I think the author of the piece that looks at Keynes vs. Lerner on FF makes a key point: Lerner seemed to look at Keynes' failure to totally embrace and advocate FF as 'timidity' on his part as if Keynes was afraid to take his own ideas to their logical conclusion. However, this was a logical leap of Lerner-and perhaps latter Post Keynesian and MMT types that isn''t necessary.
"Lerner’s position is not a logical corollary of Keynes’s economics of effective demand (as characterized in section 1 above); it is one policy position that can be aligned with Keynes’s theory of activity levels. None of those who assert the logical-corollary thesis state the substantive content of Keynes’s theory, of which functional finance is supposed to be the corollary. The pursuit of full employment in Keynes’s theoretical framework does not entail endorsement of Lerner’s fiscal doctrine. At least this is the case so long as growth of government expenditure to ensure full employment effective demand over time can be reconciled with budget balances that are consistent with stabilizing the public debt to GDP ratio, at some desired level, over some appropriate time horizon."
https://varoufakis.files.wordpress.com/2014/01/ta-on-debt-paper-1.pdf
Logically, speaking you can follow General Theory and not have to next go for FF though it could bd a policy position that aligns with Keynes, it's not a necessary corrolary. I think that part of Keynes' reservation about Lerner was political, he had some doubt that the man in the street would buy into the idea that we could just keep adding to public debt ad nauseum and there's no ill effects.
I can imagine that a lot of MMT types would be impatient and dismissive about such political calculations-in their minds all that matters is if you're right; if you are then it's just a question of public education.
In theory that might seem to be true. Yet, public education often seems to have a very slow learning curve. Everything that Lerner was talking about in 1943 still hasn't been accepted by policymkaers or the public today.
Indeed, it's struck me when I've tried to have discussions with laypeople with no understanding or background in economics how much they nevertheless instinctively believe things like Ricardian Equivalence, etc.
I've spoken with people who couldn't spell RE that will lecture me that of course if you do fiscal stimulus this means their taxes are going to go up. Much of what Keynes said about FF seemed to be on how easy it would be to sell the public on it and conversations like this underscore what he meant.
Remember that Keynes first and foremost was about effecting policy. He as Lord Keynes was uniquely situated to do just that, as he had the ear of Presidents, Prime Ministers, Treasury Secretaries, and Central Banks the world over. As someone who himself had managed to revolutionize men's thought he knew that it's important not to bite off more than you can chew.
So in part his reservations about Lerner may have been pragmatic. As I said in my last post on Keynes and Lerner
http://diaryofarepublicanhater.blogspot.com/2015/02/keynes-vs-abba-lerner-on-pubic-debt.html
by no means is anything I've said here an exhaustive resolution of the matter.
"Lerner’s position is not a logical corollary of Keynes’s economics of effective demand (as characterized in section 1 above); it is one policy position that can be aligned with Keynes’s theory of activity levels. None of those who assert the logical-corollary thesis state the substantive content of Keynes’s theory, of which functional finance is supposed to be the corollary. The pursuit of full employment in Keynes’s theoretical framework does not entail endorsement of Lerner’s fiscal doctrine. At least this is the case so long as growth of government expenditure to ensure full employment effective demand over time can be reconciled with budget balances that are consistent with stabilizing the public debt to GDP ratio, at some desired level, over some appropriate time horizon."
https://varoufakis.files.wordpress.com/2014/01/ta-on-debt-paper-1.pdf
Logically, speaking you can follow General Theory and not have to next go for FF though it could bd a policy position that aligns with Keynes, it's not a necessary corrolary. I think that part of Keynes' reservation about Lerner was political, he had some doubt that the man in the street would buy into the idea that we could just keep adding to public debt ad nauseum and there's no ill effects.
I can imagine that a lot of MMT types would be impatient and dismissive about such political calculations-in their minds all that matters is if you're right; if you are then it's just a question of public education.
In theory that might seem to be true. Yet, public education often seems to have a very slow learning curve. Everything that Lerner was talking about in 1943 still hasn't been accepted by policymkaers or the public today.
Indeed, it's struck me when I've tried to have discussions with laypeople with no understanding or background in economics how much they nevertheless instinctively believe things like Ricardian Equivalence, etc.
I've spoken with people who couldn't spell RE that will lecture me that of course if you do fiscal stimulus this means their taxes are going to go up. Much of what Keynes said about FF seemed to be on how easy it would be to sell the public on it and conversations like this underscore what he meant.
Remember that Keynes first and foremost was about effecting policy. He as Lord Keynes was uniquely situated to do just that, as he had the ear of Presidents, Prime Ministers, Treasury Secretaries, and Central Banks the world over. As someone who himself had managed to revolutionize men's thought he knew that it's important not to bite off more than you can chew.
So in part his reservations about Lerner may have been pragmatic. As I said in my last post on Keynes and Lerner
http://diaryofarepublicanhater.blogspot.com/2015/02/keynes-vs-abba-lerner-on-pubic-debt.html
by no means is anything I've said here an exhaustive resolution of the matter.
“I think that part of Keynes' reservation about Lerner was political, he had some doubt that the man in the street would buy into the idea….” I quite agree!
ReplyDelete“Everything that Lerner was talking about in 1943 still hasn't been accepted by policymkaers or the public today.” Too right!
Ralph are you related to Richard Abel Musgrave?
ReplyDelete