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Re: Keynes, Hayek & Krugman


Noah Millman sets me straight on Keynesianism:

Japan has been mired in a deflationary depression for 10 years, and has been priming the pump furiously, to no obvious effect.

The Keynesian National Recovery Act and other New Deal legislation did little or nothing to end the Great Depression, and may have prolonged it. What the WPA and the like did accomplish was charitable (it put people to work and thereby kept them from hunger) and psychological (it told people someone was doing something for them, and thereby kept political stability). But the New Deal did not bring economic recovery. What finally brought about a solid and sustained economic recovery in the 1950s was the revival of global trade after WWII.

If you buy into the basic assumptions of monetarist and/or supply-side economics, you can’t also buy into Keynesian economics. They are mutually exclusive. Monetarists believe that inflation and deflation are purely monetary phenomena. Supply-siders think what drives growth in the long term is the marginal return on invested capital. Keynesians think that what drives both inflation and growth is “aggregate demand” which they think the government can manipulate through deficit spending and/or running a surplus. If growth is low and inflation low, a Keynesian would say that government should spend more to increase aggregate demand. A supply-sider would say that this will actually decrease growth because the increased spending will require raises in taxes or in borrowing (which implies hikes in future taxes, which would be discounted back to the present by the market), which in turn would reduce the marginal return on invested capital. And further, a supply-sider would say, this deficit spending would increase inflation because, by reducing returns on investment, it would encourage consumption over investment. With an uptick in inflation and a drop in real growth, you could get a rise in nominal growth, which would look like a recovery to debtors and other folks at the bottom of the economic barrel, but for the economy as a whole you’d have a net loss.

Of course, you can also not buy into ANY economic theory, and simply conclude that economics is a branch of psychology, and therefore whatever works works. This was basically the Clinton/Rubin economic stance: don’t worry about the theory, just do what the markets seem to want and all will be well. That works fine until the market decides that you really have figured out how to ensure permanent low-inflation growth, at which point you’ll have a speculative blow-off and a deflationary crash. Which is what just happened to us. This is the Austrian “malinvestment” thesis of where depressions come from–the market periodically “overinvests” after which there’s a deflationary recession to work off the excess capacity thus created – and the standard critique from economists is that it isn’t an economic theory (why should the market “overinvest” sometimes but not other times?) but a psychological one. Which is true. But that doesn’t disprove the theory.

Got Another!


Kathryn, If you were keeping this drive going until you got me to sign up,
then it worked. As a university professor who is late on a book deadline,
but can’t bear the thought of not reading every word on NRO and in the
Corner, you think I’d exhibit better judgement than adding to my required
reading. I hope you’re proud of yourself. Rich Erickson

And what about you now? And all those subscriptions you were going to buy….? The money you were going to give?


Dress Over His Head


Yes, it’s a metaphor. This has been my term of choice for people — like Krugman — who get hysterical about stuff they imagine to be a big deal rather than stuff that is actually a big deal. In fact, whenever my daughter is in her crib and pulls the bottom of her outfit over her head, my wife and I say “she’s pulling a Krugman.”

Web Briefing: July 22, 2014

I’m An Idiot


Shows you how dumb I am to post pre-dog walk and pre-coffee. Keynes wrote the “The General Theory of Employment, Interest and Money,” not Hayek. Sorry, don’t know what I was thinking.


Re: Hayek, Keynes, Etc.


Jonah: I don’t think there is enough disagreement here–or in my case,
knowledge–to justify taking this thread any further. You did stop me
dead, though, with that metaphor about Krugman having “his dress over his
head.” It is a metaphor, isn’t it? And how do I get rid of the mental
image it conjures up? I have tried whanging my head against the door jamb,
but that doesn’t work.

