May 7, 2013 § Leave a comment
Niall Ferguson has apologized for his offensive suggestion that Keynes’ phrase on being dead in the long run was somehow related to his sexuality or the fact that he was childless. Good for him. Note, however, that in that famous phrase from the Tract on Monetary Reform, from 1923, Keynes was still very much a conventional Marshallian author who thought that full employment would reassert itself, and that the Quantity Theory of Money (QTM) worked pretty well. In fact, it is often said that the Tract was Milton Friedman’s favorite among all of Keynes’ books.
The full quote says:
“But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.”
The point of the quote is that in the long run everything would be fine, since markets do get to full employment, and so, even without intervention, deflation and inflation do its magic, but the process is too long and painful, so it would be more reasonable to act in the short run. This was typical of the Cambridge version of Marginalism, which was very much in favor of government intervention to deal with market imperfections in the short run. This is true of Marshal and Pigou, as well as Robertson, and certainly Keynes, before the General Theory. Note that this does not mean, as most people think, that one should only be concerned with the short run. The point is that action in the short run facilitates the road towards the fully adjusted equilibrium in the long run.
This was still essentially Keynes’ view by 1930, when he published the Treatise on Money, a book that is essentially Wicksellian [so at least he got rid of the QTM in this book], and that suggests that unemployment results from a monetary rate of interest that is too high with respect to the natural rate, in practice as a result from the Gold Standard rules, which Keynes wanted to abandon. [This precedes the modern views that the Gold Standard caused the Depression, by the way, as say defended by Barry Eichengreen]. This was a cyclical crisis that could be solved by reducing the monetary rate of interest, and in the short run employment programs, something Keynes defended in Can Lloyd George Do It?
The point of the General Theory (GT) is that there is no natural rate of interest, meaning that reducing the rate of interest would not bring investment to the full employment level of savings, and that the crisis was caused by lack of demand. The equilibrium between investment and savings was determined by variations in the level of output, and in the long run we are not self adjusted to full employment. Hence, the very logic of the phrase above is debunked by Keynes, when he became Keynesian, so to speak, and got rid of the old modes of thinking. read more
PHOTOGRAPH: Ryan McGinley
January 16, 2013 § Leave a comment
You should know that the hacker, programmer, writer and activist Aaron Swartz has died of suicide at age 26. His body was found in his apartment on Friday. Aaron was one of those preternaturally brilliant, precocious hackers who, at the age of 14, co-developed the Really Simple Syndication or RSS web protocol that is the key component of much of the web’s entire publishing infrastructure…
You should also know that at the time of his death Aaron was being prosecuted by the federal government and threatened with up to 35 years in prison and $1 million in fines for the crime of — and I’m not exaggerating here — downloading too many free articles from the online database of scholarly work JSTOR. Aaron had allegedly used a simple computer script to use MIT’s network to massively download academic articles from the database that he himself had legitimate access to, almost 5 million in all, with the intent, prosecutors alleged, of making them freely available. You should know that despite JSTOR declining to press charges or pursue prosecution, federal prosecutors dropped a staggering 13 count felony indictment on Aaron for his alleged actions.
In a statement about his death Aaron’s family and partner wrote:
“Aaron’s death is not simply a personal tragedy. It is the product of a criminal justice system rife with intimidation and prosecutorial overreach. Decisions made by officials in the Massachusetts U.S. Attorney’s office and at MIT contributed to his death.” read more
STILL: Oshima Nagisa