Friedman VS Keyslan
Fcurrie133
school lines OR along Keysian policies? Can you explain the difference?
Thanks muchly , Lesa Currie
James McCown
<19990521173318...@ng-ba1.aol.com>...
Well, current monetary policy is definitely not being implemented along
monetarist lines. The monetarists said that the Fed should target the money
supply and keep the growth at a constant rate. The Fed has been targeting
the Fed Funds rate and doing a good job of maintaining price stability.
The Fed supposedly targeted the money supply during the period from 1979 to
1982 and many people have pointed to that era as an example of the
infeasibility of the monetarist prescription, but there is substantial
evidence that Volcker was actually ignoring the money supply completely and
targeting the interest rate.
As for Keynesian policies, Keynes wasn't very interested in monetary
policy. Some of the economists of the "Keynesian" persuasion have argued in
favor of targeting interest rates. But there really has never been a
coherent Keynesian prescription for monetary policy.
Robert Vienneau
> ... Keynes wasn't very interested in monetary policy.
Amazing! One is taught the most silly ideas if one believes what one
reads on sci.econ.
Anyways, is the question between monetarism and "Keynesianism" an
empirical dispute over the relative sizes of slopes of curves in
the IS-LM model?
--
Robert Vienneau
r
v
i
e m
n o Whether strength of body or of mind, or wisdom,
@ c or virtue, are always found...in proportion to
d . the power or wealth of a man [is] a question
r e fit perhaps to be discussed by slaves in the
e p hearing of their masters, but highly unbecoming
a a to reasonable and free men in search of the
m c truth.
s -- Rousseau
James McCown
<rvien-22059...@ua2-p28.dreamscape.com>...
> "James McCown" <rock...@mindspring.com> wrote:
>
> > ... Keynes wasn't very interested in monetary policy.
>
> Amazing! One is taught the most silly ideas if one believes what one
> reads on sci.econ.
>
> Anyways, is the question between monetarism and "Keynesianism" an
> empirical dispute over the relative sizes of slopes of curves in
> the IS-LM model?
Robert, I could debate this issue with my springer spaniel and get a more
coherent discussion than you would ever provide.
con...@inow.com
>
> Well, current monetary policy is definitely not being implemented along
> monetarist lines. The monetarists said that the Fed should target the money
> supply and keep the growth at a constant rate. The Fed has been targeting
> the Fed Funds rate and doing a good job of maintaining price stability.
>
> The Fed supposedly targeted the money supply during the period from 1979 to
> 1982 and many people have pointed to that era as an example of the
> infeasibility of the monetarist prescription, but there is substantial
> evidence that Volcker was actually ignoring the money supply completely and
> targeting the interest rate.
>
> As for Keynesian policies, Keynes wasn't very interested in monetary
> policy. Some of the economists of the "Keynesian" persuasion have argued in
> favor of targeting interest rates. But there really has never been a
> coherent Keynesian prescription for monetary policy.
>
Hi James. Is there any evidence that monetary policy works, and can
control the economy? It just seems to have not worked about as often
as it worked. What's the story?
Thanks,
John
--
John Conover, 631 Lamont Ct., Campbell, CA., 95008, USA.
VOX 408.370.2688, FAX 408.379.9602, whois '!JC154'
con...@inow.com, http://www2.inow.com/~conover/john.html
con...@inow.com
>
> Anyways, is the question between monetarism and "Keynesianism" an
> empirical dispute over the relative sizes of slopes of curves in
> the IS-LM model?
>
Hi Robert. At:
http://www2.inow.com/~conover/correspondence/990215192020.29398.html
is a graph of the run lengths of US GDP's expansions and contractions,
at two scales-quarterly, and annually. Both graphs are overlayed, with
a third graph, erf (1 / sqrt (t)).
It would appear that the US GDP is a self similar/affine fractal with
a fractal dimension near 0.5, ie., approximately, random walk.
How can the paradigms of monetarism and/or Keynesianism be reconciled
with something that appears to be produced by a random mechanism?
JOHN J WEATHERBY
Freidman's papers though you see that it more like using a scimitar than a
surgeon's scapel. Freidman's case look at Federal Reserve decisions and find
the Fed has over under reacted. The Freidman and Schwarz argument is that we
don't really have enough information to base day to day monetary policy on.
It is best then not to use reactionary monetary policy. Therefore an optimal
rule would continual growth of the money supply around two or three percent.
Rational expectations economist agree with this. They state becuase the
way expectations are formed you can't fool all the people all the time.
People will anticipate the feds moves and it will be much less effective.
Therefore the Fed should have a target inflation level stay around it and be
consistent. If this happens peoples expectations about the future will stay
steady and we won't see too many really bad swings. People will adjust their
spending and investing etc. to keep things steady.
The Keynesian monetarist position is even if it is a scimitar we have to
use it. Fiscal policy acts too slowly and becuase of this the right policy
can be implemented at the wrong time. In the Keynesian view Monetary policy
is the only way to counteract the business cycle. Due to price and wage
stickiness monetray expansion will increase output and gets us out of a
recession. Interestingly Freidman doesn't deny this. What Friedman argues is
that it isn't precise enough. The Fed often goes to far making the situation
worse than when the recession began.
It is hard to say exactly what the rational expectation stand is though.
Sargent and Wallace give a special case where monetary policy does nothing.
That is when the people have the same information set as the Fed. Yet they
state this is a special and unlikely case. They show monetary neutrality
could happen but state that they think it won't.
Neo-Keynsains like John Taylor have shown that even in a RE framework
that monetary policy can have effect. For instance with Staggered wage
contracts prevalant. Sergant and Wallace have not denied this. In fact they
have spoke little about whether there truely is neutrality or not. I for
reading their paper that mostly just want to show a case where it is
possible not deny it.
Essentially the question is not does monetary policy have effect rather,
can we make monetary policy do what we want? Freidman and Schwarz and other
authors say no. Keynesians seem to just respond well it is better than doing
nothing.
Fcurrie133 <fcurr...@aol.com> wrote in message
news:19990521173318...@ng-ba1.aol.com...
JOHN J WEATHERBY
Robert Vienneau <rv...@see.sig.com> wrote in message
news:rvien-22059...@ua2-p28.dreamscape.com...
> "James McCown" <rock...@mindspring.com> wrote:
>
> > ... Keynes wasn't very interested in monetary policy.
>
> Amazing! One is taught the most silly ideas if one believes what one
> reads on sci.econ.
>
> empirical dispute over the relative sizes of slopes of curves in
> the IS-LM model?
>
ISLM model. In fact the model is rarely used anymore. Dornibusch has revived
it some with analysis of exchange rates but that is it. Please excuse any
mistakes I make here to IS or LM curve, it has been a while since I have
look at the model. The Sergant and Wallace special case of money neutrality
essentially argues the LM (money market?) curve is flat. Therefore monetary
policy has no effect. Other Chicago types would probably argue that is near
to be flat.
The question that Friedman posited though was quite different. Freidman
and Schwartz asked have we really learned enough to make monetary policy
effective. They found that in almost all cases, the Fed had acted wrongly
when they acted. The argument wasn't that monetary policy can't work. The
argument was that either we need to study the effects of it more or the Fed
simply doesn't have the information to make the right decision. We really
don't which one it is. Therefore it is best not to mess with. Monetary
policy has effects but it is a stab in the dark. The Fed may do more harm
than good by acting.
--
The setting is a worhty one. If the devil did decide to have a hand in the
affairs of man.
JOHN J WEATHERBY
break points. You will notice stationary trends on both sides of these
breaks. This is the easy way to see how it isn't random. The hard way
involves many gruelling statistical test for unit roots with structral
breaks. Trust me they are grueling I had do several for a class last
semester. Yet it wasn't for nuaght, I found as well as other papers writen
on the subject that once unit roots test where done with structural breaks,
you can identify stationary series. The data set used involved about forty
countries developed and developing countries both were included. All showed
stationarity once a test for structural breaks was implemented. These test
use endogenously set dummy variables to find the breaks. On each side of the
break the trend is stationary and analysis can be done. If you are
interested look to papers by Bai, Perron, Browning, Lumsdaine, Stock, and
Vogelsang. Or you can check out Madala's new book on Time series with
structural breaks.
JOHN J WEATHERBY
structural breaks. On each sides of these breaks the process is stationary.
That's the simple answer.
The hard way and the way to really prove it is through statistical test.
There are a series of unit root test with structural breaks included. In
these test a set of dummy variables are added to find the break date. The
break year is set endogenously and the test are run. These are a pain to run
but worth the time. I spent a good part of last semester running them for a
class on time series analysis. I found as the other researchers who have
done this have found, that almost all countries tested first seemed to a
random walk under traditional ADF test. Yet when structural breaks are
included the results are reversed. In all countries tested, a sample of
about forty(developed and developing included) countries showed all had
structural breaks where the process was stationary on each side of the
break. For instance the big break in Britain was WWI. FOr the US around the
great depression. When dummy variables are added you can see that the
procress was trend stationary and not a random walk on each side of the
break. The problem with normal unit root test and your method is that you
can't distinguish between a random walk and stationarity if there is one
time endogenous shock to the system. For instance the depression caused a
large one time decrease in US GDP. If you are look at the series as a whole
the process them seems to deviate it looks like it doesn't revert to the
mean. Yet if you find the proper date of the one time event then break the
series in two their you will find that each part does revert to its long-run
trend. The problem is there may another break in those samples. Meaning you
have to divide the sample again. A pain but curable.
If you are interested in these methods look to papers by Bai, Perron(the
man who pioneered the process), Vogelsang, and Browning, Lumsdaine, and
Stock. Or you can check out Madala's new book on cointegration and
structural change.
JOHN J WEATHERBY
Look to Christina Romers work and the famous Freidman and Schwarz paper.
Freidman found monetary policy has effect but the Fed usually does the wrong
thing. This means one of two things:
1. We don't know as much about monetary policy effects as we think we do. We
need to study it more.
Or
2. The Fed doesn't have enough information to make the right decision on
monetary policy.
Hence the Freidman hypothesis that it is better not to mess with it. Either
way monetary policy is just a shot in the dark.
John Weatherby
con...@inow.com
> The hard way and the way to really prove it is through statistical test.
> There are a series of unit root test with structural breaks included. In
> these test a set of dummy variables are added to find the break date. The
> break year is set endogenously and the test are run. These are a pain to run
> but worth the time. I spent a good part of last semester running them for a
> class on time series analysis. I found as the other researchers who have
> done this have found, that almost all countries tested first seemed to a
> random walk under traditional ADF test. Yet when structural breaks are
> included the results are reversed. In all countries tested, a sample of
> about forty(developed and developing included) countries showed all had
> structural breaks where the process was stationary on each side of the
> break. For instance the big break in Britain was WWI. FOr the US around the
> great depression. When dummy variables are added you can see that the
> procress was trend stationary and not a random walk on each side of the
> break. The problem with normal unit root test and your method is that you
> can't distinguish between a random walk and stationarity if there is one
> time endogenous shock to the system.
Hi John. The graphs can detect between a random walk and
stationarity. That's why I chose to do the distribution of run lengths
of expansion and contractions of GDPs, (and showed them to be the same
at different time scales.) If the US GDP was characterized by a "one
time endogenous shock to the system", then it would be a Levy flight
distribution, over time, and the graph would be a horizontal line.
The empirical data does not show that to be the case.
What the empirical data does show is a fractal dimension that lies
between a random walk, and a Levy flight, about half way.
But, since either random walk or Levy flight is constructed via a
random mechanism, it still does not explain how:
John Conover wrote:
>>
>> How can the paradigms of monetarism and/or Keynesianism be reconciled
>> with something that appears to be produced by a random mechanism?
>>
John
Chasna1
>Sargent and Wallace give a special case where monetary policy does nothing.
>That is when the people have the same information set as the Fed. Yet they
>state this is a special and unlikely case. They show monetary neutrality
>could happen but state that they think it won't.
My understanding is that Sargent and Wallace have unwittingly adopted the
"real-bills" doctrine and therefore are out of the game as far as any questions
regarding the effectiveness of monetary policy is concerned.
Chasna1
>and Schwartz asked have we really learned enough to make monetary policy
>effective. They found that in almost all cases, the Fed had acted wrongly
>when they acted. The argument wasn't that monetary policy can't work. The
>argument was that either we need to study the effects of it more or the Fed
>simply doesn't have the information to make the right decision. We really
>don't which one it is. Therefore it is best not to mess with. Monetary
>policy has effects but it is a stab in the dark. The Fed may do more harm
>than good by acting.
I don't understand why you are lumping Friedman with Schwartz, but Friedman has
adopted the money-growth rule that was propounded before him in the 20's and
30's by Snyder, Warburton, et al.
