Levine On The Keynesian Illusion
David Levine has a really squeamish post service on the Keynesian Illusion.
Some large themes: Standard Keynesian economic science violates budget constraints. He explains it well, simply it is certain to occasion the green venom from with the "Say's police clit fallacy" brigade that has a lot of problem agreement the departure betwixt budget constraints together with equilibrium conditions.
David does a lot without equations. That broadens the appeal, simply equations tin hold upwards useful. For representative equations clarify that crucial departure betwixt budget constraints together with equilibrium conditions. Equations tin pose to residual featherbrained controversies. We mightiness non yet hold upwards writing papers, books, together with weblog posts nigh what "Keynes actually meant," eighty years afterwards the fact, or using "Say's law" every bit rotten tomatoes, if Keynes had written closed to equations. Cynically, mayhap the lesson is that lack of equations -- or fifty-fifty an equations appendix or citation -- keeps debate going together with your mention inward the papers.
I besides fearfulness that his lovely anecdote nigh people each of whom wants what others hit volition Pb readers a chip astray. Keynesian economic science is nigh lack of "demand," gluey prices non absent prices. It's non nigh absence of money, double coincidence of wants, together with and then forth.
David goes beyond the green IS/LM formalism, to explicate closed to of the "coordination failure" interpretations of Keynes. He besides references Axel Leijonhufvud's "great together with famous work" describing a mismatch betwixt saving, a wishing for generic futurity consumption, together with the need for specific goods that firms ask to invest.
He has a squeamish personal flush of his Keynesian upbringing, which reminds me of my own. And
The final paragraph is a gem:
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| David Levine's analogy for Stimulus |
David does a lot without equations. That broadens the appeal, simply equations tin hold upwards useful. For representative equations clarify that crucial departure betwixt budget constraints together with equilibrium conditions. Equations tin pose to residual featherbrained controversies. We mightiness non yet hold upwards writing papers, books, together with weblog posts nigh what "Keynes actually meant," eighty years afterwards the fact, or using "Say's law" every bit rotten tomatoes, if Keynes had written closed to equations. Cynically, mayhap the lesson is that lack of equations -- or fifty-fifty an equations appendix or citation -- keeps debate going together with your mention inward the papers.
I besides fearfulness that his lovely anecdote nigh people each of whom wants what others hit volition Pb readers a chip astray. Keynesian economic science is nigh lack of "demand," gluey prices non absent prices. It's non nigh absence of money, double coincidence of wants, together with and then forth.
David goes beyond the green IS/LM formalism, to explicate closed to of the "coordination failure" interpretations of Keynes. He besides references Axel Leijonhufvud's "great together with famous work" describing a mismatch betwixt saving, a wishing for generic futurity consumption, together with the need for specific goods that firms ask to invest.
He has a squeamish personal flush of his Keynesian upbringing, which reminds me of my own. And
Knowledge of Keynesianism together with Keynesian models is fifty-fifty deeper for the cracking Nobel Prize winners who pioneered modern macroeconomics - a macroeconomics with people who purchase together with sell things, who salve together with invest - Robert Lucas, Edward Prescott, together with Thomas Sargent alongside others. They besides grew upwards with Keynesian theory every bit orthodoxy - to a greater extent than together with then than I. And nosotros rejected Keynesianism because it doesn't operate non because of closed to aesthetic sense that the theory is insufficiently elegant.The constant refrain that critics "don't know" Keynesian economic science is an ingorant (I hateful that non an insult, simply inward its literal meaning, ignoring the facts) calumny. Sargent's showtime mass "Macroeconomic Theory" is a cracking representative of a modern economists wrestling difficult with Keynes.
The final paragraph is a gem:
Keynes ain operate consists of amusing anecdotes together with misleading stories. Keynesianism every bit argued yesteryear people such every bit Paul Krugman together with Brad DeLong is a theory without people either rational or irrational, a theory of graphs pulled largely out of sparse air, a serial of predictions that are hopelessly incorrect - together with the vain promise that they tin hold upwards pose correct if exclusively the curves inward the graphs tin hold upwards twisted inward the correct direction. As it happens nosotros select developed much improve theories - theories that hit explicate many facts, theories that supply sensible policy guidance, theories that operate reasonably well, theories that are non an illusion. The electrical flow versions of these theories are really dissimilar caricature theories of hopelessly rational people who are all identical. Current theories are non perfect - simply dissimilar the Keynesian theory of perpetual motion machines they explicate a cracking bargain together with select a cracking bargain of truth to them. H5N1 working macroeconomist reading Krugman together with DeLong feels every bit a MD would if the Surgeon General got upwards together with said that the agency to cure cancer was to trace blood using leeches.
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