[P2P-F] Fw: [gang8] On Keynesian/post-keynesian monetary "thought"

Thu May 24 17:12:56 CEST 2012

----- Forwarded Message -----
From: Arno Mong Daastoel <amd at daastol.com>
To: gang8 at yahoogroups.com 
Sent: Thursday, 24 May 2012, 15:23
Subject: Re: [gang8] On Keynesian/post-keynesian monetary "thought"

Dear Gunnar, 

I wonder, apart from jealousy, is there any “factual” reasons or interests that would make J.Mill and Ricardo suppress Bentham's ideas?

Keynes wrote,
> the increase in the quantity of money is capable of increasing employment.  

Yes, I am aware that he wrote stuff like that elsewhere too, arguing that the initial effect of increasing the money supply was to increase economic activity, as when he discusses the Quantity Theory in 1922 (arguing that it is better to risk inflation later, as long as we increase employment now “in the long run we are all dead”). Yet, in the 1933 pamphlet, where the issue of was precisely how to deal with unemployment, he is repeatedly and perfectly clear: Borrow the money. 

Also Michael and Richard have both dealt with the forerunners of the “money matters” argument, like John Law etc., as in Michael’s book on trade, and the chapter “Monetary expansion increases employment before prices”.

But the Germans went perhaps one step further? - first by arguing that in a situation of massive unemployment, inflation is hardly as risk (Lautenbach and his colleague Röpke) , and secondly by arguing that new money for productive purposes also is "deflationary" (Lautenbach and Schacht).