JOHN J WEATHERBY
> But, since either random walk or Levy flight is constructed via a
> random mechanism, it still does not explain how:
>
To be honest with you I know nothing of your method. But I can tell you that
there is a growing amount of econometric evidence that refutes your claim.
No paper using structural breaks has yet to conclude that GDP follows a
random walk. Test have been done for a variety of countries. They have been
tested for single and multiple breaks. Other test have been done for groups
of countries. The results are quite clear. GDP process are regime-wise
stationary.
JOHN J WEATHERBY
on Federal reserve actions was cowritten with Schwartz. Hence Friedman and
Schwartz. It has been a while since I have the read the paper and the first
textbook descriptions of it though, so my memory could be playing tricks on
me.
Chasna1 <cha...@aol.com> wrote in message
news:19990523144830...@ng-fp1.aol.com...
JOHN J WEATHERBY
paper I refer to. That is "Rational Expectations, the Optimal Monetary
Instrument, and the Optimal Money Supply Rule" JPE April 75. In this they
study monetary policies under an AD Hoc model. They find with rational
expectations and the populace having the same information set as the Fed any
monetary rule is neutral in effect. Again they discount their own finding
becuase it is an Ad Hoc model. Yet do discount rational expectations. I
really don't know anything the two have done past this really. I just know
that this is an important paper in the literature. It was spurred the
Neo-Keynesian responses from people like John Taylor. In these they showed
monetary policy can have effect under RE if rigidities are introduced.
con...@inow.com
Oh, a Levy-Pareto distribution is not the distribution of a random walk.
So, is Contagion regime-wise stationary?
Christian Hallqvist
>"James McCown" <rock...@mindspring.com> wrote:
>> ... Keynes wasn't very interested in monetary policy.
>Amazing! One is taught the most silly ideas if one believes what one
>reads on sci.econ.
>Anyways, is the question between monetarism and "Keynesianism" an
>empirical dispute over the relative sizes of slopes of curves in
>the IS-LM model?
>--
>Robert Vienneau
Maybe a naive question, but my understanding of Keynes is that
his ideas were developed during or right after the effects of the
great depression in the 30's which was at the time of goldstandard.
How is it possible to have a flexible/political monetary policy if the goldstandard
is the monetary policy? My understanding of orthodox 100% pure Keynesianism
is that it has nothing to do with the monetary policy, it is only related
to that the government should in a certain degree save money during
good times and spend the money during bad times and in this way try to
even out the economical cycles.
Christian
mas...@ix.netcom.com
It has been writ:
>
>>> ... Keynes wasn't very interested in monetary policy.
>
>is that it has nothing to do with the monetary policy,
But what Keynes wrote:
"It seems, then, that the *rate of interest on money* plays
a peculiar part in setting a limit to the level of employment,
since it sets a standard to which the marginal efficiency of
a capital-asset must attain if it is to be newly produced."
GT Chapter 17
"There is, however, a second, much more fundamental
inference from our argument which has a bearing on the future
of inequalities of wealth; namely, our theory of the rate of
interest. The justification for a moderately high rate of interest
has been found hitherto in the necessity of providing a sufficient
inducement to save. But we have shown that the extent of
effective saving is necessarily determined by the scale of
investment and that the scale of investment is promoted by
a *low* rate if interest..." GT Concluding Notes p.374
Keynes General Theory as a whole is difficult reading because
Keynes was arguing against a deeply embedded collection
of erroneous economics. It was hard going and is so to
this day. BUT ! Many key paragraphs and the Concluding
Notes are plain English -- readable even by Americans if they
would only do so instead of whining about Keynes.
Mason C
------------------------------------------------
Mason A. Clark mas...@ix.netcom.com
http://www.netcom.com/~masonc
http://www.geocities.com/CapitolHill/3210
Political, Social, Psychological Economics
Ronald Reagan's amazing insight in economics
The Healing Wisdom of Dr.P.P.Quimby (book)
-------------------------------------------------
I am not a Republican
Chasna1
> Keynes was arguing against a deeply embedded collection
> of erroneous economics. It was hard going and is so to
> this day. BUT ! Many key paragraphs and the Concluding
> Notes are plain English -- readable even by Americans if they
> would only do so instead of whining about Keynes.
>
> Mason C
I'm sorry but your God is flawed. Not only did Keynes not understand the
traditional doctrines, but he also did not understand his own theories. The
reason the GT is hard reading is because it is inherently confused and
contradictory throughout.
Many of those who are whinning the loudest are those very Keynesian neophytes
who have tried repeatedly to understand Keynes's GT and have come away
disappointed and confused from the attempt.
Keynes, in my take, was an extremely intelligent, but smug and arrogant man who
in his haste for greatness set back monetary economics a good hundred years.
Chas
mas...@ix.netcom.com
Generalized ad hominem attacks, although common on
the Usenet, are not helpful and do the poster no credit.
I'm sure you have something in mind.
What, specifically, did Keynes teach that "set back monetary economics
a good hundred years"?
mas...@ix.netcom.com
I should have added for the benefit of bystanders that Keynes
was no God and economic theory has continued to develop
beyond his contributions. One of the the best references for
this is:
*Post Keynesian Macroeconomic Theory*
A Foundation for Successful Economic Policies for the
Twenty-first Century by Paul Davidson
Be warned though that Davidson has been hardened by many
a battle and is not always courteous to fools. ( I have some
bruises to show :-)
Mason C
Chasna1
>>traditional doctrines, but he also did not understand his own theories. The
>>reason the GT is hard reading is because it is inherently confused and
>>contradictory throughout.
>>
>>Many of those who are whinning the loudest are those very Keynesian
>neophytes
>>who have tried repeatedly to understand Keynes's GT and have come away
>>disappointed and confused from the attempt.
>>
>>Keynes, in my take, was an extremely intelligent, but smug and arrogant man
>who
>>in his haste for greatness set back monetary economics a good hundred years.
>>
>>Chas
>
> Generalized ad hominem attacks, although common on
> the Usenet, are not helpful and do the poster no credit.
> I'm sure you have something in mind.
>
> What, specifically, did Keynes teach that "set back monetary economics
> a good hundred years"?
>
> Mason C
Let's not play Simon Pure. Keynes's personality has always, always been a part
of the "What Did Keynes Really Mean" industry.
I know a couple of economist who have spent years writing books and articles
for the Keynes industry and his personality has always been a topic of
discussion and controversy. Do you deny this fact?
mas...@ix.netcom.com
>> What, specifically, did Keynes teach that "set back monetary economics
>> a good hundred years"?
>>
>> Mason C
>
>Let's not play Simon Pure. Keynes's personality has always, always been a part
>of the "What Did Keynes Really Mean" industry.
>I know a couple of economist who have spent years writing books and articles
>for the Keynes industry and his personality has always been a topic of
>discussion and controversy. Do you deny this fact?
Not at all. When people don't understand and when their
beliefs are challenged they resort to ad hominem attacks.
It's one of the standard weapons of debate.
Mason
By the way, what, specifically, did Keynes teach that led you to
say that he "set back monetary economics a good hundred years"?
Christian Hallqvist
> It has been writ:
>>
>>>> ... Keynes wasn't very interested in monetary policy.
>>
>> My understanding of orthodox 100% pure Keynesianism
>>is that it has nothing to do with the monetary policy,
> But what Keynes wrote:
> "It seems, then, that the *rate of interest on money* plays
> a peculiar part in setting a limit to the level of employment,
> since it sets a standard to which the marginal efficiency of
> a capital-asset must attain if it is to be newly produced."
> GT Chapter 17
> "There is, however, a second, much more fundamental
> inference from our argument which has a bearing on the future
> of inequalities of wealth; namely, our theory of the rate of
> interest. The justification for a moderately high rate of interest
> has been found hitherto in the necessity of providing a sufficient
> inducement to save. But we have shown that the extent of
> effective saving is necessarily determined by the scale of
> investment and that the scale of investment is promoted by
> a *low* rate if interest..." GT Concluding Notes p.374
These are general observations by Keynes (I even believe that the monetarists
would agree with these observations as well). So logically he was struck by the
attributes of the depression when interest rates were indeed low and yet the economy
did not move for long time. My understanding of the history and Keynes is that
he thought that a faster way out of the depression would be that the government
does some increased spending on public projects (like on infrastructure for instance).
Historically though the goldstandard at that time must have limited the flexibility
of the monetary policy (compared with today) and I don't recall that he in anyway
critized that. On the other hand, I do recall, he recommended that the
government should actively even out the cycles with spending/saving and that is
indeed in line with a monetary policy based on the goldstandard.
Christian
Chasna1
>> a peculiar part in setting a limit to the level of employment,
>> since it sets a standard to which the marginal efficiency of
>> a capital-asset must attain if it is to be newly produced."
>> GT Chapter 17
>
>These are general observations by Keynes (I even believe that the monetarists
>would agree with these observations as well).
>
>Christian
That the "rate" of interest is set by the supply and demand for money or even
that we can speak logically of a demand for money where the incentive for
holding money is the height of a foregone return on an alternative ----hardly.
Chasna1
> beliefs are challenged they resort to ad hominem attacks.
> It's one of the standard weapons of debate.
>
> Mason
This may be tuue in general, but the personality of Keynes is hardly an
untalked of subject matter. In fact, Keynes's arrogance does explain his
dismissive attitude about the established literature of economics and what may
have led him to believe, if, in fact, he really did believe, that he had
corrected it.
>
> By the way, what, specifically, did Keynes teach that led you to
> say that he "set back monetary economics a good hundred years"?
>
I would say almost everthing in his GT and Treatise.
Neil
Look it we have not had a depression since Keynes. It really does work in the real world.
Neil
mas...@ix.netcom.com
The "demand for money" and "the incentive for holding money" are two
quite different things. "Demand" is mostly for investment. "Holding" is
for daily use in trade and a very little for hoarding. Perhaps the role of
banks in creating money is being missed here.
Mason
JOHN J WEATHERBY
answers. I will state again I know little of your method so can not comment
on its merit. What I can say is I know a good bit about mine. It does have
shortcomings. For instance it tells you what the break year is but doesn't
explain why the break might occur. I have read and seen many papers showing
the statistical relevance of this method. It is not shoddy statistics.
Therefore I do stand behind its results. I know little of your method
therefore I can not and will not comment on its merits.
Markku Stenborg ®
wrote:
> : I would say almost everthing in his GT and Treatise.
>
> Look it we have not had a depression since Keynes. It really does work in the real world.
Either that "we" needs to be interpreted quite narrowly or the
definition of depression has changed since 30s.
--
© Markku Stenborg
markku döt stenborg ät finofc döt fi
Markku Stenborg ®
wrote:
[snip]
> The "demand for money" and "the incentive for holding money" are two
> quite different things. "Demand" is mostly for investment. "Holding" is
> for daily use in trade and a very little for hoarding. Perhaps the role of
> banks in creating money is being missed here.
Demand and incentive may be somewhat different things, but in this
context, they should not be "quite different". Demand for money is
essentially = supply of bonds and other (financial) assets. Recall
"demand for money" is your decision to hold part of your wealth in
liquid form, in means of exchange, rather than in interest-bearing
assets.
mas...@ix.netcom.com
>On 26 May 1999 13:29:54 PST, in sci.econ Neil <ne...@pacifier.com>
>wrote:
>
>> : I would say almost everthing in his GT and Treatise.
>>
>> Look it we have not had a depression since Keynes. It really does work in the real world.
>
>Either that "we" needs to be interpreted quite narrowly or the
>definition of depression has changed since 30s.
I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
In any case, not including the Great Depression. So what depression
have "we" (presumably the U.S.) had since Keynes?
Recessions, yes, or do you have a special definition of "depression"?
Since Keynes, since December 1941 (remember it?), we have had a Keynesian
economics. Ask any Congressman -- start with Harry Byrd, he keeps a lot
of West Virginians Keynesian employed :-)
Mason C.
mas...@ix.netcom.com
What about a corporation's "demand for money" which it satisfies
by *selling* "bonds and other (financial) assets" -- or by begging for
money from its favorite banker? Does this demand affect interest rates?
Christian Hallqvist
>> "It seems, then, that the *rate of interest on money* plays
>>> a peculiar part in setting a limit to the level of employment,
>>> since it sets a standard to which the marginal efficiency of
>>> a capital-asset must attain if it is to be newly produced."
>>> GT Chapter 17
>>
>>These are general observations by Keynes (I even believe that the monetarists
>>would agree with these observations as well).
>>
>>Christian
>That the "rate" of interest is set by the supply and demand for money or even
>that we can speak logically of a demand for money where the incentive for
>holding money is the height of a foregone return on an alternative ----hardly.
