Oct 05, 2011 12:18 AM GMT
http://www.newyorker.com/online/blogs/johncassidy/2011/10/what-would-keynes-say-now.htmlKeynes wrote a lot, and over the years his views changed quite substantially. If you search his writings, you can find a quote here or there to back up all sorts of things, including even supply-side economics. (Thanks to Dr. Arthur Laffer for pointing out that one.) But the real essence of Keynes, I eventually decided, can be expressed in these terms:
1. In the short-run, demand is what drives economies, not prices.
2. In a demand-driven economy, many types of unfavorable and self-sustaining outcomes are possible, including lengthy slumps.
3. The role of the government is to sustain demand and help the economy avoid such disastrous outcomes.
There’s much more about this is in the piece, together with some speculations about what Keynes would be recommending now. Obviously (at least I think it’s obvious) he would be defending the Obama stimulus and arguing for more of the same. But I think he would also be consumed by the international situation, particularly the European debt crisis. After his experience at the Paris peace talks after the First World War, where he saw the victors impose onerous debts on the Germans and Austrians with disastrous consequences, he would surely be pushing for a restructuring of Greek debt, and probably something similar for Ireland and Portugal, too.
Finally, and I didn’t put this in the piece, I think Keynes would be sympathetic towards the anti-Wall Street protestors who are camping out in downtown Manhattan. Somewhat like George Soros, Keynes was an ardent and skilled speculator in the markets who, nonetheless, had few illusions about the social utility of various fashionable forms of finance. “Speculators may do no harms as bubbles on a steady stream of enterprise,” he wrote. “But the position is serious when enterprise becomes a bubble on the whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, it is likely to be ill-done.”
The piece he's referring to is a "longish essay" on Keynes: