of false perfection offered by microeconomic mathematisation requires “extreme” countermeasures.
JL: The name of Paul Davidson, a relatively unheard-of heterodox economist in the Post Keynesian school, comes up a lot in your book. Do you see Post Keynesians as having a better grasp of the uses and limitations of Keynes’s theories? In an interview, Davidson told me that Keynes’s current prescription for the U.S. would be a much larger stimulus than we currently have, lasting until well after panic has subsided, the Fed rate is back above the zero lower-bound, and the economy is back to steady growth (this interview was in the spring, so his opinion might have changed). Is that what you would have expected?
RS: I agree with Paul. Keynes would have been pleased to see that our current governments had learnt something from the mistakes of the governments during the Great Depression. Rather than letting the last energies of a collapsing economy disappear into the abyss of depression, governments worldwide have shouldered the responsibility to provide stimulus. However, as the first so-called “green shoots” have appeared conservative economists spread alarm stories about the costs of continuing the stimulus. They seem to assume that now the banks have been rescued the economy will roar ahead as though nothing has happened. This strikes me as very dangerous. Recovery is still far too fragile for economies to be taken off their life-support systems. The talk about losing investor confidence is exactly what actually makes investors lose confidence in governments. Keynes would probably have pointed to the output gap numbers in America and elsewhere. The IMF expects the U.S. output gap — that is, the difference between what America can produce and what America does produce — to be around $600bn in 2009 and more than $800bn in 2010. That is because Americans are spending much less than they did when the economy was at full employment.
Keynes would have said that given the current state of expectations, aggregate spending would not recover spontaneously to fill the gap. Unless the government plugs the spending deficit, we will be stuck with high unemployment figures for a very long time to come. The U.S. stimulus plan amounts to roughly $680 billion and would therefore seem to match the 2009 gap rather well. However, those $680 billion are distributed over three years! This is the reason why Davidson, Krugman and [Martin] Wolf among others have advocated larger stimulus packages. And I agree. The sums required are huge, but the cost of letting the economy slip is much larger. The whole point of stimulus is to raise confidence in order to increase demand and investment. Thus, with more demanded and more produced tax revenue increases and the cost of social security decreases. In this sense, I believe that post-Keynesians like Davidson understand what Keynes’s take on our crisis would have been rather well.
JL: In the U.S., Keynes’s cause is being championed by Paul Krugman, most notably in a recent New York Times Magazine article that I’m sure you’ve seen. Do you have any thoughts on his argument regarding the neoclassical school’s ignorance of Keynes? Are there significant ways in which your thesis differs from his?
RS: Paul is not convinced that uncertainty lies at the heart of Keynes’s explanation why economies are not self-correcting following a disturbance. Indeed, he believes (I think) that Keynes never did provide a satisfactory explanation of this. He and other economists like [Nobel laureate Joseph] Stiglitz are “sticky price Keynesians.” Output adjusts to a shock because wages and prices are if not rigid, insufficiently flexible. This lack of flexibility is explained by information problems of one kind or another — either the information is too costly to acquire, or some economic agents have more information than others. Paul admits, though, that this type of theorising, which takes place within a rational expectations framework, doesn’t get to the heart of the problem of sticky prices. I believe that Keynes put it much more directly: wages and prices don’t adjust when the economy has started to slide because no one knows what the correct wages and prices are. Economic theory needs to start from the assumption of uncertainty, not of perfect information.
About the Author
Joseph Lawler, former managing editor of The American Spectator, is editor of Real Clear Policy. Follow him on twitter: @josephlawler.
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Ryan| 10.6.09 @ 8:07AM
The more I learn about Keynesian economics, the more uncomfortable I get with it. It seems to go against two basic principles - freedom and saving.
When government takes a bigger role in economics, it takes away freedom from individuals. It's not the government's role to purposefully influence economic behaviour.
Also, Keynes' solution is based on spending, not saving. We have banks which loaned too much and ran out of money. How many problems would we have avoided if we had a system which rewarded saving money instead?
I DO agree with one thing in the article - economists (like journalists) need history classes.
Michael L. Hauschild| 10.6.09 @ 8:37AM
Ryan,
My “economic” background is “economic geography,” the spatial and temporal extent (when, where - mapping the flow of goods and money), not economic theory. It does seem presumptuous to me, however, to rely on a brand of higher education (History) that is conveniently flexible enough to be “re-written” to serve whatever author or instructor simply “as needed.”
Alan Brooks| 10.6.09 @ 5:19PM
history is the lie that is commonly accepted.
Economics? no hope in the moral sense; an economy is everything from baby food and diapers to dope and porn. Econnomics is value neutral, a vacuum filled by monopoly state violence.
Ryan| 10.7.09 @ 1:59PM
All of the liberal arts are like that (and economics is a liberal art); of course, I'm a history MA so my biases lean in that direction. However, without the study of history, ALL liberal arts typically become short-sighted and make the same mistakes over and over. It's the one thread that needs to be in all of them. Theory is nice and all, but study of how past theories were applied is critical.
Howard| 10.6.09 @ 8:28AM
Good interview. One thing not discussed is the carrying expense of additional stimulus. So if another $500,000,000,000 is borrowed, the interest on that amount would be say at 3% long bond $15,000,000,000 per year for thirty years, or in reality indefinitely since the bonds would be reissued. This is an additional transfer payment to China. So, while the simple Keynesian response is borrow and spend, there are real costs involved. Perhaps solid tax incentives costing less would be favorable.
Eric R| 10.6.09 @ 8:28AM
It is ridiculous, bordering on academic malpractice, to propose that government is the solution to a depression for which it is largely the cause. The collapse of aggregate demand is not some irrational act by skittish children-citizens, who need to be taken by the hand by intellectually superior parental Keynesians until they no longer fear the recessionary bogey-man. Hunkering down is an absolutely rational response to the uncertainty produced when big bully government (a.k.a. national socialism) threatens to completely scramble all the rules.
The government caused the crap sandwich debt bubble. Then, instead of cleaning up the mess they made, they scared the h*** out of everybody by launching an enormous stimulus-bailout boondoggle – administered, literally, in a lawless, un-transparent and arbitrary fashion - that destroyed all confidence in markets. They showed that from now on corporate survival is not achieved by superior performance, but by prostituting to support unconstitutional powers for the Maximum Leader or his Party.
The professor says “The whole point of stimulus is to raise confidence in order to increase demand and investment”. But the reason we have a confidence crisis is precisely that we don’t know on whom the giant government elephant will next smash his foot. We have no confidence investing in energy or manufacturing, because the government promises to destroy any industry not under the Cap and Scam political protection racket, and we have no idea how bad consumers and producers will be hit. We have no confidence investing in pharma/biotech because government constantly attacks performers; only backroom deals to support medical socialism will win a crimped space for survival, likely contingent on future campaign cash.
We have no confidence that the top management we chose as shareholders won’t be arbitrarily and unconstitutionally fired by the President in an act of naked lawless power. We have no confidence investing in the wired world, because who knows when the radical socialist appointed to the FCC by the President might declare expensive infrastructure a publicly-regulated utility. We have no confidence investing in consumer goods because the possible taxation futures for the middle class, ruined by the disastrous New Deal ponzi schemes, range from oppressive to ruinous. We have no confidence making decisions affected by the value of money, because the government seems just fine with banana republic currency.
We have no confidence as consumers precisely because we know in our gut that unaccountable big government puts its power accumulation first and middle-class economic prosperity second, and seems intent on repeating the same disastrous mistakes over and over again.
Classical and neoclassical economics never pretended to deal with the uncertainty caused by arbitrary, coercive government, so faulting them because the Poli-Sci department didn’t understand how their blundering socialism threatens markets is not the fault of the theory of the free-marketeers. Keyne’s treatment for the hangover caused by government-induced drunkenness is a stiff shot the next morning. It is odd to praise his largely warped outlook because his models use duct tape and chicken wire to cope with the problems caused by the practitioners of his models.
The professor’s argument that we should take “extreme countermeasures” to force econ students to stop studying the “false perfection” of microeconomics and take up political science is truly frightening and absolutely wrong. The problem we have today is not enough appreciation for pure markets, not too much. There is virtually no respect among the ruling intelligentsia for the vulnerability of markets to government-induced uncertainty. Nor is there understanding of the profoundly stable, limited, constitutional government that is absolutely necessary for markets to have confidence years ahead. Government is increasingly run by unelected elites from the poli-sci department who preach a socialism that is utterly ignorant of how it destroys the markets required for the prosperity of the populous.
Granted, the student of free market economics should be wise as serpents to how political coercion is a variable entirely outside the model. But he should be defending against that benightedness, not surrendering to it.
Econ| 10.7.09 @ 11:47AM
Corporate USA owns and operates Government USA.
Nuff said.
Dan Hirsch| 10.6.09 @ 8:35AM
I don't know where Mr. Lawler was in the early 1980's, but I was at the University of Chicago's School of Business getting my MBA. The instructors in my course on micro-economics, macro-economics, money and banking, finance, and cognitive science* were all fairly clear on a couple of things:
Milton Friedman's greatest contribution was not that there is a natural rate of unemployment; that is of footnote impact.
One of his major planks in a huge body of work-his brilliance was in recognizing that supply and demand laws also apply directly to currency, credit, any financial asset, as well as tangible assets.
Probably his most notable contribution was his clear, strong, and correct support of free markets as the best decider of how assets should be allocated throughout an economy.
Keynes, on the other hand, was thoroughly discredited, to the point of open derision, as was the Federal Reserve's credit tightening, the Federal government's price meddling in the 30's, and the international trade war. All things that the current regime in Washington is rehabilitating and re-instituting in their effort to reverse current economic trends.
A review of Mr. Krugman's body of will work will show a clear, consistent support of centralized economic control-a system that has been shown to be inefficient in allocating resources to where they will do the most good in providing choices and wealth to individuals. Cf. Soviet Union, et al.
That we are trying to rehabilitate Keynes as an entry to rehabilitating the clearly failed centralized economic controls, i.e. "rational planning" also reminds one of the political trials and rehabilitations of the Soviets after their aperiodic changes of government.
Mr. Lawler, we were done with John Mayhard Keynes in the early 1980's- too bad you want us to go back there. Last time it took us 50 years and several wars to get shut of him. Hopefully this time won't take so long, maybe only twenty years...
Dan Hirsch
Paris, Wisconsin
* U of C researchers were trying to quantitatively address the apparent mismatch between micro- and macro-economics and cognitive science was their approach-I have seen the results of their early research, in decision modeling, directly applied by the US Army. People whose decision making quite often results in very tangible results.
Joseph Lawler | 10.6.09 @ 9:50AM
Mr. Hirsch,
Thank you for your comment. Regarding your statement, "Keynes...was thoroughly discredited, to the point of open derision," please read the companion 1981 essay by Prof. Skidelsky on the main site. Prof. Skidelsky in fact makes the exact same point, and shows in detail just how Keynes's obsolescence came about in the early '80s. His narrative is more nuanced than you give him credit for, and although he subscribes to Keynes's theories, there is a lot to learn from a careful account of his strengths and weaknesses.
Rich in New Hampshire| 10.6.09 @ 9:53AM
Mr. Hirsch and others responding have it exactly right. Those advocating a new Keynesian theory are suffering from a delusion of 'hope over experience'. There is no practical evidence of the benefit of Keynesian economics, quite the contrary there is plenty proof of its damage. You don't NEED a Chicago MBA to understand that but, for anyone who listened during classes there, the clarity of Free Markets is clear.
Any comments about Mr. Krugman's wandering and self-contradictory analyses are better left unsaid.
Regards,
Rich
Econ| 10.7.09 @ 12:08PM
"...the clarity of Free Markets is clear". Allow me to remind you that mortgage securitization operated in a supposed free market. Market failure is oblivious to any political-ideological assumptions.
fundamentalist| 10.6.09 @ 1:13PM
As Keynes was overconfident in his own economic theories, so Mr. Skidelsky demonstrates excessive confidence in his understanding of Keynes. The reason that mainstream economics drifted from its Keynesian roots is that Keynes was deliberately obscure, especially in his last book.
Keep in mind that Keynes had very little training in economics. He knew a little bit about the economics of Marshall and that’s all. Hayek knew Keynes very well and commented later that Keynes often astounded him with his ignorance of economic theory and history. Yet what Keynes had enormous self-confidence. He was confident he didn’t need to study economics because he knew how it all worked without any study. It must have been revealed to him from on high.
