Macro-Consensus

No End to the Consensus in Macroeconomic Theory? A Methodological Inquiry 
 (Published version)
 John McCombie & Maureen Pike 
American Journal of Economics and Sociology, April 2013, Pages 497–528 

Abstract: After the acrimonious debates between the New Classical and New Keynesian economists in the 1980s and 1990s, a consensus developed, namely, the New Neoclassical Synthesis. However, the 2007 credit crunch exposed the severe limitations of this approach. This article presents a methodological analysis of the New Neoclassical Synthesis and how the paradigmatic heuristic of the representative agent, namely, market clearing subject to sticky prices, excluded the Keynesian notion of involuntary unemployment arising from lack of effective demand. It shows these models may be modified to produce Keynesian results, but are ruled out of consideration by proponents of the New Neoclassical approach by weak incommensurability. It concludes that because of this the New Neoclassical Synthesis, in spite of its failure to explain the sub-prime crisis, is likely to resist successfully the resurgence in Keynesian economics. 

Nod to Kevin Lewis

Not a Caricature, Not the Onion

I often get criticized (yes, me!) for "caricaturing" the Keynesian view of the multiplier and job creation.  To be fair, Keynes himself was circumspect.  But the Keynesians are quite clear.

Here is an acolyte, making the straightforward argument that unemployement creates jobs, as long as we PAY people to be unemployed.  It gets good after about 2:50...



Hilda Solis is the US Sec'y of Labor.  She apparently wants to be the Sec'y of Unemployment.  Employed workers aren't docile enough, and they might vote the wrong way.  But unemployed folks, getting other peoples' money in the mail?  THOSE are Democrats.

Nod to William H., and to Pretense of Knowledge.

Keynes

I am often impressed by Keynes.
"the political problem of mankind: how to combine three things: economic efficiency, social justice and individual liberty" (Keynes, "Economic Possibilities for our Grandchildren")

Much less often am I impressed by Keynesians.

(Nod to Neanderbill)

Hayek Caused Hitler

Wow. Robert Sidelsky is clearly a zealot, someone who puts worship ahead of logical argument. But that's okay. There are plenty of folks I admire who do that also.

Sidelsky has perhaps overstepped, however. It turns out that Hayek's economic policies brought Hitler to powerin Germany. If only the D-Bank had been Keynesian, and had inflated the money supply, and wasted a bunch of money on make-work projects, the Nazis would never have had a chance.

Who knew?

The surprising thing for me is that I would have said that inflating the hell out of the money supply and spending a bunch of money on crony projects was EXACTLY what Weimar did. Thank goodness B-Sid is here to set me straight.

Note that I am not making the Godwin's Law objection. Sidelsky is not making a gratuitous comparison to Hitler. He literally means that Hayekian economic policies are directly responsible for the rise of the Nazis.

(Nod to Herr F, who is helpful)

It's Different if SPACE ALIENS Break the Window

The broken window fallacy is pernicious. John Stossel explains, for those of you who have lived under a rock, or studied economics at Harvard, MIT, or Princeton.

(heh; heh heh; heh: he said, "Fallacious")

Most recently, of course, it was KPC's favorite deep space Keynesian, P-Kroog.

Mary Theroux has some thoughts.


...

The Guy's First Name is "Lord"?

The Keynes-Hayek debate was again debated.

George Selgin on the side of the angels. (Really? That's what we've got?) A podcast for background.

And on the other side a guy whose first name is "Lord." Russ Roberts schools "Lord", whose qualifications appear to be a cool accent and a desire to canonize Keynes, in this video.

(Nod to Anonyman)

I Can Be Flexible...I Know Brad Is!

Brad DeLong raises some questions about the characterization of Keynes as an advocate of "central planning." (Brad DeLong's "Grasping His Winky with Both Hands" blog)

And then turns into a textual critic/ deconstructionist, examining Keynes's writings.

He may have a point, but it seems to me this is like comparing Marx and Marxists.

Marx was interesting, but Marxists are mostly thugs and totalitarians.

It is certainly true that Keynes himself was flexible (As Frankenfurter put it, "I know Brad is!") on both his economic beliefs and his bouncy-bouncy partners. And good for him. I admire Keynes.

But the people who advocate central planning in the U.S. call themselves Keynesians. And, in my opinion, they are Keynesians. Their views are derived from Keynes, in ways that are plausible and in the spirit of Keynes's own work.

So, Dr. DeLong...please. The distinction you are trying to make is foolishly pedantic, even for a foolish pedant like you.

UPDATE: Steven H gets it right. And said it better than I did. Because he is smarter and nicer. Well, smarter.