Heilbroner and Keynes
"Heilbroner describes the development of thinkers and the formation of their ideas in their social and intellectual context -- and explores the ways in which they and their ideas in turn influenced the policies of elites and broader social and cultural trends. Adam Smith sought to address the problems of mercantilism, Karl Marx the dislocations of the industrial revolution, Keynes, the problems of deflationary economic policy."
Please reply to this seed with your posts on the reading.
posted by SlickRicks @ 4:52 PM
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2 Comments:
While reading Keynes’ works, I could not help but think to myself that a lot of Keynes’ arguments seemed almost self-evident, bordering on tautology, and that the other economists of his day, which he cites on numerous occasions, must have been fools to disagree with the proposed fiscal policy. However, it also occurred to me that Keynes’ arguments seemed much more politically vindictive than economically revolutionary; he seemed more motivated by the fact that the conservative government had poorly managed the economy than he seemed to be treading new ground in economic thought. Like Heilbroner’s interpretation of Marx, Keynes’ discontent towards the status quo may have formed his opinion, and his theory developed after the fact.
It seems to me that Keynes may not have been as honest with himself or his opponents as one might hope for. For one thing, the classical school of thought Keynes rejects is not exactly the best theory of economics ever proposed, and the system Keynes proposes as an alternative undermines some basic understandings of market operation. For example, in Keynes’ world, one must simultaneously believe that demand is primary to production (which does not correspond well with the idea of unplanned and planned investment), while ignoring the instructiveness or possibility of ever reaching a “long run.” Also, it seems unlikely that a country’s economy could be at an equilibrium far lower than full employment if so many of the workers were unemployed. Such an attitude disregards the possibility of entrepreneurship or innovation, and is probably dangerous if the recommended government spending results in a type of inflationary “crutch” for the country to claim full employment and equilibrium. By creating disincentives (in this case government spending) for people to create new businesses, government expenditures may do more harm than good for the long term health of a country. But, I suppose, Keynes already assumes that in the long run, we were all dead.
Additionally, Keynes’ theory seems to be debunked today by economic thought that purports the efficiency of a free market that is not crowded out or impeded by government spending. As J.S. Mill points out, distribution is entirely distinct from production; governments may and do interfere with economic realities as often as they like. In Keynes’ case, such interference may be for the better, but that does not mean that his recommendations conform to some form of “natural economic law.”
So here goes an attempt at directing the Ricardo and Keynes readings towards free trade even though the readings seemed to only discuss it in passing. I found that there was the possibility for an interesting comparison between Ricardo’s landed elite and Keynes’ bankers. Both groups collected rents on the prominent form of capital in their day; the aristocracy on their agricultural land and the banks on currency. In both situations, the groups are at least partially responsible for the negatives society faces. Nevertheless, one should remember that land owners caused negatives in optimal distribution plans while banks were causing problems by supplying “an unsatisfactory market for capital investment.” This highlights the fact that one must not carry the comparison too far. Keynes obviously holds more respect for the banks as an important institution for the future than Ricardo did of the landed elite.
A further similarity between the two groups’ negative impacts can be discovered when one looks at trade policy. By obstructing free trade, whether of capital investment or of agricultural products, the landed aristocracy of the 1820s and the banks of the 1920s further increased the plight of the people around them. Both Ricardo and Keynes recognized that for the improvement of the human condition, barriers against trade needed to be dropped. Conservative measures designed to protect banks from risk prevented the positive use of capital in a time when capital investment was desperately needed. Aristocratic opposition to cheap food imports unfairly squeezed the pockets of those who were actually working for the system.
A final observation should be made. While trade liberalization aided Ricardo’s bogeyman, the landowner, as well as Keynes’ foe, the conservative banker, it has become the benefactor of the modern capitalist. It seems that in some ways “trade liberalization” (the oh-so derided foe of much of the third world) has been changed to offer capital holders in the 21st century more new renters than competitors. This has the great benefit of helping to prevent some of the problems Keynes and Ricardo noted when powerful capital holders oppose free trade. The question still remains, however, about whether the gain by those who merely hold capital without contributing management or labor is the socially optimal distribution.
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