Skidelsky doesn’t want to lay the blame for the stagflation of the 1970’s on his idol. Who would? No one wants to take credit for it. But the historical fact is that the 1970’s resulted from the honest attempt to implement Keynesian policies. As Richard Nixon said, “We are all Keynesians now.” Skidelsky doesn’t like the way Keynes’s ideas were implemented, but that doesn’t mean the people implementing them were disloyal to Keynes or didn’t understand Keynes. It means that Keynes was so obscure that many interpretations of his “system” are possible. The implementation of the 1970’s was one legitimate attempt.
The shift in mainstream economics from pure Keynesian to neo-classical, was an attempt to fix what went wrong with Keynesian economics in the 1970’s. Neo-classical econ didn’t drop down from the sky for no reason.
Skidelsky is correct in his judgment of neo-classical econ. It did cause the crisis. But that is no reason to return to failed Keynesian economics. There is an alternative, Austrian economics. Hayek, the champion of the school of Austrian economics, lost the popular debate in the 1940’s with Keynes. Hayek won his Nobel Prize partly because he predicted the Great Depression when no one else, not even Keynes, saw it coming. Austrian economists predicted the current crisis, too, when no one else saw it coming.
However, because neo-classical econ failed doesn’t mean that we have no alternative but to return to the other failed economics. Austrian econ is alive and well at several universities and has the answers that have eluded mainstream econ for the past 80 years. If anyone wants training in basic Austrian econ, www.fee.org has posted several instructional videos.
Martin| 10.6.09 @ 1:32PM
Keynesian stimulus rests on a fallacy. Governments cannot create weaalth, so any stimulus must be borrowed. If as in Australia and China the government was running a surplus going into the downturn, stimulus can be beneficial in blunting the effect of recession. If as here, the government was already run by a bunch of Keynesian bureaucrats and pork-happy pols, as under GWB and in Britain under Brown, then the deficit going into recession will be magnified by stimulus and lead to crowding out of private invetsment, which can only be prevented by running money growth at full throttle, which produces commodity bubbles, asset bubbles and inflation. Given the current budget deficit of 10% of GDP, there is no way to get back to sustained non-inflationary growth except through reducing government. It appears that, as in the 1970s, we will discover this the hard way.
Skidelsky is a lovely man, a much pleasanter individual than his hero, also less committed to government control than his hero. He has however wasted his life on a charlatan.
fundamentalist| 10.6.09 @ 1:56PM
Here is a good review of Skidelsky’s biography of Keynes that demonstrates Keynes was not a friend of market economics: http://mises.org/story/891.
Also, here is Rothbard on Keynes:
“The young Keynes displayed no interest whatsoever in economics; his dominant interest was philosophy. In fact, he completed an undergraduate degree at Cambridge without taking a single economics course. Not only did he never take a degree in the subject, but the only economics course Keynes ever took was a single-term graduate course under Alfred Marshall….”
