Posts Tagged ‘Keynes’

Friedrich Hayek and John Maynard Keynes

Saturday, December 17th, 2016

I just finished reading Nicholas Wapshott’s Keynes Hayek: The Clash that Defined Modern Economics (Norton, 2011). Herbert Gintis and Greg Ransom, two American economists whom I admire, wrote scathing reviews of the book at In contrast, I enjoyed the book, especially the parts dealing with the life and personality of Hayek. The book is an easy, quick read (Gintis wrote that it is akin to reading an article in People magazine!), but that is all the more reason to read it. Don’t purchase it for reference, however. Borrow a copy from a public library.

Nicholas Wapshott (born 1952) is a British journalist and writer who has a degree in politics from the University of York. Cardiff Garcia recently interviewed him for an Alphaville podcast.

What to me was most valuable is the attention that Wapshott pays to differences in the personalities of Hayek and Keynes. The differences are, indeed, quite striking. Here are a few passages from the book that caught my attention. I am more familiar with Keynes than with Hayek so, for this reason, ignore Wapshott’s many comments on the personality of Keynes. (more…)

Keynes vs Hayek podcast

Sunday, December 4th, 2016

I enjoy very much listening to weekly podcasts from FT Alphachat. The host is Cardiff Garcia, and the hour-long talk is almost always entertaining. This week’s podcast is particularly good. You can download it at the link below, or at iTunes. Notes and links for this episode will be posted at ftalphaville within a few days.

All FT blogs and podcasts can be downloaded without charge. (Free registration may be required.)

Cardiff Garcia sits down with Nicholas Wapshott, author of Keynes Hayek: The Clash that Defined Modern Economics [Norton, 2011], to discuss which economist

Keynes was wrong!

Monday, November 3rd, 2014

No reader responded, but I found, in today’s Financial Times, an intelligent argument debunking yesterday’s post “Keynes was right!“.

Does monetary policy become ineffective once interest rates reach zero? With negative interest rates, monetary policy can continue to work, regardless of how low interest rates go. Real negative rates are certainly possible, and often observed, when the rate of inflation is greater than the interest rate. But the relevant question is: Are negative nominal interest rates possible? Martin Sandbu, writing in the Financial Times, thinks so.

In liquidity trap models of the economy, the central bank is impotent. Although it can create money at will, this power no longer provides influence over interest rates or the ability to give the economy a boost.

The reason this is said to happen is a supposed

Keynes was right!

Sunday, November 2nd, 2014

This ‘must-read’ column is not gated. Click on the link below to download all 11 paragraphs. The language is clear, concise, easy to understand. IMHO, the analysis is spot on. If you disagree, please post a comment.

Countries that took emergency measures to reduce public borrowing have mostly suffered weaker growth, as in the case of Britain from 2010 to 2012, Japan this year and the United States after the 2013

wise words from a great economist

Sunday, February 2nd, 2014

[E]conomics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value.

John Maynard Keynes: Letter to Roy Harrod, July 4, 1938

So true, but so often forgotten!

DeLong remembers Friedman

Wednesday, August 14th, 2013

Berkeley economist Brad DeLong (born 1960) recalls conversations with Chicago economist Milton Friedman (1912-2006), a giant of 20th century economics.

In my rare coffees and phone calls with Milton Friedman, I found I could distract him whenever I was losing an argument by saying: “Why is it that the government needs to intervene and keep the flow of liquidity services provided to the economy growing along a smooth path? Why must there be a quantitative target achieved by government for the path of the liquidity services industry–commercial banking–when there must not be a quantitative target for kilowatt hours or freight-car loadings?”

He would chuckle and say it was a hard problem, but that he was confident that someday he or somebody else–maybe even me–would find a good, concise, convincing way of proving the point that a modern economy needed very heavy-handed government intervention in regulating the commercial banking industry but nowhere else. It was, he thought, something about the social waste of unnecessary bankruptcy, the catastrophic consequences of bank failures, debt deflation, and the fact that the price of liquidity services was intimately tied up with the units of account that we used to denominate our web of debt.

Brad DeLong, “Why Did Milton Friedman Think a Modern Economy Needed Heavy-Handed Government Regulation in the Liquidity Services Industry and Nowhere Else?” Brad DeLong’s Semi-Daily Journal, 12 August 2013.

DeLong’s post was prompted by the following comment of Princeton economist Paul Krugman in his newspaper column:

One way to think about [Milton] Friedman is that he was the man who tried to save free-market ideology from itself, by offering an answer to the obvious question:

debunking public sector myths

Monday, August 5th, 2013

Martin Wolf reviews The Entrepreneurial State: Debunking Public vs Private Sector Myths, a new book by Mariana Mazzucato (Anthem Press, 2013).

Growth of output per head determines living standards. Innovation determines the growth of output per head. But what determines innovation?

Conventional economics offers abstract models; conventional wisdom insists the answer lies with private entrepreneurship. In this brilliant book, Mariana Mazzucato, a Sussex university professor of economics who specialises in science and technology, argues that the former is useless and the latter incomplete. Yes, innovation depends on bold entrepreneurship. But the entity that takes the boldest risks and achieves the biggest breakthroughs is not the private sector; it is the much-maligned state. ….

This book has a controversial thesis. But it is basically right. The failure to recognise the role of the government in driving innovation may well be the greatest threat to rising prosperity.

Martin Wolf, “A much-maligned engine of innovation“, Financial Times, 5 August 2013.

That is the beginning and end of the review. Copyright restrictions prevent me from copying and pasting the middle paragraphs. Read the entire review. Non-FT subscribers, this is an excellent use for one of your ten monthly downloads.

You can view the table of contents and introduction to the book at

I enjoyed the following quotation, which appears (with three others) at the beginning of the book, just before the table of contents.

The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.

John Maynard Keynes, (“The end of laissez-faire“, Hogarth Press, 1926)

Krugman and Sumner on fiscal stimulus

Sunday, March 31st, 2013

Via Mark Thoma (EconomistsView), here is Paul Krugman espousing the Keynesian view that fiscal stimulus is necessary to stimulate an economy caught in a liquidity trap, with low interest rates and low expected inflation.

As I see it, the whole structural/classical/Austrian/supply-side/whatever side of this debate basically believes that the problem lies in the labor market. …. For some reason, they would argue, wages are too high….

As regular readers know, I find this prima facie absurd ….

So what

austerity vs stimulus

Wednesday, June 13th, 2012

An FT reader writes that it is much too early to conclude that “the UK government

inequality and the politics of austerity

Tuesday, May 15th, 2012

Paul Krugman and Robin Wells, in a recent essay, expand on their thesis that rising income inequality can explain why governments in general – and the US government in particular – chose to respond to the current financial crisis with policies of austerity rather than stimulus.

In 2008 we suddenly found ourselves living in a Keynesian world …. By that we mean that we found ourselves in a world in which lack of sufficient demand had become the key economic problem, and in which narrow technocratic solutions, like cuts in the Federal Reserve