June 19, 2015

Flight of ideas and the dead end of all econtalk

Comment on ‘Anti-Keynesianism — in most cases a sign of ignorance’

Blog-Reference

The two-hats Keynes
There are two public Keynes'es: the practical politician and the theoretical economist. The first trouble is that the two are constantly confused. Wren-Lewis's post is a case in point.* The theoretical question whether Keynes's employment theory is right/wrong is immediately confuted with the question of whether state intervention is good/bad. This guarantees that the discussion ends up in some parallel universe.

Second things first
To put political questions first is the bane of economics. It is pretty clear that, when the employment theory is false (Classicals) or incomplete (Keynes) then the whole discussion of how to fix unemployment is vacuous.

What action?
Keynes, the theoretical economist, clearly said what the appropriate action was: “Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required to-day in economics. We need to throw over the second postulate of the classical doctrine and to work out the behaviour of a system in which involuntary unemployment in the strict sense is possible.” (See intro)

No pre-emptive labeling
Keynes started to “work out the behaviour of a system in which involuntary unemployment in the strict sense is possible” but it is fair to say that the General Theory is not in all respects satisfactory. To criticize it is, first of all, neither a sign of Anti-Keynesianism nor of ignorance (2015).

Scientific correctness
“Accordingly, scientists, in their critical discussions, do not attack the arguments which might be used to establish, or even to support, the theory under examination. They attack the theory itself, qua solution of the problem it tries to solve.” (Popper, 1994, p. 159)

Flight of ideas
Due to the complete lack of scientific focus the discussion about employment drowned in word play about voluntary/involuntary unemployment and unemployment equilibrium.

Post Keynesianism
The main task of Post Keynesianism is not to defend Keynes against critique or to get mired in Keynes-exegesis but to develop a theory of employment that shows clear signs of material and formal consistency.

The dead end of all econtalk
“I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews. Whose evidence is better? I’m not sure it’s a meaningful question. My empirical points about Keynesianism won’t convince Krugman. His point don’t convince me. I am not saying that we will never get any kind of decisive evidence on the question. I’m saying it sure isn’t here now.” (Roberts, 2011)

As they always say in Cafe Hayek: It's much too complex and nobody can do anything.

Egmont Kakarot-Handtke


References
Kakarot-Handtke, E. (2015). Essentials of Constructive Heterodoxy: Employment. SSRN Working Paper Series, 2576867: 1–11. URL
Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Models, Instruments, and Truth, pages 154–184. London, New York, NY: Routledge.
Roberts, R. (2011). The evidence for Keynesian economics. Blog-post. URL

* See my comment on the discussion or here