When will Krugman catch up with Keynes?

16 January, 2016 at 10:44 | Posted in Economics | 2 Comments

In his column this morning, Paul Krugman, had this to say about issues that have mattered a lot to me over many years now. I admire Krugman, of course, but this is bullshit, pure and simple. Not the Harry Frankfurt kind, which requires willful ignorance of the facts, but the everyday kind, which requires mere ignorance of the historical record.

“Don’t say that redistribution is inherently wrong. Even if high incomes perfectly reflected productivity, market outcomes aren’t the same as moral justification. And given the reality that wealth often reflects either luck or power, there’s a strong case to be made for collecting some of that wealth in taxes and using it to make society as a whole stronger, as long as it doesn’t destroy the incentive to keep creating more wealth.”

The “incentive to keep creating more wealth”? …

John-Maynard-Keynes-capitalism-quoteKeynes, bless his heart, called it “a somewhat disgusting morbidity.”

He was right … Here’s how he put it [in ‘Economic Possibilities for Our Grandchildren’ (1930)]:

“When the accumulation of wealth is no longer of high social importance, there will be a great change in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession … will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialist in mental disease.” …

Paul Krugman is a hero to many of us because he fights the good fight against the idiocies of economic theory and practice in our time. But he is now behind the times because he hasn’t yet caught up with Keynes.

James Livingston



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  1. Paul Krugman is a political liberal (in the American sense), but a conservative economist.
    I saw the headline on this post, and expected a different point to be made — something more along the lines of: when will Krugman feeling the weight of the critique of neoclassical economics free himself and come into the light? Read in the light of my expectation, Professor Livingston’s brief essay made me think of the previous blog post concerning Simon Wren-Lewis’s model eclecticism and (alleged) methodological orthodoxy. Wren-Lewis, like Krugman, appears to be slightly left of centre in his politics, but is, at base, a conservative economist.
    Keynes of the General Theory gets some large and important things wrong and simply obscures others with impenetrable prose when the power of his thought falls short. It is a great book, because he knows that his theory — the body of systematic ideas he projects onto poor Pigou — is wrong and he needs a new theory to understand the actual economy. Keynes casts himself as an intellectual version of the classical hero, ready and eager for the moment of climactic insight, when the hero sees how he has been wrong, how he has been the wilful author of frustration, impotence and tragedy. (Maybe not quite as over the top as Oedipus Rex, though.)
    The capitalist world economy today, as in circa 1930, is an unfolding tragedy, which we, collectively, have authored and willed with our economic theories and policies.
    The problem with methodological orthodoxy and model eclecticism is that it locks up the actual theory in a dark vault where it is never questioned — or rather where all the questions are met with denial of the form, we have a model for that. Critics, in despair, point out the challenge to orthodoxy inherent in the events of the GFC of 2008, but are met with incomprehension. We have insights into that, we are told, important insights.
    The economy is an emergent phenomenon, a by-product of the processes by which our individual intentions are subverted in a semi-chaotic mix of cooperation and conflict and discovery. Economics at its best ought to be about developing collective self awareness of the implications, opening the possibility of learning from our inevitable mistakes, of turning recurrent social tragedy into deliberate reform.
    Instead, economics has been the means by which established elites resist change and obscure their own responsibility for tragic outcomes.
    Tragic outcomes are unavoidable in an important sense in a genuinely uncertain world. If we learn to fly we will learn to crash. We take the risk and we take control, learning where we can. This orthodox neoclassical economics studiously resists.

  2. Krugman is simply pointing out, like Keynes did, that the accumulation of wealth has the consequence of mass poverty – that wealth should be limited!

    There is no parallel economic field that contests the current economic field. There are economic reports and there is the criticism of them, but there is no field that jettisons neoliberal economic theory and strikes out in an alternative direction.

    It is like a world of Moonies who fervently believe in their practices which no criticism can bend, where no one can think different.

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