Keynes Hayek and Other Dead Economists

Tag: Keynes Hayek and Other Dead Economists

An easy subject at which very few excel!

The study of economics does not seem to require any specialised gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! — John Maynard Keynes

I came across this gem at Brad Delong’s website, where he is having a dialog with Paul Krugman about the use of graphs in Econ 101, and specifically whether Production Possibilities and Edgeworth Boxes should be introduced at the introductory level.

This is certainly a conversation we are having on our floor. I think we generally introduce PPFs, but not the Edgeworth Boxes in our introductory courses, and our Econ 300 students get the Ysidro Edgeworth treatment. I guess I’m all ears if you have thoughts on the topic.

As for the more obnoxious point that economics is a seemingly lightweight subject that few are good at, huh. Keynes continues:

The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher-in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future.

That’s from his obituary for Alfred Marshall, author of the incredible Principles of Economics, the profession’s first textbook, and namesake of Marshallian Demand! Truly a pioneer and an intellectual giant, regardless of what Keynes says here.

It’s nice to see someone say something nice about economists, even it if is an economist, and even if it was 90 years ago.

Keynes Hayek: Questions for Thursday’s Read

Alright, I still don’t have an accounting of our numbers (and I’m not even listed as an instructor), but it’s time to start talking about Wapshott’s Keynes Hayek book.

First up, roll call. Who are Edgeworth? Marshall? Mises? Menger? Robinson? Kahn?

Second up, what do we know about the personalities of Keynes and Hayek? Do they remind you of anybody? Do you think the recent rap videos are accurate characterizations? (see, for example, p. 48).

Third up, let’s revisit some basics — what is meant by “capitalism” and “socialism”?

A continuing question: What is Keynes view of government? As you answer this question, think of (1) his reaction to the war reparations and his characterization of the likes of David Lloyd George and Woodrow Wilson; (2) the Bank of England’s decision to raise lending rates in 1923 (p. 32); (3) Britain’s decision to return to the gold standard (pp. 39-40). In each case the government made what Keynes considered to be disastrous decisions, yet at the same time he believed the “he maintains the belief that the government or the Bank of England should manage the economy. Does Keynes believe that the British government as an institution is fundamentally sound, but that they just need better economic advice? The second point above, evidently, was the beginning of the Keynesian Revolution (p. 32; read footnote 3). Does that surprise you?

Another continuing questions: what is meant by “laissez faire”? The simple answer would seem to be that there is “limited” government intervention. Yet, the Bank of England sets interest rates, the government must make fundamental decisions about the currency — whether or not to adopt a “gold” standard, whether to have a central bank, whether to have a national currency, whether or not to tie that currency to precious metals (e.g., a gold standard or a “bimetallic” standard). What would constitute laissez faire in these contexts?

As a follow up to this question, on page 43 Wapshott argues that the battle lines are drawn: Keynes believes in using the government as a means to help the disadvantaged, Hayek sees intervention as futile. Again, given what’s going on in these previous two paragraphs, is this characterization too simplistic?

To what extent does Keynes’ advocacy (ideology?) affect his analysis? Consider his discussion of sticky wages and unemployment on p. 60.

What is the effect of fixing the price of currency to gold on the general price level and on the exchange rate? (see, for instance, pp. 38-9).

What is the “natural rate of interest”? (see, for instance, p. 43).

That should get us through the first hour. See you at 3:25 in Steitz.

For those of you with some extra spare time, reviews from Tyler Cowen, Peter Lewin (UT Dallas), and Brian Doherty (Reason magazine), and here’sNicholas Wapshott talkign with Russ Roberts (including beau coup resources at EconTalk).