Friday, September 18, 2009

The return of John Maynard Keynes

We are all in the same boat these days--either coping with reduced income or dreading the prospect of same. My income has dwindled somewhat, but the change is bearable, at least so far. Yet I am starting to get worried by the way the euro is trouncing the dollar.

In these days of uncertainty, there has been much casting about for a new (or old) orientation in the realm of economic theory. That is understandable. A feature of this quest is a certain revival of the ideas of Lord Keynes. I must aver that this development makes me a bit nervous, as Keynes has been drafted into service as an excuse for a number of dubious economic policies in the past.

Reduced to a bumper sticker--or very near--Keynes’ economic theory amounts to a reprise of the counsel Joseph gave to Pharaoh in the Hebrew Bible. Stock up during the fat years, and then generously dole out the surplus during the lean years. Too often, it seems to me, modern planners have adhered only to the second part. There has been hardly any stockpiling during the lean years.

James M. Buchanan, an economist critical of Keynes, has observed that the Keynesian doctrine of deficit spending provided the academic excuse for elected representatives to spend without taxing, thus removing the self-imposed discipline of balanced budgets that had existed prior to the adoption of Keynesian thinking. "The legacy or heritage of Lord Keynes is the putative intellectual legitimacy provided to the natural and predictable political biases toward deficit spending, inflation, and the growth of government."

Buchanan suggests that Keynesianism might perhaps work under a system of benevolent dictatorship, but not in a democratic setting with citizens who are both taxpayers and beneficiaries of public services, while living in the orbit of professional politicians, political parties, and government bureaucracy. "Political decisions in the United States are made by elected politicians, who respond to the desires of voters and the ensconced bureaucracy. There is no center of power where an enlightened few can effectively isolate themselves from constituency pressures.”

Defenders of Keynes have argued that these damaging conclusions are a distortion of what Keynes actually wrote. Maybe so, but that is the way his legacy has operated in recent decades.

Still, John Maynard Keynes is an interesting--indeed representative--personality in many ways. His formation occurred in the palmy days of Edwardian England. Keynes became a member of the Bloomsbury group, gay branch, along with E.M. Forster, Lytton Strachey, and the painter Duncan Grant.

As far as I can see, all relevant aspects of Keynes’ career are covered in Robert Skidelsky’s masterly, indeed sumptuous biography in three volumes. In 1983, after reading the first volume (which offers full coverage of the economist’s gay period), I could scarcely wait for the second and third installments (1992, 2000). They did not disappoint--except of course for an aspect beyond Lord Skidelsky’s control: Keynes heterosexualized himself by marrying a Russian ballerina. We all have friends who seem to be totally gay (and maybe still are), but who marry and have children. Mr. and Mrs. Keynes did not have children though--hence the jibe that his economic theory took no thought for future generations.

Now Lord Skidelsky has revisited the subject with a new book: “Keynes: The Return of the Master. “ It seems that this short work does not recap the three-volume magnus opus; the writer did that earlier. On this occasion, the author tries to imagine what Keynes would want now. Somehow, I’d rather not.

Lord Skidelsky is an interesting figure in his own right. According to the biography on his website, Robert Skidelsky was born on April 25,1939 in Harbin, Manchuria. His parents were British subjects, but of Russian ancestry. His father worked for the family firm, L. S. Skidelsky, which had leased the Mulin coalmine from the government. When war broke out between Britain and Japan in December 1941, he and his parents were interned first in Manchuria then Japan, but released in exchange for Japanese internees in England A few years ago, when Skidelsky returned to Harbin for a conference, he was acclaimed by his Chinese hosts for helping to restore the city’s Jewish heritage. This struck the honoree as a bit much, as his family was only partly Jewish and he had been raised an Anglican,

Skidelsky was educated at Brighton College and at Jesus College, Oxford.

In 1970, he became an Associate Professor at the School of Advanced International Studies, John Hopkins University. But the controversy surrounding the publication of his biography of Sir Oswald Mosley --in which he was felt to have let Mosley, the British fascist, off too lightly--led John Hopkins University to refuse him tenure. Oxford University also proved unwilling to give him a permanent post. These rejections were their loss.

In 1978 Skidelsky was appointed Professor of International Studies at the University of Warwick, where he has since remained, though joining the Economics Department as Professor of Political Economy in 1990.
During the 1980s he began to take a more active interest in politics. He was a founder member of the Social Democratic Party (SDP) and remained in the party until its dissolution in 1992. In 1991 he was made a life peer: Lord Skidelsky. Initially, he took the SDP whip but subsequently joined the Conservatives. In 2001, he left the Conservative Party for the cross benches. His political affiliations show a flexibility and attention to circumstances which I find admirable.
Today Lord Skidelsky is Emeritus Professor of Political Economy at the University of Warwick, I recommend his website,, which is both well written and informative on a number of subjects of current interest.



Anonymous Anonymous said...

I have little respect for James Buchanan. In his Collected Words (by Liberty Press), he argues no good reason to vote exists. Spending money makes more sense than our political choices. (See, Individual Choice in Voting and the Market, Vol 1 of 19).

If one's entire perspective is money, then Buchanan is the proto-plutocrat. This myopic focus could only be by someone who lacks "a complete focus."

I suppose, by Buchanan's standards, the limited choices offered by monopolies justifies "choice" between monopolies, but politicians take (hopefully) more into their monetary choices into global focus than their next meal ticket. Buchanan's analysis strikes me as no less absurd than Princeton's Paul Krugman. I would not cite either as an "authority."

In defense of Keynes, who SAVED capitalism from itself, he advocated the use of deficit spending ONLY during periods of economic contraction, until capital expansion could repay the deficits. Both parties think "economic contraction" is perennial. Keynes did not. The "rainy day" theory, which I admit is an alternative, simply takes "money" out of the system, and that is precisely what caused the Great Depression.

7:49 PM  
Blogger Dyneslines said...

An ad hominem attack on James Buchanan is not helpful. Instead one has to address the particular argument.

This morning I find that it has been endorsed by a conservative of a rare breed: someone who really does support fiscal responsibility: Bruce Bartlett:

"Every time I write about the need to raise revenues to pay for federal spending, some nitwit always demands to know why we don't just cut spending. That is not a viable option to deal with our fiscal problem.

"The first point that people need to understand is that we live in a democracy. We don't have a dictator who can just wave his hand and abolish government programs. We have a president who may propose spending cuts, but before they take effect he must get agreement from both the House of Representatives and Senate, both of which may be controlled by a different party. Congress' efforts to cut spending on its own are futile without prior agreement from the president to support them, as Republicans found out the hard way in 1995."


7:32 AM  

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