Friday, October 4, 2013

Keynes: The math is hard

Loosely associated thoughts on Keynes's "General Theory"

1) The General Theory is a landmark work in the science of economics. If you agree with the general conclusions or deny them, you cannot deny the influence of the work. This is the same with Keynes as it is with Hayek or Friedman or Fischer or Marx or Smith. This work, as the others, are part of the cannon. Keynes was wrong in places. He was right in others. Different schools of thought may disagree on which place is which.

2) Part of the power of the work is that it is set up in response to an orthodoxy that is no longer demode. Poor professor Pigou is beat over the rocks for his poor understanding of economic phenomenon. Pigou is a minor figure in history were Keynes not to attack him; instead he has an immortality that is undeniable. The only possible problem here is that Pigou is a straw man, as most contemporary readers will have to rely on Keynes's characterization of Pigou's positions.

3) To get into terms of contemporary financial debate, Keynes was in favor of a financial transition tax, which we would propose as a "Tobin Tax" nowadays. Not that I'm a Keynesian, but within the context of capitalism I tend to agree with the economists aligned with his tradition more than the other side(s).

4) This is a big point, but Keynes acknowledges that the book is intended for professional economists. There is a lot of stuff here that is opaque to the lay reader. S/he might need a class on the topic to walk him/her through the arguments. I know I had to brush off my calculus to get through large sections. It might have better to have been on a white board.

5) However, a lot of the stuff is accessible. Keynes is a good writer. He had to be, considering the group he ran with. He was the square in the hippy house, but a certain style is evident in his writing. Though a large part of the chapters is devoted to the mathematical basis of his argument, he still explains what he is talking about. This comes at the end of the chapters in surprising little nuggets. You can't escape his beautiful metaphors, especially his most famous one about the market, where the function is to find "what average opinion believes average opinion to be".

Posted 3.2.11 at