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Old 08-28-2013, 04:05 PM   #2690
Jailblazers7's Avatar
Join Date: Jul 2006
Location: Pittsburgh, PA
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Default Re: What are you reading?

Originally Posted by Dresta
Keynes served up his theory on a politically convenient platter. His theory was politically asymmetrical, and he knew it.

So many modern economic problems and fallacies have come from Keynes: the pointless obsession with the GDP stat, the complete disengaging of economists from reality and their obsession with abstract mathematical models, ubiquitous state spending and the belief the state can solve everyone's problems, the crude development of a macroeconomic discipline completely out of touch with reality, the fallacy of there being such a thing as a 'national economy' and many more.

Yeah, the GDP stat is pretty much a direct contribution by Keynes but part of the problem is that measuring a wide-scale economy is so difficult. Macro data is usually extremely poor but Keynes was only the first step in attempting to measure the operations of an economy. Eventually, the field will focus more on data measurements in order to improve the economics. Still, I don't see that as some great curse of Keynes. The crude development of macro is largely because of the crude development of macro data which is something I wouldn't lay at the feet of Keynes.

Hayek's (and Austrian) theories are just as abstract and mathematical as Keynes. The field as a whole is to blame for that, not just Keynes and his followers. Belief that the state can solve everyone's problem is an extreme interpretation of Keynes which is taken far too often. He believed in countercyclical policies to minimize the volatility of the business cycle. Acting like he prescribed gov't spending as a magic potion is silly.

Furthermore, he was an arrogant dick in all walks of life. He prevented much of the Austrian discipline from being translated because he reviewed Mises's book (despite not knowing German) and gave it a bad review in spite of not being able to read it. He was a bully and an elitist who was born with a silver spoon jammed so far down his throat that he had lost touch with reality from the crib onwards.

The book sounds terribly simplistic to me, and now having looked it up i am sure it is. It portrays the economic discipline as having two sides (Austrian/Keynesian) and there being some kind of battle between them. Hence why you think Friedman straddled the middle (he didn't, he was a free-market dogmatist in a way Hayek never was, all he brought was his brand of monetarism that was a disaster).

It does take a simplistic view but that doesn't ruin the book as long as that fact is kept in mind while reading it. It is more interesting as a historical narrative of the times than a text on economics.

What I meant by Friedman straddling the line is that he admired the economics of Keynes. His economics are certainly influenced by Keynes but he rejected most fiscal policy measures as too dangerous (which is in line with Hayek's philosophy and Friedman's free-market dogmatism). Instead he favored the use of monetary policy as the preferred controls of economic policy which is more of an improvement and extension of Keynes than it is a paradigm shift.

You need to read a bit more about Hayek if you don't think his economic contributions were first rate. Not only his own work, but he brought Menger and other Austrian ideas to light when they had been so well ignored. Contrast that with Keynes who was proven wrong on a number key issues (e.g. mass unemployment coupled with high inflation in the 1970s, which he had deemed impossible).

(read Hayek's The Use of Knowledge in Society for example. In substance, it is better than anything Keynes ever wrote - though Keynes had the sparkling prose)

I'm not saying Hayek was a bad economist or anything but his economic work is very abstract and falls into the sometimes dubious category of "high theory." Your critique of Keynes' abstract models can just as (probably more) easily be applied to Hayek. Hayek's contributions as a political philosopher greatly outweigh his contribution to economics (which isn't a bad thing).

Also, Keynes never deemed stagflation as impossible and I think I remember reading that Keynes had reservations about such a scenario. That idea mostly came about in the 50s with the Phillips Curve. I think part of the problem is that the distinction between Keynes and Keynesians has become so blurry over the years. His theory was by no means perfect tho and stagflation helped to expose some issues with it.

I will check out that Hayek piece tho. I read Road to Serfdom a few years ago and enjoyed it.
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