Hayek, Keynes Etc


Derb — Yes, I agree. In the race to discuss the gay angle I think both of us cut some corners. I agree that Keynesianism isn’t as awful as conservatives (including myself in those posts) sometimes make it sound. And, I should have been more clear about Hayek. The Road to Serfdom wasn’t an explicitly anti-Keynesian treatise. But, Keynes and Hayek were legendary mortal intellectual enemies in 1930s Britain (though they were quite friendly socially). It was Hayek’s “The General Theory of Employment, Interest and Money,” written in 1936 which was the real — and winning — anti-Keynesian broadside, not the Road to Serfdom. My point about the RtS was that it was a foundational book of the modern right and its author was opposed to Keynes for reasons which have absolutely nothing to do with who could quote Oscar Wilde verbatim. Indeed, all of this underscores the point that Krugman, once again, has his dress over his head about a completely made-up issue.

UPDATE: See post above: “I’M AN IDIOT”

The Next Judicial Stonewall?


Brett Kavanaugh, an ex-Starr aide, is reportedly the White House choice for a D.C. Appeals Court seat. You can hear the Schumer, Feingold, Leahy, and Feinstein aides preparing their ridiculous questions now. Did you vote for President Clinton? Have you ever attended lunches at the Heritage Foundation? Do you hum hymns? Did you sing along when Ken Starr did? Are you a card-carrying member of the Vast-Right Wing Conspiracy? Are you sorry for what you did to Bill and Hillary Clinton? Do you know you kept them from the business of the people? Do you listen to talk radio? Do you watch the Fox News Channel?

Shut Up, Already, Kathryn!


Have you subscribed? Have you subscribed as a gift for someone? A college kid? An upcoming birthday? A donation to your local NR-less library? And, if you you have purchased all the subscriptions you can think to give–a treat for yourself or others–how about a straight investment in NRO’s future? [Joanh's Couch: T-H-E-R-A-P-Y, Kathryn. And why the heck am I 380-percent funnier when Jonah is at the keyboard. Huh? Huh? Go away. They're subscribing and they're donating--but it is because I told them to, not you. You're just annoying.]

Guilt Free!


A reader commits to NRODT! He has a few, ahem, requests though. I’ll take them under advisement. (Derb–don’t get too excited.)


Haven’t checked the Corner for a few days, and just got done reading three days worth of blegging. Then, to top it off, I read Jonah’s opening day bleg, and am still wiping away the tears.

As an NRO freeloader for the past year, founder of the Flying Monkeys chapter at work, and a Corner addict, I am proud to say that I can add to the list NRODT-subscriber . I have a few demands, however:

1) The institution of an intermittent “culture column” by Jonah’s couch.

2) A 1:1 posting parity of Star Trek blurbs for every mention of the NY Yankees in the Corner.

3) The diversion of some fraction of my subscription fee towards an “on location” series of columns on beach erosion in the Bahamas by the Derb. I’m sure that he can come up with an appropriate equation to determine his cut…

Brad Sweet
Washington, DC

Do like he did and we might consider the Couch thing. Maybe.

Miche Mouse


An NR subscription is a great gift idea for your left-wing friends. But if you’ve already bought them one, check out these items blending Mickey Mouse and Che Guevara.

Gay Marriage Again


I’m off to my congressional hearing on Title VI. In the meantime, here’s a response to Andrew Sullivan’s latest comments on gay marriage. Andrew Sullivan continues to miss or ignore my point about lesbian marriage, which is at least as likely to disrupt monogamous norms as is gay marriage-–but here, through the eventual legalization of three parent families, leading to legalized polyamory. And as I argued in “Code of Honor,” the effect of even relatively small numbers of people who deny the very premises of a collective “honor code” can be disproportionately great. This is particularly true if the media focuses on and magnifies, as it will, the “cutting edge” forms of open marriage being pioneered by the new homosexual couples. It is also particularly true if a substantial portion of homosexual couples themselves want to transform marriage, which they do. It’s also important to note that many gay couples who do not buy into traditional monogamy may well marry anyway, for the benefits. But all these effects together, and you get a powerful engine of change. And that’s not even taking into account the tendency of a precedent for redefining marriage to bring about legalized polyamory, which already has a large constituency waiting to argue for legalized group marriage based on the same-sex marriage example. But I’ll have much more on all this after Massachusetts.

