Wednesday, June 24, 2009

whose weapon?

A short piece titled "Weaponized Keynesianism" by Paul Krugman, from his blog:

I'm unsure how relevant the term "weaponized Keynesianism" is to analysis of current politics in Washington. Both the right and the left equally take part in cutting up Keynes' General Theory and other writings into the part that fits its ideology. Keynes wrote the General Theory under the explicit premise (made throughout the book, two examples of which I believe can be found in Chapter 12 on long run expectations and also Chapter 22 on Trade Cycles) that private investment was inherently volatile to the point that full state control of capital is required to regulate the business cycle in a socially optimal manner. However, few Democrats in Congress argued for nationalization of banks. What we got instead was the stimulus package, TARP, TARP 2, and PPIP, the last one in particular being the "big policy move" that essentially creates a partnership, a "middle path" between private investors and the government in order to get credit markets back to the status quo (apparently under the assumption that the status quo is desirable).

If we want to talk about "weaponized Keynesianism", then let's talk about what has been weaponized ever since the General Theory appeared in print (see, e.g., Leontief's review of the book in the Nov. 1936 QJE): reframing a radical theory in the most conservative terms possible by, for example, placing the short run dynamics of Keynes' theory against a backdrop that is remarkably similar to the classical model which Keynes himself rejects in Chapter 2.

Of course, I am fully aware that I am speaking of the theory itself, along with its implications. I am not speaking of or defending the man: it was Keynes after all who said "the class war will find me on the side of the educated bourgeoisie."

1 comment:

  1. Can we escape a class by rejecting it? Perhaps Keynes was just being honest about what his education (and birthright) had made him. I hope not as it does not bode well for my career, but an important point nonetheless.