"This revolutionary theory – his Liquidity Preference Theory – is still considered too radical to be acceptable today."
What? Liquidity preference was taught in my undergrad macro class using the textbook by Greg Mankiw. It's the basis of the IS/LM model. And central banks are constantly worrying about interest rates and liquidity. To whom is it too radical? Probably some people disagree with it, but I wouldn't call it very "radical" today. The author is fighting straw men.
My main experience with this on a microeconomic level was during the housing bubble and recovery. I tried working at home flipping used Macintosh computers to sell on eBay and found that as money got tighter and tighter around the country, prices kept falling from $300-500 in the course of a year to $150-300 and eventually I couldn't make any money at it.
Part of this was the natural drop in price of electronics but part of it was also the fact that everyone was broke so demand for computers fell. I think we could do a lot for the US economy by putting more money in the hands of consumers and raising demand. We could also think about what people are buying, and start investing in projects that pay off in the long run (renewable energy, permaculture, automation etc) vs projects that are unsustainable (coal, monocropping, the service economy).
The fact that most people have never really heard of these sorts of government-driven public works since roughly the late 70s tells me that supply-side economics won. But I think on a local level, we might see a resurgence in demand-side economics with recycling, cooperatives, some level of universal basic income - things that make life easier for working people. At least, I thought that before the last presidential election. But if people are looking for hope in these times, Keynesian economics is a great place to start.
The "Friedman vs. Keynes" split exists to a small extent, but the imagination that's a deep divide between neocon and neoliberal (or whoever) is almost entirely a fiction of op-ed writers and armchair economists. Both are considered foundational to modern economics. Liberal economists took a lot from Friedman and many prominent conservative economists (Mankiw for one) consider themselves Keynesians. And "supply-side vs demand-side" is not at all the axis that divides the two; that's another fight far more fascinating to the armchair crowd than practicing economists.
I'm sorry but your comment and the post you link to is complete nonsense economically and worse applied to Keynes and Friedman is utterly wrong. The article you linked is an honestly an embarrassment.
Furthermore nothing in the actual economics of either of these two people puts them squarely in the supply-side/demand-side 'camp' and furthermore those terms are used competently wrongly to the point of meaninglessness in public discussion anyway.
I don't want to get into a long post here, but your way oversimplifying the issue economist discuss to a point where it borders on satire.
To get a somewhat better understanding in a short time:
I think you need those programs to start at the federal level rather than the local level if you want to avoid bankrupting the more local governments. I would like to see more of those programs by the way.
> Worse, it has led to increasingly frequent financial crises. These began first on the fringes of the global economy (in the 1970s and 80s), but in 2007–9 moved to its core, the US and Europe.
Far as I got in TFA...
Anyone who doesn't recognize "financial crises" have been going on for, like, forever probably isn't that much of an expert on the subject to even consider their argument.
The first of the "increasingly frequent financial crises", I should think, is what's intended. Not the first one period. Not to defend that point—my background is little help here—but I think yours is a misreading.
No you´re right. The banking system was bouncing up and down like a yo-yo in the 19th century, on average there was a crisis every 10-12 years (also astonishingly regular). The mean time to crisis is several years longer these days.
Oh, I realize that most people don't study historical banking system but what your saying is only partly and only if you look at specific places.
The crisis in the US system in the 19th century were usually based on bad harvest that lead to a banking crisis. The US was suffering from absolutely horrible banking regulations back then and that was acknowledged by everybody (and was blocked from being reformed for 25 years).
However the severity and duration were not necessary longer then they are today. The Great Depression and Great Recession were easily as bad or worse then any of the recessions in the pre-WW1 era.
Furthermore Canada, who was just north of the US and with a similar economy suffered no banking crisis at all during that period. So saying that it was like a yo-yo in the 19th is simply not true unless you are locking at the US. Even in the US banking systems in some states performed significantly better then others (more diversity in regulation back then).
Actually, some of us do, and some of us study it rather more widely than the US - which is actually regarded as having one of the world's more dubious banking systems during the 19th century.
