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Buchanan on Keynes as an "artist" (seemed somewhat appropriate):

Keynes was the consummate artist, and his macroeconomic abstractions were comparable in boldness with those of his painter, poet, and composer peers in the world of high culture that he inhabited. Because his acknowledged purpose is to change perception rather than to explain, the artist must acknowledge the existence of competing perceptions. Further, when perception is used instrumentally for more ultimate purposes, as it was used by Keynes, there would necessarily be some allowance made for appropriately timed switches among alternative perceptions of that which is. But while Keynes may be interpreted as an artist, his economist peers were scientists. His work was being a generalizable scientific paradigm. Neither Keynes nor any of this early disciples was aware of this fundamental difference that emerges naturally between the artist and the scientist. [/blockquote]

James M. Buchanan, "Keynesian Follies," in:

Hayek on Keynes again:

“There were of course extraordinary gaps in his knowledge. His knowledge was aesthetically guided, with the result that he was completely ignorant of nineteenth-century economic history. Totally ignorant. He just disliked it.
I had to tell him every day, not so much about economic history, but even about earlier English economists…if I had introduced him to English inflationists of the nineteenth century, that might have put him off.
…if you take his time of study, I don’t think he spent more than a year learning economics… I like to say, I liked Keynes and in many ways admired him, but do not think he was a good economist” from 'Hayek on Hayek' , 1994, pp. 92-3)

Very interesting. But what accounts for his "followship" among such logical thinkers as Samuelson, Hansen, Hicks et al.? True they patched up things but most of Keynes's doctrines remained intact in their hands. I think Hayek is once again underestimating Keynes.

...what accounts for his followship?


Ptolemy's cosmology was repeatedly 'patched up' in ways that were internally consistent until Kepler and Newton offered theories that better fit observations.

A willingness to begin at the beginning, like Smith and von Mises did, has always been rare among scholars.

With all due respect, Mario, I would suggest that if you had "Keynes" as student in a class (and you had never heard a "Keynesian" approach before) and he started to articulate the reasoning and the premises upon which he justified his "general theory," so much of it would seem so clearly counter to the core concepts of general economic theory that you would likely give him an "F." Or if generous, a "D-."

And he would deserve it.

Richard Ebeling

I agree with Mario.

It's not a coincidence that the lowest quality arguments from two giants I deeply respect like Hayek and Buchanan are precisely their rejections of Keynes. Keynes has a way of getting under peoples' skin and that has a way of getting them to lash out in ways that aren't the most convincing.

Keynes was profusely charming, something which Hayek might have lacked.

So what were some of Keynes' "agreeable" stuff?

Interest rates coordinate the supply and demand for the stock of various financial assets, not necessarily the flows of savings and investment. At times, this allows consumption and investment to move in the same direction.

Keynes was a flake who wrote in grand terms about an "economics" which pleased the political masters of his time, and our time. Classical economics says to leave the people alone. Keynesian economics says that politicians are supreme, and are able to correct the "deficiencies" of the businessmen who unfortunately happen to create all of the wealth.

Keynes could not see the fallacy in the Broken Window Fallacy. Believing in this fallacy is the centerpiece of Keynesian thought.

The average person believes in breaking windows because there is a shopkeeper with additional wealth in the story, ready to buy a new window and produce beloved "economic activity".

The Keynesian idea that distributing money (stimulus) creates wealth depends on a store of wealth in the society waiting idly to be confiscated to increase "economic activity". Wealth is reduced to a minimum after a few such interventions.

A story about Keynes shows that he really believed in the Broken Window fallacy. If you take resources from a restaurant owner, you can increase restaurant employment.

Keynes, Digger of Holes
=== ===
During a 1934 dinner in the U.S., one economist carefully removed a washroom towel from a stack to dry his hands. Mr. Keynes swept the whole pile of towels on the floor and crumpled them up. He explained that his way of using towels did more to stimulate employment among restaurant workers.
=== ===

Daniel Kuehn,

Here's a sentence that I just ran across on the Wikipedia article on Choice Modeling...

"It has long been known that simply asking human beings to rate or choose their preferred item from a scalar list will generally yield no more information than the fact that human beings want all the benefits and none of the costs."

Here's what you wrote on your blog...

"More stimulus would have been ideal, and Obama could have worked harder but I don't know if he could do anymore on that."

Keynes told people that there was such a thing as a free lunch. They could have their cake and eat it too. They didn't have to put their money where their mouths were.

That's why Keynes is so instantly appealing to you liberals.

It's a lot harder to understand that abundance is a result of difficult opportunity cost decisions.

So I'll be the first to admit that I lash out at the free lunch crowd in ways that aren't the most convincing...but hopefully someday you'll come to understand that you really don't want to be convinced.

Check it out though...I created a Wikipedia article on your favorite subject...

Oh man, it really cracks me up. On the article's talk page I wrote, "If you believe that the idea of government success isn't notable enough to warrant its own article...then please feel free to share your objections."

David Friedman's recent blog entry on market failure was what actually motivated me to create the article...

Incidentally...there are two things that are especially great about the year 1978...that's when I was born and that's when Deng Xiaoping started his free-market reforms in China...

My intuition tells me that the two events are related. heh

Right, as Hayek pointed out:

"Interest rates coordinate the supply and demand for the stock of various financial assets, not necessarily the flows of savings and investment. At times, this allows consumption and investment to move in the same direction."

Cafe Hayek has an appropriate quote:

… is from page 58 of Hayek’s 1988 volume, The Fatal Conceit:

"Although Keynes was, in spite of himself, to contribute greatly to the weakening of freedom, he shocked his Bloomsbury friends by not sharing their general socialism; yet most of his students were socialists of one sort or other. Neither he nor these students recognized how the extended order must be based on long-run considerations."

And thus the great appeal of Keynesianism to politicians.

Greg, do you think Hayek and Keynes meant the same thing? I think that Hayek's idea is that only a change in the stock of money could mess things up, whereas Keynes thought speculation about the prices of bonds and stock could mess things up. Or do you think Hayek accepted Keynes's views? If so, what happens to the idea of the natural rate of interest, i.e. an interest rate determined by the (full employment) flows of savings and investment (rather than by the supply and demand for financial wealth)?

McKinney, you could say that Hayek ran interference for socialism. But the biggest interference runner of all was scientism, the framework of ideas that rarely gets discussed but decides the winners and losers - so good economics and classical liberaism were losers in the 20th century. But they can revive in the approprite framework which is available.

Just thought I'd mention that the liberal economist John Quiggin is writing the sequel to Hazlitt's book..."Economics in One Lesson"...

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