“Keynes’s General Theory was, at least in the short run, one of the most dazzlingly successful books of all time. In a few short years, his “revolutionary” theory had conquered the economics profession and soon had transformed public policy, while old-fashioned economics was swept, unhonored and unsung, into the dustbin of history. How was this deed accomplished? Keynes and his followers would answer, of course, that the profession simply accepted a starkly selfevident truth. And yet The General Theory was not truly revolutionary at all but merely old and oft-refuted mercantilist and inflationist fallacies dressed up in shiny new garb, replete with newly constructed and largely incomprehensible jargon. How, then, the swift success? Part of the reason, as Schumpeter has pointed out, is that governments as well as the intellectual climate of the l930s were ripe for such conversion. Governments are always seeking new sources of revenue and new ways to spend money, often with no little desperation; yet economic science, for over a century, had sourly warned against inflation and deficit spending, even in times of recession. Economists—whom Keynes was to lump into one category and sneeringly disparage as “classical’ in The General Theory—were the grouches at the picnic, throwing a damper of gloom over attempts by governments to increase their spending. Now along came Keynes, with his modern “scientific” economics, saying that the old “classical” economists had it all wrong: that, on the contrary, it was the government’s moral and scientific duty to spend, spend, and spend…”
“But there were also strong internalreasons for the success of The General Theory. By dressing up his new theory in impenetrable jargon, Keynes created an atmosphere in which only brave young economists could possibly understand the new science; no economist over the age of thirty could grasp the New Economics. Older economists, who, understandably, had no patience for the new complexities, tended to dismiss The General Theory as nonsense and refused to tackle the formidably incomprehensible work. On the other hand, young economists and graduate students, socialistically inclined, seized on the new opportunities and bent themselves to the rewarding task of figuring out what The General Theory was all about. Paul Samuelson has written of the joy of being under thirty when The General Theory was published in 1936, exulting, with Wordsworth, “Bliss was it in that dawn to be alive, but to be young was very heaven.” Yet this same Samuelson who enthusiastically accepted the new revelation also admitted that The General Theory “is a badly written book; poorly organized. . . . It abounds in mares’ nests of confusions. . . . I think I am giving away no secrets when I solemnly aver— upon the basis of vivid personal recollection—that no one else in Cambridge, Massachusetts, really knew what it was all about for some twelve to eighteen months after publication” (Samuelson [1946] 1948: 145; Hodge 1986: 21–22).”
From http://mises.org/etexts/Keynestheman.pdf
John II| 10.6.09 @ 3:32PM
A keynote running through all the responses thus far (and sounded as well in Mr. Skidelsky's remarks) is that economics of itself is not adequate to the task of understanding, much less explaining, the human condition.
I recall with fondness a wise old American history teacher I had in my undergraduate days who remarked on the brevity and directness of the US Constitution. He suggested that the Founders obviously regarded the personal and private sphere of human relations as belonging to a higher order than the public and the civic--with the latter arranged in service to the former and not the other way around. (He was no "individualist" because he also suggested that the Founders understood the most basic unit of the larger social order to be the family.)
Amid all this rumination over the shape and motive of the Constitution, he suggested a metaphor that I have never forgotten. He said that, in America, the state is (and should be) fostered primarily not as a controlling agency but as a referee--a third party on which the private principals in the game of life depend for knowledge and enforcement of the rules and for peaceful and disinterested settlements of their disputes. When the proper roles blur and the state starts behaving like a player, true freedom is diminished or lost.
My own brief (and that of others on this thread) against what is broadly called Keynesian economics--which I also had to study in college back in the 1960s under the tutelage of teachers who seemed to me to have little of the breadth of learning and none of the good sense of that American history teacher--is moral. And I think it may be relevant to the discussion that Keynes himself suffered a bit of trouble in that department.
Bar none that I can recall, this is the best thread I've ever scrolled through in response to an informative piece terrific in its own right. Thanks to all--and more, please.
Nick| 10.6.09 @ 10:22PM
John II,
"(He was no "individualist" because he also suggested that the Founders understood the most basic unit of the larger social order to be the family.)"
When I read this, I immediately had this thought:
A libertarian is a conservative who grew up in a dysfuctional family.
Just a generality, all you libertarians. Don't flame me.
John II| 10.6.09 @ 11:47PM
Hi Nick. Whoa. Never thought of it that way. But now that you mention it, every self-declared libertarian of my acquaintance whom I know anything about personally . . . nope, I ain't going there.
Keep the faith, Nick.
fundamentalist| 10.7.09 @ 1:17PM
I can only speak for myself and other libertarians I know, but we all grew up in nearly idyllic, suburban homes. Sorry.
Margie| 10.7.09 @ 5:46PM
A Libertarian is an anarchist in conservative's clothing. Ha!
~I am impervious to flame.
Alan Brooks| 10.6.09 @ 5:12PM
there is no resolution to the dilemmas of marginal tax rates, is there?
Someone's ox always gets gored, and they gore back. Redulting in... gore. And I don't mean Algore.
Alan Brooks| 10.6.09 @ 5:14PM
pardon,
resulting, not 'redulting'.
Len| 10.6.09 @ 6:51PM
The problem with considering any particular economic "philosophy" and then endeavoring to apply the chosen one through government is THAT the federal government has no such authority. It was granted power over commerce and nothing more, and that power is in regards to ensuring that THE STATES do not hinder the flow of trade through excessive taxation upon non native businesses.
