Robert “The Keynesian” Lucas

27 Feb, 2014 at 16:28 | Posted in Economics | 1 Comment

In his Keynote Address to the 2003 History of Political Economy Conference, Nobel laureate Robert Lucas said:

Well, I’m not here to tell people in this group about the history of
monetary thought. I guess I’m here as a kind of witness from a vanished
culture, the heyday of Keynesian economics. It’s like historians rushing
to interview the last former slaves before they died, or the last of the
people who remembered growing up in a Polish shtetl. I am going to tell
you what it was like growing up in a day when Keynesian economics
was taught as a solid basis on which macroeconomics could proceed.

keynesdanceMy credentials? Was I a Keynesian myself? Absolutely. And does my
Chicago training disqualify me for that? No, not at all. David Laidler
[who was present at the conference] will agree with me on this, and I will
explain in some detail when I talk about my education. Our Keynesian
credentials, if we wanted to claim them, were as good as could be obtained
in any graduate school in the country in 1963.

I thought when I was trying to prepare some notes for this talk
that people attending the conference might be arguing about Axel
Leijonhufvud’s thesis that IS-LM was a distortion of Keynes, but I didn’t
really hear any of this in the discussions this afternoon. So I’m going to
think about IS-LM and Keynesian economics as being synonyms. I remember
when Leijonhufvud’s book2 came out and I asked my colleague
Gary Becker if he thought Hicks had got the General Theory right with
his IS-LM diagram. Gary said, “Well, I don’t know, but I hope he did,
because if it wasn’t for Hicks I never would have made any sense out of
that damn book.” That’s kind of the way I feel, too, so I’m hoping Hicks
got it right.

Mirabile dictu! I’m a Keynesian – although I haven’t understood anything of what Keynes wrote, but I’ve read anoher guy who said he had read his book, so I hope for the best and assume he got it right (which Hicks actually didn’t, and was intellectually honest to admit in at least three scientific publications published about twenty years before Lucas statement). In truth a very scientific attitude. No wonder the guy after having deluded himself into believing (?) being a Keynesian – although actually only elaborating upon a model developed and then disowned by John Hicks – got the “Nobel prize” in economics …

1 Comment

  1. It was a lot of words to declare what old Columbia Professor Richard Hofstader described as the “Snobbish Proudness of Ignorance” a unlucky theme in the tradition Anti-intellectualism in American Life. Robert Lucas absent of wittness contrast to other former masters in that area even at places as Harvard.What comes to my mind,is of course John Kenneth Galbraith.He understood J.M Keynes thoughts very well.
    In Interview: Conversations with History; Institute of International Studies, UC Berkeley he described much of what Robert Lucas represent in words like this:

    Harry Kreisler: Professor Galbraith, welcome back to Berkeley.

    John K Galbraith :It’s very nice to be back.

    H K: What are your fondest memories of the campus, when you were here in the ’30s?

    JKG: There would be no doubt about that. My fondest memories are of the surroundings, the ambiance. As I’m saying in my speech this evening, it’s always assumed that academic study must be under depraved conditions, otherwise it has no real effect.
    My memory of Berkeley in those years is of the supreme beauty of this setting, but also of a range of professors who were enormously close to the students and who also had a kind of built-in dissidence, a will to be inconvenient, a desire to afflict the comfortable, which I think had a certain and, I hope, good effect on a whole generation of graduate students in economics, and on students generally.

    HK: What would you say is Berkeley’s most distinctive contribution in shaping the style and the ideas of John Kenneth Galbraith?

    JKG: I would hope that it was a certain tendency to question the official wisdom, what I later called the “conventional wisdom,” one of the few phrases for which I can, rightly or wrongly, take some responsibility.

    HK: Are you saying that Berkeley was a hotbed of radicalism in those days? Or was it more that it left you with an inquiring mind?

    JKG: I would hope it was both. I was here during the years of the Great Depression, when nobody could say that the economic system was working with great precision and great compassionate effect. And there was certainly a strong, possibly romantic, movement to the left during those times. I looked on this with some jealousy as a matter of fact, and would like to have joined it. But I was in Agricultural Economics and I was fresh from studying agriculture so I had a sense that I was not the right material for this highly sophisticated movement. Also, as I’ve said many times, secretly I was enjoying the system. And, while I never admitted that to any of my colleagues, I think this kept me on perhaps an unfortunate avenue of respectability. On the other hand, no one could be at Berkeley in those years and be just a passive recipient of that “conventional wisdom.”

