Keynes the monetarist

Brad De long republishes a great piece of his arguing that Keynes Tract on Monetary Reform was a great monetarist document.  As he concludes:

[F]rom our perspective today–in which the Great Depression is seen as a unique disaster brought on by an unprecedented collapse in financial intermediation and in world trade, rather than as the largest species of the genus of business cycles–it is far from clear that Keynes of 1936 is to be preferred to Keynes of 1924.

Besides, Keynes of 1924 writes better: his prose is clearer, less academic, less formal; his argument is more straightforward, linear, easier to follow; his style is as witty.

If you’ve not read it, go check it out. Friedman was a big admirer of Keynes.

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Bring Back CL's blog
Bring Back CL's blog
14 years ago

it is some twenty years since I read most of Keynes so on an uncertain memory I will agree with both Brad & Nicholas but I did think his piece on the Versailles treaty and effects there of was pretty good too.

Funny enough although the General Theory is his most influential I found it the hardest going

Ingolf
14 years ago

Keynes

James Farrell
James Farrell
14 years ago

Nicholas, I

Ingolf
14 years ago

James, I see the two as inseparable. In managing interest rates, central banks do so for the most part through changes to the monetary base. Put another way, they can manage either short term interest rates or the monetary base, but not both at once. Determining flow on effects to the wider money supply and credit markets is of course another matter entirely.

Having said that, my comment about leaning against the prevailing passions is perhaps more apt when used to describe his views on countercyclical fiscal policy.

James Farrell
James Farrell
14 years ago

If that’s the definition of a monetarist, I wonder who isn’t one. Robert Mugabe?

As for Friedman’s praise quoted above, well, it doesn’t sound that sincere to me. I think he’s buying insurance againts charges of prejudice, which he knows is expensive in his case. But I’ll have a look at the whole article.

Ingolf
14 years ago

Nicholas, price stability as a policy aim certainly beats the hell out of the growth oriented approach of the 1960s and 70s. Nevertheless, its very amiability and seemingly irreproachable reasonableness can at times obscure serious problems.

In its 1998 annual report, the Federal Reserve Bank of Cleveland devoted a lengthy essay to the topic

Ingolf
14 years ago

Amen to that, Nicholas. If ever anything fitted Churchill’s description of Russia, it’s the current international financial architecture.

Ingolf
14 years ago

Interesting article, Nicholas (the first one that is), but not one that I find particularly convincing.

De Long contends that “The Federal Reserve did not push reserves into the banking system during the 1929

Ingolf
14 years ago

It

Ingolf
14 years ago

Most interesting, Nicholas. I think I see a bit more clearly now why we differ. We

Ingolf
14 years ago

You

Ingolf
14 years ago

Nicholas, it’s becoming clear to me that I may not properly understand how you’re using various terms and concepts. For example, what do you really mean by saying it’s absurd to argue there’s no market failure when it comes to macro-markets? Or that the idea that there’s a natural equilibrium in a free monetary system is equally absurd? Nor am I sure I understand how you’re using the term positive feedback. Or, come to think of it, what you really intend to convey with your usage of “lean against the wind”.

These matters seem to be important to you, for reasons that aren’t at all clear to me. As I guess was obvious, I was trying to tiptoe out of the conversation with my last post because it had started to feel a bit too much like a stoush rather than an amusing discussion on a fascinating subject. So, maybe if I better understand your argument — and in particular your use of terminology — we might be able to clarify things and either reach some agreement or happily agree to disagree.

James Farrell
James Farrell
14 years ago

Nicholas, going back to your #12, De Long’s characterisation of a specific school of ‘Keynesian’ thinking is accurate and helful. But he errs in equating this with ‘modern Keynesianism’ in general. ‘New Keynesianism’ is in fact essentially monetarist, by virtue of embracing the third plank in De Long’s menaifesto, namely:

-Business cycle fluctuations in production are best analyzed from a starting point that sees them as fluctuations around the sustainable long-run trend (rather than as declines below some sustainable potential output level).

But if you interpret ‘modern Keynesian’ neutrally as meaning contemporary Keynesians, they certainly don’t all subcribe to that, and needless to say Keynes wouldn’t either.

In any case, the cross fertilization of the last three decades doesn’t have much to do with your original post. What I objected to about that was the suggestion that the Tract on Monetary Reform contains some profound and original insights that Keynes subsequently lost sight of in the GT. It might have been more lucid, but it’s a much less ambitious book, and its adherence to the Quantity Theory framework, while completely understandable (everyone else did it), is a limitation rather than a virtue. I can’t see how anyone could agree with Krugman’s assessment and think otherwise.

As for the discussion with Ingolf, I suggest that one or other of you start a new thread, with as explicit as a statement as possible. This topic does lend itself to arguing at cross purposes.

Ingolf
14 years ago

Nicholas, absolutely no need for an apology. Anyway, we could always just do a swap for mine from #19!

Thanks for the answers. I