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« @Steve Horwitz, Larry White and George Selgin: What is Wrong With This Proposal for Bank Reform? | Main | A Correction to a Wrong Impression From My Earlier Post »


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Could you clarify what you mean by this, Steve:

"Thus we cannot afford to be overly concerned with morality if the goal is to get out of the recession."

My impression was that Krugman's whole point is that we can have normative opposition to war, we just shouldn't let that dictate our positive conclusions about economics. So you aren't attributing the above sentiment to Krugman, are you? You're unclear in the post whether that is meant to be attributed to Krugman or not.

Could you also clarify where you read Krugman say that war "is morally acceptable". I never read that anywhere. Is that how you understood "vice is virture/virtue is vice"? Because I took that to be more of a "Fable of the Bees" statement than an ethical statement. The entire rest of the post seems to militate against understanding that as an ethical statement from Krugman.

I'm also curious why you didn't mention this post, which came immediately before the post you cited:

Doesn't that post seem relevant to your point? Did you read that post? What were your reactions to it?

I guess I'm just concerned that two posts that Krugman wrote that I read to mean "war is not moral and when I say it had X, Y, and Z effect on the economy I want to make clear I am not saying that makes it moral" you reply "Krugman thinks war is morally acceptable because he thinks it did X, Y, and Z to the economy". You seem to be claiming he said exactly the opposite of what he actually said.

And you completely omit mention of the other post where he makes Bastiat's Broken Window point.

I do think it's important to note that "it boosted measured GDP" is not a good test for whether stimulus "works." But I don't think you are really responding to the core of the Keynesian claim in this article.

The argument for government stimulus is that for no good reason, consumers are refusing to spend their money to effect mutually beneficial gains from trade. Thus it doesn't matter if the government spending itself has no value, because the real purpose is just to get the multiplier effect going. It gets people to engage in those beneficial trades again.

Unfortunately, the foregoing argument makes no sense to me, so I can't think of a way to answer it. But I still think a Keynesian would be unmoved by your assertion that government spending is itself wasteful.

To bring Keynes back in the picture, it is the case that Keynes's views on morality are quite interesting. His system does turn certain virtues (like saving) into vices -- from an economic or consequentialist perspective. What is particularly disturbing is that from a long-run perspective surely saving is a "virtue." But the Keynesian short-run is a very unclear idea. How long does it last? When we get to full-employment, some may argue, we can return to the long-run virtues. But full-employment is not easily defined once you get serious about it. Furthermore, we are always being "threatened" by new shocks. And if you want to get pre-emptive about those, you are back to the new virtues and vices. Messy system, if you ask me.

RE: "Messy system, if you ask me."

To paraphrase Elinor Ostrom and many others "complex doesn't mean messy" (she actually said "complexity doesn't necessarily mean chaos").


Ask Ostrom what she thinks of Keynes. More importantly, this is what Keynes does -- gives the impression of complexity and profundity when (most often, though not always) he is just confused in interesting ways. While being "interesting" does make for a fun dinner partner, it should not be confused further with enlightenment.

Actually, there is a certain enlightenment to be gained on the part of the rest of us by refuting his errors. I think Viner or Knight (or one of the other General Theory reviewers) made this point.

Mario -
The point isn't what Ostrom thinks of Keynesian economics, it's what she has to say about complex systems which you can find valuable as a Keynesian or a non-Keynesian (lot's of Keynesians have made very similar points about complex systems, in other words - but Ostrom always says it very well).

I've heard some of what she's had to say about "government spending" in general - but I wasn't aware that she's really had that much to say about the kind of things that Keynes talked about that you're refering to here. Is there anything on these issues that's especially good to look at? I just hadn't realized she ever really had anything to say on macroeconomic issues - I was only aware of the common pool/governance issues she's dealt with.

Have any of you ever read Joe Haldeman's novel "The Forever War"? It considers the idea that military Keynesian is correct and results in a war between humans and an alien race. It's good if you're ever at a loose end.


"Keynes...does turn certain virtues (like saving) into vices -- from an economic or consequentialist perspective. What is particularly disturbing is that from a long-run perspective surely saving is a 'virtue.'"

But surely it's not. Investment is a 'virtue', not saving as such.

In fact, one person's saving is someone else's debt, so in itself the act of saving is entirely neutral:

To those who think I'm being unfair to Krugman:

When has Krugman EVER extended ANY principle of charitable interpretation to the ideas of Austrians or anyone who fundamentally disagrees with him? I'm all in favor of arguing in good faith and playing fair, but that is not an inexhaustible resources. When others have demonstrated that they consistently refuse to play fair, I will have no hesitation about responding in kind.

I'm just engaging Krugman by the rules he has demonstrated he plays by, and I refuse to apologize for it.

No investment without foregoing present consumption.

I am, by the way, aware that Keynes thought he was making a big discovery when he determined that savings does not NECESSARILY equal immediate investment in real productive activity. But John Stuart Mill argued in an essay written in 1829/30 (but published in 1844) that the common understanding of what we now call "Say's Law" allowed for the phenomenon of increases in the demand to hold money out of income when there is a lack of business confidence.

Besides, I don't see how anyone can read the article Horwitz references and NOT come away believing he's arguing for war. One has to be especially generous, to the point of blindness to what he actually says, to think anything else. It's there, in plain English.

And actually, Daniel, you need to read that Krugman article you linked much more closely than you did. The title is misleading. The article actually argues that the destruction caused by WWII had no real effect on U.S. trade and GDP, and his very last sentence is a clear (in retrospect) lead-in to his argument for war as being good for the economy.

Mario -
Does he think he was making a big discovery or did he think he was making an important point? My recollection is he cites a long line of people who suggested exactly what you're describing - he's just restating the point and noting that "classical" economics as he described it really has no place in economic theory.

But Keynes himself reached back centuries to demonstrate he wasn't the first one to say all this.

Keynes completely misrepresented John Stuart Mill among other economists who favored "Say's Law." Keynes didn't really care what was understood by generations of economists before him on the matter of savings, investment and the demand for money. He wanted to make a polemical point and cast his own theory in revolutionary light.

He also admitted to Austin Robinson (I think) that he misrepresented Pigou but added that he "had" to do that to make his point.

If you really believe in morals you would understand that you cannot play "the eye for an eye" game and pretend to be fair. Unless you accept consequentialism as a sound moral theory.
The "charitable interpretation" is not an option... You sound like Jack Bauer (24) admitting that you should use the same strategies of the bad guys in order to defeat the bad guys... it is quite irrational (from the moral point of view), isn't it?
Obviously, I still really admire your clarity and your deep intellectual understanding of Austrian Economics.

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