Whose Keynes? Keynes’s Keynes!

3 Oct, 2014 at 11:18 | Posted in Economics | 1 Comment

Keynes’s own policy perspective should be obvious from the titles of his books, up to and including The General Theory of Employment, Interest and Money. Keynes sought a theory of capitalism that could guide policy in a world after gold—and, in GT, after classical economics. While GT is a work of theory, its ultimate aim was practical: the fuller justification for the monetary reform that he had long advocated. It is most unfortunate that he did not spell this out. He wrote for his audience then and not for us; his practical observations were almost throwaway remarks to an audience that knew the context …

17%20dec%202012%20(31)The policy dimension raises a more substantial puzzle, one that suggests another wellspring of the Keynesian counter-revolution: class conflict. In the light of Keynes’s theory, society faces a choice of interest rates. But as we know, high interest rates favour rentiers or finance capital and low interest rates favour industry and labour. Keynesianism, as classical economics before it, dealt with the choice by ignoring its existence, leaving ‘the market’ to set rates. A conservative reaction in the wake of theoretical challenge may be even more disturbed by a challenge to the social and political status quo. Keynes did not hold back from the revolutionary implications of his theory in his ‘social consequences’ chapter. But while he went far, it is quite clear—in the wake of democratic socialist revolutions all over the world—that many would want to go further. Siding with the rentier was to protect the status quo. The apparently apolitical nature of much of the debate should not blind us to the possibilities of a political agenda …

The world now confronts a financial and economic crisis of the same nature as the Great Depression. The transfigured Keynes does not offer the means to the restoration of prosperity. It is mainly for this reason, not mere academic nicety, that we find it important to answer Backhouse and Bateman’s (2010) question, ‘Whose Keynes?’ with the answer ‘Keynes’s Keynes, if you don’t mind’. Our concern is that political, ideological and class interests holding back the restoration of Keynes’s theory be confronted and that economists engage in a genuine and impartial debate on the meaning and implications of GT for today’s and tomorrow’s economy.

Victoria Chick & Geoff Tily

1 Comment

  1. The methodological Keynes

    Comment on Victoria Chick and Geoff Tily’s ‘Whose Keynes? Keynes’s Keynes!’

    It is trivial but worth repeating: political economics and theoretical economics are different things and have to be strictly kept apart. The core problem of economics as a science is, of course, that by its very nature it is closely entangled with politics. The biggest threat to theoretical economics is that it gets hijacked by those with a political agenda. It does not matter whether this agenda is good or bad in moral terms. Science is committed to its own criteria or it ceases to be science.

    But are we not all inescapably involved in the struggle between good and evil? Politics, religion, and philosophy say yes. But even if this is true, it is no justification to hijack science or to let it be hijacked. What has to be recognized and respected is that science is about true/false and not about good/evil. This distinction is part of the demarcation problem, which is the fundamental problem of methodology (Popper, 1980, p. 34).

    Keynes had a political agenda and this was his first priority. Let us agree for the moment that his attempt to alleviate unemployment was good and right without any qualification. Hence we all can accept Keynes’s agenda — except for one point: Keynes used theoretical economics for political purposes. This is unacceptable.

    Having taken politics out of the way, the next question is about the scientific content of the General Theory. Here we can — in very general terms — side with Allais: “… mais son [Keynes’s] insuffisance logique ne lui a pas permis de résoudre les problèmes que son intuition lui avait fait entrevoir.” (1993, p. 70)

    In more specific terms we can definitively declare that the formal foundations of Keynesianism are logically defective since the General Theory (2013).

    It is no contradiction to accept Victoria Chick and Geoff Tily’s argument that Keynes was one of the good guys of political economics and not to accept the General Theory as a valid contribution to theoretical economics.

    But good social intentions do not count for much in science, only material and formal consistency. So what is left?

    Keynes lasting scientific contribution relates to methodology. He spoke it out loud, so that every fellow economist could hear it: Throw over the classical axioms and put theoretical economics on new foundations. What else could Keynesian Revolution mean than a paradigm shift?

    Egmont Kakarot-Handtke

    References
    Allais, M. (1993). Les Fondements Comptable de la Macro-Économie. Paris:
    Presses Universitaires de France, 2nd edition.

    Kakarot-Handtke, E. (2013). Why Post Keynesianism is Not Yet a Science. Economic Analysis and Policy, 43(1): 97–106. URL http://www.eap-journal.com/
    archive/v43_i1_06-Kakarot-Handtke.pdf or URL http://ssrn.com/abstract=1966438.

    Popper, K. R. (1980). The Logic of Scientific Discovery. London, Melbourne,
    Sydney: Hutchison, 10th edition.


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