Limbaugh On Levin


Rush Limbaugh, writing in the Wall Street Journal today doesn’t let Senate Democrat Carl Levin get away with calling the President a liar on WMDs. Rush asks, “What did Carl Levin know in 1998 that he doesn’t know now?”
Rush writes:

The problem with Mr. Levin pointing a finger of accusation at the Bush administration is that he’s also pointing three fingers at himself. You see, Mr. Levin also serves on the Senate Armed Services Committee, and has for some time. Presumably, he knows something about Iraq’s weapons programs. So, when he repeatedly insisted that Iraq possessed weapons of mass destruction, was he “shading intelligence information” or did he “exaggerate or overstate . . . intelligence information?”

Rush’s piece is here. I think that is a subscriber-only link, subscribe to National Review and pick up the WSJ on the newsstand today.



Those donations are still coming in–keep ‘em up. We’re almost done for now. Andyou might want to keep on with those Dead Tree subscriptions. I’ll be able to report in a few hours where we are in reference to the lucky 1,000th.

Michael Moore


Many Europeans are far too enamored of that self-satisfied millionaire, Michael Moore, self-appointed scourge of the rich and, it seems, the truth. This piece from the London Times provides a useful antidote.

The Middle of The Night...


…is no excuse not to subscribe.
[Jonah's Couch: You're sick. Go away. Go to sleep. Shut up. Now, people--SUBSCRIBE already.]

From a Reader Who Feels The Same Way I Do About Philosophy


Derb: The G-File’s first paragraph reminds me of a joke I think you’d
appreciate. A college dean with budget problems is talking to the head of
the physics department. “You always want this expensive lab equipment,” he
complains. “Why can’t you be more like the math department? They just
request pens, paper, and waste-paper baskets. Better yet, the philosophy
department — they just request pens and paper.”

Why I Am So Darned Annoying


Because when I try to stop, I see e-mails like this one:

Well, I finally did it: subscribed to NRODT. I actually intended to just make a donation to NRO but never found the right link. Thanks for all the wonderful work you guys do.

Don’t get lost. Right here, right now. And, thanks.

Re: High-Larious


Jonah: What I know about economics, you could write out longhand on one of
Milton Friedman’s pinkie nails, but I’m not sure that Keynesianism is
fundamentally wrong-headed. It is only that it is of limited application;
and that, once adopted, it entrenches itself, for psychological and
political reasons, and overstays its welcome. In the catastrophically
deflationary circumstances of the 1930s, Keynesianism was a pretty good
idea. At any rate, nobody seems to have had a better one…. I *did* read
Roads to Serfdom 20+ yrs ago, and as I recall the thing that got Hayek
frothing was not so much Keynesianism per se as PLANNING. Which is not the
same thing.

The 1,000th Subscriber...


…will be glad he is…it could be you–subscribe now…

Re: Keynes


Derb – I hear you. In fact, Ramesh tells me that The Economist was fond of making much the same point for quite a while (that is, people without kids wouldn’t define the “long run” as terminating with their own funeral). But, surely the long-standing, empirically-tested, deep and profound rightwing objection to Keynesian economics would endure even if Keynes were not gay. After all the modern American conservative movement was arguably launched by the publication of Hayek’s “The Road to Serfdom.” And, I’m pretty sure Hayek’s famous objections to Keynesianism weren’t based on the fact that they could replace one of the Village People with a Keynes impersonator. The fact that Keynes was gay might be relevant as to why he held the views he did. But they have nothing to do with why free-market conservatives think he was wrong. I mean, are homosexual conservatives slightly more sympathetic to priming the pump than non homosexual conservatives? Okay, that might sound like a bad choice of words, but you get my drift.


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