|The Prophet Malachi, |
painting by Duccio
di Buoninsegna, c. 1310 [A]
"In the aftermath of the Great Depression, a peculiar doctrine came to be accepted, the so-called 'neoclassical synthesis'. It argued that once markets were restored to full employment, neoclassical principles would apply. The economy would be efficient. We should be clear: this was not a theorem but a religious belief."As a reply, Brad DeLong reveals who conceived that "religious belief": no one other than his lordship, Baron Keynes.
So, I guess now Keynes can claim the title of religious prophet:
"Our criticism of the accepted classical theory of economics has consisted not so much in finding logical flaws in its analysis as in pointing out that its tacit assumptions are seldom or never satisfied, with the result that it cannot solve the economic problems of the actual world. But if our central controls succeed in establishing an aggregate volume of output corresponding to full employment as nearly as is practicable, the classical theory comes into its own again from this point onwards. If we suppose the volume of output to be given … then there is no objection to be raised against the classical analysis of the manner in which private self-interest will determine what in particular is produced, in what proportions the factors of production will be combined to produce it, and how the value of the final product will be distributed between them". (The General Theory, chapter 24, the same "euthanasia of the rentiers" chapter)Now, I am sure readers may come up with many interesting thoughts on that. I'm happy making a rather obvious observation: in the passage above, Keynes seems to claim that, outside of recessions, "neoclassical economics" works just fine (which would explain DeLong's interest).
This is remarkable because, among Post-Keynesian economists, the term "neoclassical economics" is something of a putdown: with or without reason [*], they claim pretty much everything in "neoclassical economics" is wrong, beginning with its assumptions.
Post-Keynesian economist Steve Keen illustrates this. He claims to have found "logical flaws" in the neoclassical theory of economics: without much digging, part 1 of his book "Debunking Economics" reads "Foundations: the Logical Flaws in the Key Concepts of Conventional Economics" [%]. (Incidentally, I mention Keen only on account of his prominence; it wouldn't take much effort to point to other examples)
But according to Keynes, the problem was not "finding logical flaws in its [i.e. neoclassical economics'] analysis". For him, there were no such flaws: "For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premises" (The General Theory, preface). His aim was to clarify those premises and make them more general, while preserving its "fundamental theory of value" [#]: "We are thus led to a more general theory, which includes the classical theory with which we are familiar, as a special case".
Whether Keynes was right or not regarding "neoclassical economics" is irrelevant here. My observation is that Keynes' position and that of the self-described Post-Keynesian economists are mutually contradictory: both sides cannot be right.
You are free to adjudicate victory: either Keynes, or his self-proclaimed intellectual legitimate children and heirs, the Post-Keynesian economists. But you cannot deny that is a dysfunctional "family".
On top, and ironically enough, it's the neoclassical economists, Keynes' bastard children, who seem closer to the Father on this.
So there, Department of Whiskey, Tango, Foxtrot, Bang, Bang, Bang.
[*] While I have my own views on this, I ain't taking sides in this family feud.
[%] Keen, Steve (2011-09-22). Debunking Economics - Revised and Expanded Edition: The Naked Emperor Dethroned? (p. 37). Zed Books. Kindle Edition.
[#] One can only imagine Mrs. Robinson's face reading this reference to a "theory of value".
[A] The Prophet Malachi, painting by Duccio di Buoninsegna, c. 1310. License: Public Domain. Source: Wikipedia.