Krugman, What Keynes Really Mean, and is Economics a Science?

    The question just came to me again as I read Krugman here.

     "Lars Syll approvingly quotes Hyman Minsky denouncing IS-LM analysis as an “obfuscation” of Keynes; Brad DeLong disagrees. As you might guess, so do I."

      "There are really two questions here. The less important is whether something like IS-LM — a static, equilibrium analysis of output and employment that takes expectations and financial conditions as given — does violence to the spirit of Keynes. Why isn’t this all that important? Because Keynes was a smart guy, not a prophet. The General Theory is interesting and inspiring, but not holy writ."

     http://krugman.blogs.nytimes.com/2014/09/11/their-own-imaginary-keynes-wonkish/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

     Without even starting to take sides between Krugman, Delong on one side and Syll on the other let me just say that no matter how many times Krugman mocks the idea of caring what 'Keynes really meant' I never get why asking what he meant is so self evidently absurd as he, and Delong. and Wren-Lewis, and Noah Smith or Katrik Athreya think it is. 

     As I've chronicled I've tried reading some econ textbooks and in fact am currently reading the one Krugman wrote with his wife Robin Weil, but haven't yet come to the chapter that explains why this is so absurd. Yet there must be some NK textobook somewhere that explains it as all NKers repeat this mantra. 

     http://diaryofarepublicanhater.blogspot.com/2014/05/katrik-athreya-modern-macroeconomics.html

       This is why I wonder if Econ is really a science. You never hear physicists sniffing about 'What Einstein really meant' or "What Newton really meant.'

     At least Krugman-unlike Athreya, to say nothing of Mankiw-doesn't disparage Keynes and GT. He even claims to have read the book. From what Athreya says, the problem with Keynes is that what he does is not what he and his fellow 'modern maccroeconomists' mean by 'macroeconomics'-Keynes writes in 'prose' so it's not a true work of macroeconomics-some argue that Hicks is the first macroeconomist in this vein. 

      In other words, because Keynes uses plain English, his work is just interesting 'literature' much like the work of Proust or Doestevesky. You may like it or not like it but it has little bearing on economics. Again, Krugman in this post actually treats Keynes a little more respectfully but the picture I've drawn here is the typical attitude as represented by Athreya, et. al. 

       In fact, Krugman does go on to defend Keynes-and by extension IS-LM-from a very common criticism of what folks like Stephen Williamson christen 'Modern Macro'-which basically means post-Lucas Macro-that Keynes and then IS-LM use a static equilibrium model. 

         "It’s also a protean work that contains a lot of different ideas, not necessarily consistent with each other. Still, when I read Minsky putting into Keynes’s mouth the claim that"

Only a theory that was explicitly cyclical and overtly financial was capable of being useful

      "I have to wonder whether he really read the book! As I read the General Theory — and I’ve read it carefully — one of Keynes’s central insights was precisely that you wanted to step back from thinking about the business cycle. Previous thinkers had focused all their energy on trying to explain booms and busts; Keynes argued that the real thing that needed explanation was the way the economy seemed to spend prolonged periods in a state of underemployment:

[I]t is an outstanding characteristic of the economic system in which we live that, whilst it is subject to severe fluctuations in respect of output and employment, it is not violently unstable. Indeed it seems capable of remaining in a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.

     "So Keynes started with a, yes, equilibrium model of a depressed economy. He then went on to offer thoughts about how changes in animal spirits could alter this equilibrium; but he waited until Chapter 22 (!) to sketch out a story about the business cycle, and made it clear that this was not the centerpiece of his theory. Yes, I know that he later wrote an article claiming that it was all about the instability of expectations, but the book is what changed economics, and that’s not what it says.

The point is that Keynes very much made use of the method of temporary equilibrium — interpreting the state of the economy in the short run as if it were a static equilibrium with a lot of stuff taken provisionally as given — as a way to clarify thought. And the larger point is that he was right to do this."

      So Krugman does defend GT and if he says he read it I believe it but that distinguishes him to most NKers I would guess. 

       UPDATE: Krugman also deserves credit for admitting that the GT changed economics-not only do Keynes bashers, but also many alleged 'New Keynesians' damn GT for 'saying nothing new'-I think Hayek begun the line of saying what he was right about had already been said and what hadn't been said was all wet.      

        As Keynes himself had said 'first they say you're all wrong then they say you've said nothing new.'