Economics needs to be left in the classroom as an intellectual exercise, not used to experiment on the people, whom government is to protect in their rights. Such casual talk concerning theories that actually ruin lives in myriads of ways is disturbing, as is the casual acceptance of the many violations of the people's right to conduct mutual exchange on the terms they desire.
C Paul Cox| 10.7.09 @ 12:51PM
I write to encourage people reviewing these comments to explore Keynes in more depth. Robert Skidelsky has done the world a tremendous favor by bringing the story of this monumental man to life. It is a shame that he is branded simply as an arrogant proponent of government spending as the solution for all economic problems. Nothing could be further from the truth. Keynes would have reduced pundits like Paul Krugman to mincemeat in a matter of minutes.
In the depth of the depression Keynes advocated increased government spending as a tool that might help revitalize the capitalist/commercial system that had emerged so strongly during the 19th century and was under such ideological attack. In the 1920’s and 1930’s many leaders and intellectuals of the world were convinced that this capitalist / commercial system was doomed and that the choice was either the Marxist /Leninism of the Soviet Union or the state-corporatist fascism of the National Socialists in Germany and Italy. Keynes’ “arrogance” came not from a commitment to an economic theory but from a conviction that there was an economic solution to the depression and that the world was not doomed to a choice between communism and fascism. He was not simply a theoretician playing with people’s lives. Skidelsky’s biography documents this man’s utter engagement throughout his adult life in finding practical solutions for the issues confronting his world. His crowning achievement was his contribution to the creation of a global financial structure on which the post World War II financial boom years were built.
Milton Friedman called Keynes the greatest economist that has ever lived. Had his heart not succumbed to the rigors that his work during World War II demanded, there might have been an opportunity for these two great economists to have engaged each other one on one in seeking further solutions to economic problems. Keynes did the yeoman’s work in the dismal science so that we could live in a free world. Read Skidelsky to find out how he advanced economic thought against the ferocious forces of Marxism and fascism and how deeply committed he was to a “civilization” build on a vibrant, free economic structure.
fundamentalist| 10.7.09 @ 1:25PM
Hayek probably knew Keynes better than Skidelsky. He actually lived with him during the war. After Hayek wrote a critical review of Keynes' Theory of Money, Keynes responded that it didn't matter; he no longer believed any of that. That's why Hayek didn't launch into a critique of General Theory until 1941. Keynes was really bad about flip flopping on issues and Hayek didn't want to waste a year on a serious analysis of his book if Keynes was going to change his mind again as he so often did. Hayek finally addressed the worst fallacies of Keynes' book in the last chapter of Hayek's monumental "Pure Theory of Capital."
It's strange that some consider Keynes the greatest economists ever, while others consider him the worst. Having earned a masters in economics and studied Keynes and others for the past 30 years, I'm inclined to agree with Hayek that Keynes was a terrible economist.
fundamentalist| 10.7.09 @ 1:29PM
PS, Keynes' constant flip flopping on issues is probably one reason no one can agree on what Keynes really thought. Keynes apparently held just about all positions at some time in his professional life. He tended to go with the wind at the moment. No one will ever be able to write the definitive book on Keynes because there was nothing definite about the man.
My personal take is that he expressed himself most clearly in the chapters of General Theory in which he expressed his utopian dream of a world in which no one saved, interest rates were zero, and the state directed all investment activity.
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Poptropica is a really fun game to play but people quickly discover that it’s a lot different than other popular kids games like Club Penguin or Dizzywood, where kids can meet up anywhere and chat or hang out. Most of poptropica is a single-player experience where you try to complete missions and quests in the game.
But poptropica does have places where players can meet up to chat and even “battle” each other in a friendly way to earn status and points. Each island has a special area called a multiplayer room where different players can meet. For example, the Coconut Cafe in Shark Tooth Island. In order to connect with a friend, players should choose which island to play on and then head into the multiplayer room to chat and play games.
Tip: Friends should share their character names and describe their outfits to each other to allow for quick identification. Due to the popularity of Poptropica and the way it handles rooms, it might be necessary for them to re-enter and exit the multiplayer room before they can see each other.
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