Ep. 122 Varieties of Wrongness: The Different Kinds of Keynesianism

21 January 2018     |     Tom Woods     |     10

This week we bypass Krugman’s columns to discuss the different schools of Keynesianism, how and when they emerged, and what their differences are.

Krugman Blog Post

Why Casey Can’t Read,” by Paul Krugman

Contra Columns

Paul Samuelson Correspondence Regarding My Papers on Capital & Interest Theory,” by Bob Murphy
Kapital for the Twenty-First Century?,” by James K. Galbraith
Lucas Critique (wiki)
Episode 46: What the fork?! Bitcoin vs. Bitcoin Cash (The Lara-Murphy Show)
Instantaneous Deflation as a Macro Solution,” by Greg Mankiw

Need More Episodes?

Tom and Bob have their own podcasts! Check out the Tom Woods Show and the Lara-Murphy Report.

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  • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

    Keynesians would all seem to believe that the power of money cames primarily from it’s claim upon wealth rather than as a store of value.


    Because if spending matters more than creating then any idiot can come up with loads of plausible schemes to just spend money. Nude Emperors Abound! https://uploads.disquscdn.com/images/c31ebfd7175163c5ca7931ddc1d7ed13e03ba8857e263c82162b45103df33b40.jpg

  • http://2vnews.com 2VNews

    When government tries to micro-manage, government does a lot of damage.

    Markets will balance on their own. When government tries to eliminate the pain of market balancing, government becomes like an economic black hole; it distorts the free flow and balance of the market causing unintended consequences.

    And almost always increases the pain.

  • http://2vnews.com 2VNews

    What does nature and free market economics have in common? A: Their motto; Whatever works.

  • Eric

    I tried to plow through the General Theory a few years ago, the idea being “know thy enemy” or some such other sackcloth and ashes excuse. The only take away that really stuck with me:

    “Whilst workers will usually resist a reduction of money-wages, it is not their practice to withdraw their labor whenever there is a rise in the price of wage-goods.”
    Keynes, John Maynard. The General Theory of Employment, Interest and Money (p. 7). Signalman Publishing. Kindle Edition.

    In other words, since you dumb rubes aren’t going to take a pay cut when we want you to, we’ll just go ahead and devalue your labor by printing up a bunch of worthless scrip.

    And because most non-economists only get that far (it’s on Pg 7), they think it’s just fine with them. As long as it happens to the other guy that is.

  • David Kawaz Shalita

    i love the honking Bob, gives the show a nice morning radio show touch

  • Michael Fleischer

    At the times Keynes wrote general theory, Einstein’s scientific theory of relativity was still a fairly new concept for most educated people. Keynes in his arrogance named HIS theory the “general” theory in an attempt to mimic or assume the role of some kind of economic “genius” who was fundamentally altering the rules of econ.

    The implications of Einsteins theories and the subsequent empirical proofs were nothing short of mind blowing ( and still are).

    The general theory of relativity is based on the postulate that the local effects of a gravitational field and of acceleration of an inertial system are identical. The previous Newtonian system and theory of gravity as developed by Newton and Euler and others was inadequate to explained what happened to very very large massive objects over huge distances and also very very small objects and things moving very fast relatively to one another. The classical Newtonian mechanics was found to be but a subset of a much larger framework of which the GENERAL theory of relativity was attempting to explain. IT still however did not explain what gravity actually was.

    So Keynes co-opted this term “general” to give himself the air of some kind of genius and assert that his theory tied together all these other disparate attempts to explain econ.

    Hardly a more arrogant exercise could be imagined.

    I think it was Hazlitt or maybe mencken who wrote about Keynes, that a man can convince himself that his ass had traded places with his head and write long scholarly treatises about same but at the end of the day, he still has to walk this earth the same way as the rest of us with his feet in the dirt.

    Its almost as if Keynes wrote the general theory as a joke, intentionally turning truth on its head, like these fake postmodern articles that get accepted as real and published.

  • davegrille

    There is a snake in the Keynes’ garden ,that is spending and artificially low interest rates can’t be reversed without severe political consequences.

  • Bob_Robert

    Ok. THE REASON why Mises comes as a package rather than a Chinese menu (one from column A, two from column B):


    It’s because the foundational element of the Austrian economic analysis method is axiomatic, rather than a hodge-podge of cherry-picked examples from recent history which is what underlies Keynesian “theory”.

    Since a Misesian conclusion is based on the same fundamental axioms as every other Misesian conclusion, to accept one is to accept them all, broadly speaking. All entirely “value free” at the same time.

    Mises’ unrelenting utilitarian values, where his goal of human flourishing clashes with the mainstream goal of government flourishing, has little to do with economics itself. The Keynesian mish-mash of Chinese-menu “economics” is far more useful for disguising the goal of government flourishing with a sheen of “but it’s for your own good”.

    Anyway, I found an answer even Bob Murphy didn’t have! Hooray!

    • Robert

      Robert #3:

      I think Bob illustrates this in the debate with David Friedman, where he says that you can quibble about every minor point, but appealing to statistics won’t convince anybody when they’re still arguing over what happened in the Great Depression.

      I’ve been trying to look at some alternative sources recently to make sure I’m not stuck in a “Contra Krugman echo chamber,” such as /r/badeconomics. They are disdainful of logic-based economic methods and they seem to think that it’s cheating to not derive your answers from empirical research, so they accept 0% of the Misesian claims, even if they themselves are free market supporters. I’ve seen the claim several times that “Mises doesn’t really do deductive logic, he just hand-waves.”

      I’d be interested in learning their point of view, but I don’t think these other schools of thought have any easily accessible podcasts, where they’ll answer targeted questions, so laymen such as myself (who do this in our spare time) have nowhere else to turn to. “If you want to know why Mises is wrong about business cycles, memorize this 900 page textbook, read 100 academic jargon articles, and get a PhD in economics” isn’t a particularly helpful answer, and it seems like a bluff.

      • Bob_Robert

        I’ve noticed the trolls who visit mises.org and loudly proclaim, for example, how the ATBC is “wrong”, also can’t be specific about what it is they believe is wrong with the theory.

        It could very well be there is no actual rebuttal. I recall a recent college graduate who happened to be the son of a friend, who asked me about something economic. When I explained it, his reply was “That’s not what I was taught in school, so you’re wrong.” Nothing more than that.