Some of us would also make the claim that the reason the European banking system was also bouncing up and down like a yo-yo in the 19th, was that the American system kept crashing it (cascade failure.)
Canada's branch banking system was quite different to that used in America, and probably played a part in the relative stability. It probably also helped that during that period Canada was a big exporter, and was to some extent protected by the Sterling zone. However the British banking system was also suffering from periodic crashes during this period.. so it's unwise to get too carried away with that analysis.
Great. So we are in agreement. 19th century banking was not 'like a yoyo' it depended on lots of factors and was the opposite of a yoyo in some places.
The US history of banking is really a fucking mess. Its a travesty.
This is a fun little podcast about banking history in the US:
Bank failures were very common in the US specifically, especially in the GD. The reason is that the US had 10000s of banks because of a regulation called 'Unit Banking'. This made banks incredibly weak (not diversified) to shocks and failed often. Because of other problem in the US system this often lead to lots of banking failures. 1000s of them went down in the GD for example. Compare to Canada where no bank failed (there were less in the first place of course).
It was deregulation that finally abolished that absurd practice along with other changes, including some more regulation, and the removal of lots of old regulation that lead to an improved banking system.
The Depression of 1929-1933 was followed very quickly by a recession in 1937 but banks didn't fail anymore. Pretty much every economist agree that the reason was the FDIC and the consolidation of the banking system in the following years.
To track bank failures today on deregulation in the 80s is a really hard sell, if you study the history of banking you will see huge changes in regulatory structure, types of regulation and so on all the time, including after Reagan. To sell the old 'evil republic deregulation is cause of all evil' story is always easy but unless you are at a political rally it is a pretty meaningless statement.
We are not back in a yo-yo compared to the 19th century. We are two recessions apart from the longest period of continued growth in US history (1990's). Then there was a recession in 2001, and then another in 2008-2009.5.
You should check out the Wikipedia article for "list of recessions in the United States." It spells out recession duration and time since previous recession.
Markets and bubbles crash because of a mismatch between a price and actual comparable value (which, in their large form, are usually caused by artificial market levers or _regulations_).
Stop with this mysticism inspired "greed is bad and therefore actions inspired by greed are inherently bad so we need even more powerful people who are of course not influenced by greed to set rules for the greedy" nonsense.
I think Keynes is a lot more comparable to Freud than to Darwin. Hugely inspirational in his day, inspired a lot of interesting ideas, clearly a very bright guy. But not necessarily ever right about anything, or at least anything new.
This article contains so much nonsense its hard to comprehend how this is not an attempt at satire.
It seems the anther has read some Keynes and has defined a whole new history around it.
I highly recommend people against reading this text, it represents the worse kind of historical rewriting and reinterpretation to serve the needs the person writing it.
I would also point out that a lot of the insights that Kaynes made popular and enjoyed wide popularity from the 1950 to 1970s has since gone away. The theories today called 'New Keynesian' really are far more evolution of 70s monetarism.
> Keynes’s development of the science of macroeconomics goes largely unacknowledged by a profession still
So all of this is wrong. In no meaningful way did Keynes develop the science of macroeconomics.
There were working on the exact same topics as him for a very long time before him. One might argue that he was the most well known macro economist in England at the time, but that's about it.
Furthermore, the idea that Keynes is 'unacknowledged' is unfathomably wrong. There are macro economics schools today that refer to themselves as 'New-Keynesian', 'Post-Keynesian' or 'Old Keynesian'.
> by a profession still steeped in classical microeconomics
I don't even know what he is referring to. Nobody does 'classical' economics since the 1870 (except some forms of Marxist economics).
Please don't post unsubstantive comments here, and especially not on controversial topics. That combo amounts to trolling, whether you meant it that way or not.
This is extremely debatable. One could argue the exact opposite. I wholeheartedly disagree completely. One could presume you attribute boom and bust to him but stability came after the arrival of his theories.
If you want a dive into what it looked like before look out for a book called Lombard Street.
