Keynesian "Economics"

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

The following exchange of today's date between Geoffrey Gardiner and myself
may be of interest to PKT Forumites:


> Geoffrey:
>
> Re. the following:
>
> > I always characterise my sense of humour as warped, and I thought that
> Gunnar
> > was emulating me with his remark "striking example of lucid and
logically
> > watertight ..  thinking ." Gunnar's recurrent and worthy theme is the
> > epistemological problems for economics - and is this connection he has
by
> the
> > way taken on all the serried might of the PKT list. So what I thought he
> was
> > meaning was, "Look at this piece of fine analysis. It is logically
> > watertight. Nevertheless it is wrong! Perceive the epistemological
problem
> > which has been ignored." Was I wrong?
>
> No, you are right!
>
> Keynes, who spent 5 years on the 'Treatise', would later acknowledge that,
> by the time he was finished with it, he no longer found persuasive the
> theoretical construction on which he had spent all that time.
>
> The 'General Theory' reflects his re-thinking on the same issues in the
> first half of the 1930s, "aided" by the input of the Cambridge "Circle".
>
> At issue was his dogged determination to prove that Ricardo had been in
> error with respect to the issue which Keynes noted in a footnote to the
> opening paragraph of Ch. 2 of the General Theory, with paragraph and
> footnote reading as follows:
>
> "Most treatise on the theory of Value and Production are primarily
concerned
> with the distribution of a given volume of employed resources between
> different uses and with the conditions which, assuming the employment of
> this quantity of resources, determine their relative  rewards and the
> relative values of their products."
>
> "This is in the Ricardian tradition.  For Ricardo expressly repudiated any
> interest in the amount of the national dividend, as distinct from its
> distribution.  IN THIS HE WAS ASSESSING CORRECTLY THE CHARACTER OF HIS OWN
> THEORY.   But his successors, less clear-sighted, have used the classical
> theory in discussions concerning the causes of wealth.  Vide Ricardo's
> letter to Malthus of October 9, 1820: "Political Economy you think is an
> enquiry into the nature and causes of wealth - I think it should be called
> an enquiry into the laws which determine the division of the produce of
> industry amonst the classes who concur in its formation.  NO LAW CAN BE
LAID
> DOWN RESPECTING QUANTITY, but a tolerably correct one can be laid down
> respecting proportions.  Every day I am more satisfied that the former
> enquiry is vain and delusive, and the latter only the true object of the
> science.""
>
> Comments:
>
> 1.  John Stuart Mill completed the research agenda on the latter "true
> object of the science" with the finding that ALL VALUES are relative to
> time, place, and circumstance.  So much for "the science" in Ricardo's
sense
> thereof.
>
> 2.  The relativity of all values did not sit well with neo-classical
> would-be economists, who promptly defined a NEW research agenda, namely,
> SUBJECTIVE PRICE THEORY whereby the PSYCHOLOGICAL factors that come into
> play at such times, places, and circumstances would be addressed with
> mathematical pseudo-rigor.
>
> 3.  Keynes would have none of it - hence Samuelson's comment in his
memorial
> piece on Keynes to the effect that he had "never" had much interest in
> "economic theory"!
>
> 4.  First in the 'Treatise' and then in the 'General Theory', Keynes
> struggled mightily to clear his mind of the intellectual garbage which had
> been stuffed into it by his neo-classical/Marshallian training.
>
> 5.  In both cases, Keynes managed to persuade himself, if only fleetingly,
> that there WAS some way in which the accounting identities of Saving and
> Investment could be cut up, re-shuffled, and re-arranged into a mental
> construct that would (i) prove Ricardo wrong, and (ii) keep alive the
> neo-classical illusion that - as Schumpeter put it - Mill's "half-way
house"
> had indeed been a "half-way house" to SOME Economic Science that would
> relate to real-world economies as Newtonian Science did to real-world
> physical phenomena.
>
> 6.  As indicated in my recent message on "Keynesian "Economics"?", Keynes
> failed miserably.
>
> 7.  Hence my whole-hearted support for Mill's conclusion: All empirical
> economic phenomena are relative to time, place, and circumstance.  In
other
> words, THERE NEITHER IS NOR CAN BE ECONOMIC SCIENCE THAT RELATES TO
> REAL-WORLD MARKET ECONOMIES THE WAY THAT NEWTONIAN SCIENCE DOES TO THE
> PHYSICAL UNIVERSE.
>
> Gunnar
>
>
>
>