Keynes? Really?
Saturday November 29, 2008
Greg Mankiw asserts:
I hope someone runs a poll "IF you were going to turn to only one economist to understand the problems facing the economy, who would it be?" I'd love to see who the profession would pick.
IF you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes.If I had to make a top 5 list of economists I would turn to, I am not sure Keynes would be on it. Milton Friedman and Joseph Schumpeter would likely be one-two on my list. (And I'm already waiting for the inevitable comment that Hayek should be number one). Given all we have learned about the economy since Keynes's time, I am not sure I could pick him over a current economist such as Larry Summers or Austan Goolsbee. Or Greg Mankiw, for that matter.
I hope someone runs a poll "IF you were going to turn to only one economist to understand the problems facing the economy, who would it be?" I'd love to see who the profession would pick.
Comments
Damn straight! That stuff made no sense when I read it so I’m happy someone said something.
I would say Marx, but I know it’s not politically correct…in US.
When Paul Krugman and Greg Mankiw agree, you know you are beaten. And they agree that Keynes is the one!
It is significant that Gregory Mankiw, an economist with links to Bush and Romney, should in this excellent article encourage us to approach the current economic crisis through the eyes of John Maynard Keynes.
However, his answer to the question “what would Keynes have done?” ignores an element that would clearly have been uppermost in Keynes’s mind - how to get international action to solve the crisis. Keynes would clearly have wanted international coordination of economic policies (monetary and fiscal) between the major economies, and would have wanted international economic institutions (the World Bank and the IMF, both of which he helped to found) to act in ways to free individual countries to take action (e.g. fiscal stiumulus) to overcome the crisis.
Anyone wanting background to this integral part of Keynes’ thinking should read Donald Markwell’s path-breaking study of “John Maynard Keynes and International Relations, Economic Paths to War and Peace”, published in 2006 by Oxford University Press.
Mankiw’s argument that it is hard to see how to get effective stimulus to consumption, investment, net exports and even government purchases makes it even more important that the United States provide leadership and encouragement to international action to overcome the crisis - and all the more surprising that in this otherwise compelling article he neglects to say anything about US leadership to get international stimulatory action.
After Friedman and Hayek I’m thinking Thomas Sowell.
Beyond anything, the Mankiw comment simply gives us a better understanding of how we got in this mess.
8 trillion dollars of Keynesian stimulus over the course of the Bush years, and all I can ask is “have we ‘fixed’ the economy yet?”
I you know your Keynes you know what he really wanted was the “socialization of investment” — it turns out Bush really is a Keynesian.
As late as 2006 Milton Friedman was supporting Fed policy, and didn’t see any problems in the macro economy.
We shouldn’t got to the people who didn’t see what was happening for permanent solutions to the institutional pathologies that gave us the current crisis.
Mike — have you ever gotten a clue as to why anyone might be mentioning Hayek?
“(And I’m already waiting for the inevitable comment that Hayek should be number one).”
Note well: Friedman taught Hayek’s “The Use of Knowledge in Society” paper in his graduate seminar (where Sowell learned it) and the insight appears in the first 20 pages of Friedman’s Free to Choose. Bonus — Friedman never understood that Hayek wrote the paper as part of his crusade in favor of relative price macroeconomics, and _against_ the Keynesian economics which is at the base of Friedman’s own macro. (Read Roger Garrison to understand the Keynesian base of the Friedman macro.)
Do you know economist from Poland Leszek Barcerowicz ? No ? I think you should to get know him. He was the first economist who drew up our road to capitalism , from socialism of course .
best regards
W.
I realize time does take its toll in science but it would be hard to pass up such a creative mind as Adam Smith. It depends on whether you are considering the man or his past works though.
What is the combination Schumpeter and Friedman? Either you acknowledge their achievement through eyes of their time and than I do not see why Keynes cannot be on the list. Or you percieve it through the most modern eyes and than you cannot be objective towards Friedman. I tell you that within one generation people will recognize that -as to his all time economics contribution- Friedman will be on par with Marx. And it will be said, yeah, Friedman, brilliant mathematician, good economist, only he didnt get it right then. While Keynes will be the one on the list