Infact our problems with trade deficits and imbalances at the moment can be attributed to his defeat by Harry Dexter White in the implementation of Bretton Woods in negotiation (Bancor).
My personal pet peeves with HN is that there is a vocal minority that is completely dismissive of the entire field of economics. Obviously, the field has pluses and minuses, but it's nuts there are people that completely think the whole field is useless or harmful. Economics didn't become a major academic field studied in every college in the country (world even?) by being a bunk science.
> My personal pet peeves with HN is that there is a vocal minority that is completely dismissive of the entire field of economics.
I am mostly dismissive of a lot of economically-motivated political arguments, because a lot of the time the people advancing such arguments are abusing models that are simply not applicable.
> Obviously, the field has pluses and minuses, but it's nuts there are people that completely think the whole field is useless or harmful.
I'm very critical of the "because economics" when money is involved on one side or the other.
When the opaquely-funded Cato institute's neo-libertarian nonsense is being funnelled through here from one of the two accounts that only serve to post their content, then I'll criticise them and be in a minority.
I also think that people cherry picking arguments based on following microeconomics into a realm it isn't really applicable is responsible for some of the most cruel and savage human behaviour we see today. When supply and demand is applied to public services with no regard for taxation and planning and you have bullshit-economics acting as a mask for racists, I think it's right to call it out in the same way that I would call out someone claiming that migrants breathe too much air.
> Economics didn't become a major academic field studied in every college in the country (world even?) by being a bunk science.
Some critics argue that it got there by supporting those with the money to keep it there. If your field is funded by people who have an interest in the direction and implications of that field of study, we start to see problems. People tend to see this more with the pharmaceutical industry than with economics. Ubiquity is not a very good measure for a sign of its quality.
Nonetheless I am actually quite a fan of Keynes. I found it quite tragic to hear about his heart attacks and lack of recovery that seemed to come at such an unfortunate time.
Actually, Keyenes correctly predicted some of the main reasons WWII happened. If more world leaders had listened to him, then we probably could have prevented world war 2.
He predicted that after WWI that the reparations required of Germany would be too burdensome on their economy which would in turn lead to another war.
Marx described the problem, communism tried, and failed to solve it. He didn't create the problem of capital vs labour inequality, though.
(Meanwhile, many of the rights workers have gained over the twentieth century were given to them because of the fear that they will turn to communism.)
You can't do "positive" or "negative" things the The Earth. It is a lump of mass shot through with potential energy and lattice opportunities. Net positives and negatives are subjective assessments by perspectives constrained within a framework. The earth is the super constraint on humanity, at least for the time being. The oxygen rich atmosphere is not objectively better than the nitrogen rich atmosphere, but it is subjectively worse for us.
It's a fools game anyway. Erase the homo sapiens and some other primate gets spared a genocide. I have never understood the value in anthropomorphizing the planet outside of political manipulation.
> If I could only erase one person from history, Keynes would be very close to the top of the list. The damage caused by his malevolent theories has done immeasurable harm to all humankind.
Hitler, Stalin, Mao, or any dictator that's ever lived seem like better candidates for erasure. At least with them, you'd be saving the lives of the people they each malevolently murdered. You'd have to be clutching narrow-mindedly onto some economic dogma and view Keynes as a heretic to choose him for erasure.
I used to think that, however I would like to point out that Keynes did believe that the gold standard was necessary. What we have in economics now are Neo-Keynesians, who perhaps can be said to have hijacked Keynes.
> however I would like to point out that Keynes did believe that the gold standard was necessary.
Keynes advocating against the reintroduction of the gold standard, and then—when Churchill got it reintroduced anyway—for its abandonment until it was again abandoned.
They usually are working towards proving mathematically (with microfoundations) Keynes theories, so I don't see how they would differ besides the issues were the economic mainstream have shifted.
What? Liquidity preference was taught in my undergrad macro class using the textbook by Greg Mankiw. It's the basis of the IS/LM model. And central banks are constantly worrying about interest rates and liquidity. To whom is it too radical? Probably some people disagree with it, but I wouldn't call it very "radical" today. The author is fighting straw men.