Arno

On 21.05.2012 21:35, Gunnar Tomasson wrote: 
Dear Arno.
> 
>My following quarter-century old account of exchanges between Keynes and Hicks in the 1930s shed some light on Keynes´ monetary thinking:
> 
>In the personal letter to Hicks referred to in the preceding section, however, Keynes was more reflective.  Referring to Hicks' paper on "Mr Keynes and the Classics" [53], he wrote:
> 
>"I found it very interesting and really have next to nothing to say by way of criticism.
> 
>"From one point of view you are perhaps scarcely fair to the classical view.  For what you are giving is a representative belief of a period when economists had slipped away from the pure classical doctrine without knowing it and were in a much more confused state of mind than their predecessors had been.  The story that you give is a very good account of the beliefs which, let us say, you and I used to hold.  But if you were to go further back, how far back I am not sure, you would have found a school of thought which would have considered this an inconsistent hotch-potch." [54]
> 
>Hicks would later acknowledge the validity of Keynes' comments:
> 
>"Keynes was of course quite right to criticize my presentation of 'classical' theory," Hicks said.  "It was polite of him to suggest that what I gave was something which he himself had at one time believed; I much doubt it!" [55]
> 
>Hicks' interpretation of Keynes' views on the subject matter is reaffirmed by the letter itself, which shows Keynes actually embracing the cause of the hypothetical classical economist:
> 
>"The inconsistency creeps in, I suggest, as soon as it comes to be generally agreed that the increase in the quantity of money is capable of increasing employment.  A strictly brought up classical economist would not, I should say, admit that.  We used formerly to admit it without realizing how inconsistent it was with our other premises." [56]
> 
>Here is my take on the above:
> 
>1. By “strictly brought up classical economists”, I take Keynes to mean the likes of James Mill and David Ricardo for whom it was axiomatic that “the increase in the quantity of money is [not] capable of increasing employment”.
> 
>2.  Keynes wrote in the Preface to the General Theory that he had let “technical monetary detail” slip into the background – I have long viewed this as an indirect apology for the “inconsistent [monetary] hotch-potch” presented in GT.
> 
>3. Why “inconsistent”? Because the model of the General Theory is a “strictly classical” one – read: as in Say’s Law view of entrepreneurial market economies.
> 
>4. In the period leading up to the GT, Keynes tied himself into intellectual knots over what came to be known as the “widow’s cruse” – a testament to his failure to marry a “strictly classical” model and his thinking on money and production.
> 
>5. The same failure is evident in the GT where Keynes recognized that there was NO ROOM for entrepreneurial profit in a “strictly classical” model of entrepreneurial market economies – hence Keynes’ introduction of “profit expectations” of entrepreneurs as a determining factor in their investment/production decisions.
> 
>6. In a “strictly classical” model, a rational entrepreneur would “expect” ZERO PROFIT at best – i.e. on the assumption that Say’s Law was operationally meaningful.
> 
>7. The bold-faced words “I suggest” in the above exchanges between Keynes and Hicks is proof that Keynes recognized at the time, if only indistinctly, that the “profit expectations” spiel of the GT was “inconsistent hotch-potch”.
> 
>So, I agree with you that Keynes should not be hailed as a monetary genius.
> 
>In fact, Jeremy Bentham is the sole “monetary genius” that I came across in the 1970s, when I spent idle time at the IMF on researching the literature for sensible monetary thought.
> 
>I worked my way backward, from the most recent writers to successively older ones and was about to despair to find any trace of sensible monetary thought until I struck pay dirt in Jeremy Bentham’s writings.
> 
>All of which has a bearing on this complex subject matter:
> 
>1. The “strictly brought up classical economists” James Mill and David Ricardo absolutely detested Jeremy Bentham’s writings on “new money” being capable of “increasing output/employment”.
> 
>2. James Mill saw to it that Bentham’s writings were not published in the early 19th century – and they remained unpublished until published under the sponsorship of the Royal Economic Society around 1950.
> 
>3. Keynes, an erstwhile “strictly brought up classical economist”, took the initiative as President of the RES for someone to gather and publish Bentham’s dust-covered manuscripts.
> 
>4. Modern Keynesians have thrown out – or, rather, never understood the necessity of – the “strictness of classical economists”.
> 
>5. Therefore their monetary “thinking” is a mess – for the very possibility of an “increase in money … increasing employment” is PREDICATED on a technically precise departure from the “strictly classical” model of the General Theory.
> 
>6. A technically precise departure which, for the past 35 years or so, I have referred to as FINAL DEMAND INFLATION – i.e. debt-financed demand for final output – whereby entrepreneurial “profit expectations” are a function of such final demand inflation.
> 
>Gunnar
> 
> 
> 
>From:gang8 at yahoogroups.com [mailto:gang8 at yahoogroups.com] On Behalf Of Arno Mong Daastoel
>Sent: Monday, May 21, 2012 11:21 AM
>To: gang8 at yahoogroups.com
>Subject: Re: [gang8] Money creation pioneers? - nope.
> 
>  
>Dear Michael, 
>Yes, and I know you have gone through a lot of the "money matters" theories in your trade book.
>Richard's Chinese/Mongolian example from Marco Polo, demonstrated a clear, practical and 'massive' example in history, which therefore cannot be neglected.
>
>My point was perhaps a bit unclear: My critical comment was related only to Keynes, Schacht and Lautenbach:
>They all went for deficit spending in order to finance a recovery through public work programmes.
>(The 1931 Brauns-commission even wanted to finance this domestic spending by borrowing abroad)
>
>Deficit spending was not a very popular concept then, nor is it now.
>The option of public "money creation" was not seen by any of them.
>The 'conservative' Robert Friedländer-Prechtl hints at it in 1931, but does not spell it out.
>
>My question was. Am I wrong about Keynes, Schacht and Lautenbach?
>Guido Preparata did his diss. on Schacht's methods, and what he spells out is clear: Bills of exchange at 4 %.
>Keynes is very clear in 1933: Loans. (In The Means to Prosperty, where he discusses work programmes)
>
>On this background I find it a bit odd that these guys are praised as geniuses.
>Therefore "post-keynesians" also loose some of the gloss, when the 'master' did not get this basic issue straight?
>
>Arno
>
>On 17.05.2012 14:15, Michael Hudson wrote: 
>What you describe is an outgrowth of medieval finance, from the Templars to
>>Italian bankers, lending to finance wars.
>>  And behind them, old Rome. That untracked civilization.
>>Michael
>> 
>> 
>>On 5/17/12 5:31 AM, "Arno Mong Daastoel" <amd at daastol.com> wrote:
>> 
>>Dear Richard, Dirk, Michael et al,
>>> 
>>>As Richard pointed out (Princes of the Yen, 2003), no government is in
>>>control over its economy if it has not control over the creation (and
>>>distribution) of the country¹s money. Richard uses Marco Polo¹s
>>>description of China¹s state controlled money supply to demonstrate the
>>>stark contrast to the European tradition, where money supply (and
>>>distribution) has been dominated by private interests to this very day.
>>> 
>>>A few persons in recent history have been regarded as pioneers in
>>>³innovative² ways of repeating the Chinese / Mongol lesson. Richard
>>>mentions Law, Müller and Knapp. Many claim that J. M. Keynes and his
>>>German contemporaries like Lautenbach and Schacht were such pioneers.
>>> 
>>>It turns out, however, that all of them were bent on borrowing money for
>>>their work creation programs.
>>>(Thereby leaving much of the control and income in private hands).
>>> 
>>>This is how I read the details of what they wrote.
>>> 
>>>Does any of you have info to the contrary?
>>> 
>>>Yours,
>>>Arno
>>> 
>>> 
>>> 
>>>------------------------------------
>>> 
>>>The gang8 list is devoted to Creditary Economics.
>>>To unsubscribe, email: gang8-unsubscribe at yahoogroups.com
>>> 
>>>Yahoo! Groups Links
>>> 
>>> 
>>> 
>> 
>> 
>> 
>> 
>>------------------------------------
>> 
>>The gang8 list is devoted to Creditary Economics.
>>To unsubscribe, email: gang8-unsubscribe at yahoogroups.com
>> 
>>Yahoo! Groups Links
>> 
>><*> To visit your group on the web, go to:
>>    http://groups.yahoo.com/group/gang8/
>> 
>><*> Your email settings:
>>    Individual Email | Traditional
>> 
>><*> To change settings online go to:
>>    http://groups.yahoo.com/group/gang8/join
>>    (Yahoo! ID required)
>> 
>><*> To change settings via email:
>>    gang8-digest at yahoogroups.com 
>>    gang8-fullfeatured at yahoogroups.com
>> 
>><*> To unsubscribe from this group, send an email to:
>>    gang8-unsubscribe at yahoogroups.com
>> 
>><*> Your use of Yahoo! Groups is subject to:
>>    http://docs.yahoo.com/info/terms/
>> 
>> 
__._,_.___
Reply to sender | Reply to group | Reply via web post | Start a New Topic Messages in this topic (2) 
Recent Activity: 
Visit Your Group 
The gang8 list is devoted to Creditary Economics.
To unsubscribe, email: gang8-unsubscribe at yahoogroups.com

Switch to: Text-Only, Daily Digest • Unsubscribe • Terms of Use
. 

__,_._,___
-------------- next part --------------
An HTML attachment was scrubbed...
URL: https://lists.ourproject.org/pipermail/p2p-foundation/attachments/20120524/6237db0d/attachment.htm 