Friday, May 30, 2014

Chick & Tily on whatever happened to Keynes’s monetary theory?

New Cambridge Journal of Eeconomics paper by Victoria Chick and Geoff Tily.

From the abstract:
Some see a return to Keynes’s ideas in response to the crisis that began in 2007, but we argue that the resurrected ideas belong to that betrayal of Keynes’s thought known as ‘Keynesian’ economics. What happened is almost a reversal of the Whig history view of economics, in which past knowledge is embodied in later theory: Keynes has been made a pre-Keynesian. We trace this transformation mainly through his monetary theory, though we range more widely where necessary. We state what we consider to be his monetary theory, then identify and summarize the key contributions to its destruction. Then, in a speculative section, we suggest a variety of motivations for this subversion of his ideas. We end by assessing what has been lost, in particular his monetary policy, and suggest social and political pressures that may have been partly responsible.
Read the rest here (subscription required).

2 comments:

  1. I can see every page in this article (p. 681–699). Jealous?

    (Sticks tongue out)

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  2. Re Keynes’s monetary theory, in a letter to Roosevelt in the 1930s, Keynes said that to get out of recession, the government should BORROW OR PRINT money and spend it. As to the printing option, that of course contains a monetary element. So why did Keynes keep relatively quiet about the print option and stress the borrow option?

    My guess is that he knew he was surrounded by idiots who start chanting “inflation” every time the words “money” and “print” appear in the same sentence. The same idiots are still with us today: they predicted that QE would bring hyperinflation, which of course it hasn’t.

    Re the above “borrow or print” point, see 5th para of K’s letter to R here:

    http://www.scribd.com/doc/33886843/Keynes-NYT-Dec-31-1933

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