Do you really mean here that monetarists would not agree to that the rate of
interest is influenced by supply and demand for money?
Besides this, I find that the monetary policy without a goldstandard is very
different compared with the goldstandard times of Keynes. His observations were
done when the monetary policy was influenced by the inflexible goldstandard,
today this is completely different.
Keynes was struck by the unusual combination low interest rates and
depression (this during goldstandard).
Friedmann was struck by the unusal combination recession and high inflation
(this when the goldstandard was over and gone).
And both guys developed their solutions based on their obeservations, but these
observations are from completely different monetary environments and yet I
think both are right when the circumstances are right.
Christian
Christian Hallqvist
>On Thu, 27 May 1999 06:22:43 GMT, real.a...@bottom.of.msg (Markku Stenborg ) wrote:
>>On 26 May 1999 13:29:54 PST, in sci.econ Neil <ne...@pacifier.com>
>>wrote:
>>
>>> : I would say almost everthing in his GT and Treatise.
>>>
>>> Look it we have not had a depression since Keynes. It really does work in the real world.
>>
>>Either that "we" needs to be interpreted quite narrowly or the
>>definition of depression has changed since 30s.
> I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
> In any case, not including the Great Depression. So what depression
> have "we" (presumably the U.S.) had since Keynes?
> Recessions, yes, or do you have a special definition of "depression"?
One (among many different definitions) is three years in a row with negative growth.
I believe this definition is used by Sweden.
Christian
Markku Stenborg ®
wrote:
> On Thu, 27 May 1999 06:22:43 GMT, real.a...@bottom.of.msg (Markku Stenborg ®) wrote:
[snip]
> >> Look it we have not had a depression since Keynes. It really does work in the real world.
> >
> >Either that "we" needs to be interpreted quite narrowly or the
> >definition of depression has changed since 30s.
>
> I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
> In any case, not including the Great Depression. So what depression
> have "we" (presumably the U.S.) had since Keynes?
This presumption is exactly the narrowness I was thinking of.
We in Finland had depression in early 90s, more severe than the Great
One in the US in 30s. This despite the Keynesian macroeconomic policy
(or, at least, lip-service to Keynesian policy).
Even youse guys might have had depressions since. What about New
England or Texas in, umm ..., anyways, since 60s?
> Recessions, yes, or do you have a special definition of "depression"?
Deep recession?
[snip]
Grinch
>On Thu, 27 May 1999 06:22:43 GMT, real.a...@bottom.of.msg (Markku Stenborg Ž) wrote:
>>> Look it we have not had a depression since Keynes. It really does work in the real world.
>>
>>Either that "we" needs to be interpreted quite narrowly or the
>>definition of depression has changed since 30s.
> I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
> In any case, not including the Great Depression. So what depression
> have "we" (presumably the U.S.) had since Keynes?
Yup, there's that interpretation. Parochial Americans.
> Recessions, yes, or do you have a special definition of "depression"?
> Since Keynes, since December 1941 (remember it?), we have had a Keynesian
> economics. Ask any Congressman -- start with Harry Byrd, he keeps a lot
> of West Virginians Keynesian employed :-)
> Mason C.
Of course, that's only granting that the word "Keynesian" today is
thrown around a heck of a lot more liberally than Keynes himself ever
would have used it.
To quote the Palgrave:
"Despite the fact that the economics of deficit finance began
with the Keynesian Revolution, it has been conclusively established by
Kregel (1985) that Keynes himself 'did *not* ever directly recommend
government deficits as a tool of stabilization policy'. Keynes ...
viewed budget deficits with a 'clearly enunciated lack of
enthusiasm'...
But that was merely Keynes himself. The man is long dead, and his
estate failed to file a copyright on his name to permit only
authorized use. So for all the neo- post- ultras- and Congress, it's
"whoopee, anything goes!". (Well, to be fair, maybe not for the
neos-.)
Continuing...
"Strictly speaking, and this was fully recognized by Abba
Lerner, the founder of the Keynesian theory of public finance, its
objective is not output *per se* but 'internal balance'; this is
important because in conditions of full employment ... the doctrine
may indicate that a budget surplus is more appropriate than a
deficit".
Harry Byrd, good Keynesian, 30 years of fighting the good fight to
balance the budget over the business cycle. ;-)
Thant Tessman
mas...@ix.netcom.com wrote to Markku Stenborg:
> I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
> In any case, not including the Great Depression. So what depression
> have "we" (presumably the U.S.) had since Keynes?
>
> Recessions, yes, or do you have a special definition of "depression"?
They used to call them 'panics' but that was too panicky.
Then they called them 'depressions' but that was too depressing.
So now they call them 'recessions.'
-thant
Christian Hallqvist
>mas...@ix.netcom.com wrote:
>>On Thu, 27 May 1999 06:22:43 GMT, real.a...@bottom.of.msg (Markku Stenborg ) wrote:
>>>> Look it we have not had a depression since Keynes. It really does work in the real world.
>>>
>>>Either that "we" needs to be interpreted quite narrowly or the
>>>definition of depression has changed since 30s.
>> I assume "since Keynes" refers to the 1936 GT or to the death of Keynes.
>> In any case, not including the Great Depression. So what depression
>> have "we" (presumably the U.S.) had since Keynes?
>Yup, there's that interpretation. Parochial Americans.
>> Recessions, yes, or do you have a special definition of "depression"?
>> Since Keynes, since December 1941 (remember it?), we have had a Keynesian
>> Mason C.
Agree completely. IF Keynes would have known how his name would
have been used in the general and loose fashion of today, he probably
would have liked a "keynes-copywrite" ;-).
Christian
Chasna1
>monetarists
>>>would agree with these observations as well).
>>>
>>>Christian
>
>>That the "rate" of interest is set by the supply and demand for money or
>even
>>that we can speak logically of a demand for money where the incentive for
>>holding money is the height of a foregone return on an alternative
>----hardly.
>
>Do you really mean here that monetarists would not agree to that the rate of
>interest is influenced by supply and demand for money?
A Keynesian would say the "rate" of interest is determined by the intersection
of the supply and demand for money. A monetarist would not only disagree, but,
in some cases, would say there is in reality no such creature as a demand for
money.
My point above concerns the fact that a demand for a stock, say, goods or
capital, is predicated on some positive reward(incentive), say, utility or
income. In Keynesian theory, the quantity demanded of money to hold is based on
a negative, that is, the reward for holding something else. When the reward for
holding something else go up(down), then the quantity demanded of money to hold
decreases(increases).
The above fact alone, to the minds of many an outstanding economist,
invalidates the Keynesian notion of interest rate determination.
Grinch
>Maybe a naive question, but my understanding of Keynes is that
>his ideas were developed during or right after the effects of the
>great depression in the 30's which was at the time of goldstandard.
>How is it possible to have a flexible/political monetary policy if the goldstandard
>is the monetary policy? My understanding of orthodox 100% pure Keynesianism
>is that it has nothing to do with the monetary policy, it is only related
>to that the government should in a certain degree save money during
>good times and spend the money during bad times and in this way try to
>even out the economical cycles.
>Christian
Not naive at all. Keynes said plenty about monetary policy in his
life, but concerning the gold standard you have a perfectly valid and
significant point that too many miss.
Keynes' discussion of interest rates in the GT was in relation to the
commodity-money gold standard regime that everybody took as the norm
when the book was being composed. There are substantative differences
between the workings of rates in such a regime and the workings of
rates in the fiat money regime that the major economies take as the
norm today.
The Neo-Ks, like Samuelson et. al., keep this in mind, but the post-,
ultra-, pseudo-, self-proclaimed- and political-Ks tend to forget this
quickly (if they ever bothered to learn it).
I think Krugman, a good neo-K, even wrote an article about this at
Slate under the title "Vulgar Keynesianism". ... (taking a moment to
see) ... Yup, there it is, http://web.mit.edu/krugman/www/vulgar.html
A little teaser from which:
"Economics, like all intellectual enterprises, is subject to the
law of diminishing disciples. A great innovator is entitled to some
poetic license. If his ideas are at first somewhat rough, if he
exaggerates the discontinuity between his vision and what came before,
no matter: Polish and perspective can come in due course.
"But inevitably there are those who follow the letter of the
innovator's ideas but misunderstand their spirit, who are more
dogmatic in their radicalism than the orthodox were in their
orthodoxy. And as their ideas spread, they become increasingly
simplistic -- until what eventually becomes part of the public
consciousness, part of what 'everyone knows,' is no more than a crude
caricature of the original.
Such has been the fate of Keynesian economics....."