    HK: When you were here as a student, you did a lot of field work in agriculture. I recall reading that you would go out and check on the status of various products.

    JKG: No, that’s not quite true. I was a research assistant on the Giannini Foundation, and we were expected to earn our pay which, in my case, was $720 a year — $60 a month. And I earned my pay as an assistant to a very genial man by the name of Edwin Voorhies. I earned my pay by joining with him in a statewide study of the beekeeping industry. I think I can honestly say that I am the author of the polar work on beekeeping in California. I hope nobody in our audience will take that as a commercial.

    HK: We pride ourselves on not having commercials so that’s good! In your autobiography, A Life in Our Time, you wrote that “Agricultural economics left me with a strong feeling that social science should be tested by its usefulness.”

    JKG: Well there was at that time and still, two streams of economic thought. There was what Thorstein Veblen, who quite a few years before I came to Berkeley was at Stanford, called “exoteric knowledge,” which is knowledge related to practical application as, for example, the greater prosperity of the beekeepers. That was certainly exoteric. Then, Veblen identified a more prestigious line of work in the social sciences, and other sciences, which he called, “esoteric,” which prided itself on having no practical use of any kind, totally remote from anything having to do with what we would now call “policy and economics” — public policy. And I always felt that although the prestige still lies with esoteric activities in a university, probably the exoteric are more useful.

    HK: Is that why you spent much of your writing time working on problems of power in economics?

    JKG: Partly yes.
    There are two things that people pursue in life, not wholly unrelated. One is money and the other is power. And we see this and take it for granted. The attraction of power we take for granted in politics, in your field, where people spend tens of thousands, hundreds of thousands, and now millions of dollars in order to have positions in Washington or Sacramento or wherever, where they have power. But in economics, classical and neoclassical economics, that has no particular role. The thrust there is for pecuniary return, for money. And I have always felt, and still feel very strongly, that that denies in the economic world a very large part of the motivation. People want to be head of General Motors, or General Electric, or General Mills, or another of the other, shall we say, “generals” — they want those jobs certainly for the income that is returned. But the income is itself a measure of the prestige and power, authority, that goes with achieving those positions. And so I have tried in some of my writing, how successfully I don’t know, to bring power back into a role in economic motivation. I gave an address some years ago which has been quite widely reproduced, my presidential address of the American Economics Association, I called “Power and the Useful Economist.” One is not useful in economics unless one brings the thrust for power into appreciation, consideration.

    HK: If one were to attempt to characterize your work, it’s really political economy. And what I want to ask you is why isn’t there a political economy tradition in our great universities?

    JKG: Well, I wouldn’t be so hard as that. There is. Perhaps it’s weaker now than it once was, but at places like Wisconsin, the University of Texas, to a substantial extent at certain times at Harvard, and here at Berkeley, there was a strong tradition of people who were concerned with the political side of the subject. And indeed, that had the implication of a concern for power. I tried to bring power into more theoretical terms than some of them did. So I wouldn’t be so harsh as to say that this wasn’t part of the American tradition. It’s much more a part of the American tradition, I should think, than of the British tradition.

    HK: Was there a waning in recent times with the exception of your work?

    JKG: This one of the dangers of age, that you, to some extent, look down and see homogeneity among younger people where, when you’re younger, you look up and see enormous diversity among older people. It’s one of the dangers of listening too carefully to anyone of my age. But, having said that and having admitted the likelihood of being wrong, I do think that the last 20 years have brought a strong shift back to what I’ve called the “esoteric aspects” of economics — to mathematical expressions in economics, econometric niceties, and a tendency to leave the real world alone. It’s something that in Cambridge we call the “Belmont Syndrome.” Belmont is an extremely comfortable suburb adjoining Cambridge, and the “Belmont Syndrome” is a desire to move from a peaceful, happy life in Belmont to a peaceful, happy life at Harvard, from life to computer and back again, without any disturbance from Ronald Reagan.

    HK: I see!

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