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Who Killed John Maynard Keynes?

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Who Killed John Maynard Keynes? - Who Killed John Maynard Keynes? Rory Carroll "%gnificent, Poirot!" Hastings Friedman with his opportunity. First clapped the little Belgian heartily on he prepared his alibi of rational the back as he delicately drained the consumer behaviour to explain that as last of his hot chocolate. "To have some people have volatile incomes, succeeded where the economists and they will save a disproportionate historians offive continents have failed! amount for lean years. Empirical To have solved the most sensational evidence had proven Keynes wrong - crime of the decade - the murder of as society got richer, the proportion of John Maynard Keynes!" national income saved did not fall. Thus Friedman successfully exchanged Poirot made a lame pretence of Keynes' mUltiplier for a consumption modesty. "C'etait pas difficile, mon function, thereby eliminating the brave, if one only uses the eyes and the spectre of underconsumption in the brain. Let me explain how I came to long-run because of the implausibility my conclusions."He leaned back and of savings exceeding investment. half closed his eyes. "Yet for Friedman, it was not "The first task was to consider the enough. He liked to 'kick a man when circumstances of the crime. You will he is down', as you say. Wielding his recall that the authorities were quick to Monetary History of the United States announce Milton Friedman 's notorious he battered Keynes' liquidity preference Chicago gang as the perpetrators of the until money demand was seen to be deed, acting independently of other stable. Thus, economic instability was groups. The 'lone gunman' so to speak. not due to the instinct of businessmen, Fire was concentrated on two targets - but due to governments' erratic changes consumption and investment. in the moneysupply. It appears that the particular weapon here was quantitative "We know that Keynes favoured equations. the psychological law that as aggregate income increased, so would "But of course the correct question consumption, but by a lesser amount. to ask is why the dog did not bark in the From this he concluded that unless night? Who might have known the investment increased to absorb the plans of this dedicated assassin? So I growing savings, total effective demand had to consider the object of motive, would not grow rapidly enough to keep objectively and without prejudice. First, all employed. It was this that provided who was the immediate beneficiary of 112 Student Economic Review, Vo!. 6, No. 1 the deed? A.C. Pigou." arbitrary statistical aggregates. Thus Keynes' 'wage' cannot actually enter "Great Scott, Poirot", Hastings into economic relations. Secondly, he burst in "Pigou, the friend, the teacher riddled the artificial depression of of Keynes! Surely you could interest rates advocated by Keynes, discount. ... " arguing that it could cause boom and bust. The rationale for this was that Poirot raised an indulgent hand. capital, as a complex interlocking "Mon cher Hastings, you have the structure, cannot be treated as a feelings the most decent. I would, homogeneous substance. Thus, however, remind you that we speak of lowering interest rates induces economics, of power. The elimination entrepreneurs to invest heavily - a of Keynes reinforces Pigou' s attack on commitment that requires much time the liquidity trap which, you may recall, and money to be fully integrated. Yet, suggests that a fall in wages would such an increase in investment increases increase aggregate demand, employment, consumption and wages independent of a change in interest -thereby diverting resources away from rates, because the real value of money capital, choking off its cheap credit and cash balances and private wealth would leaving an incomplete and increase consumption by reducing the uncoordinated structure. Boom and need to save out of a given income bust, n' est-ce pas? level. In short, it denies Keynes' liquidity trap by proposing a shift out "Yet the story does not end here for of the IS curve. Yet the neglect ofthis Hayek likes to put the boot in a la theory embittered Pigou. thereby Friedman. He also attacked the furnishing him with a motive to finish existence of quantitative functions in off Keynes." economics as the myriad behaviour of individuals in a constantly changing "On the other side we have that society as too complex to be formulated rabid fundamentalist of the Austrian on arithmetic grounds. Thus Keynes school - Hayek ... " had to be wrong if no fixed relationship existed between income and "That filthy swine, I'd like to get consumption. Yet naturallemcnt such my hands on that cur." sentiments are not popular with economists as it renders much of their "Pas de zele, pas de zele, Hastings", efforts futile. Perhaps, this accounts said Poirot beseechingly. "Of course, for our hostility - n'est-c.e pas?" it is unlikely that he had any knowledge of the Monetarist plot, given that some Hastings reddened. "But Poirot, of his shots ricocheted off Keynes and you are forgetting the Marxists!" hit Friedman! Nevertheless, he fusthit Keynes' concept of realism, which, as Poirot smiled soothingly. Always you know, ascribes a real existence to your favourite suspects, Hastings. Bien 113 ------------ Student Economic Review. Vo!. 6. No. 1 sur, they had no love for Keynes, the man who highlighted the declining "Nor must we neglect our friends influence of private capital and who follow the new fashion of formulated the theoretical undermining the significance of underpinnings for the revived capitalist unemployment. As much is composed system. They too must be included in of mere women, untrained or the list." uneducated blacks and restless teenagers - what is the urgency? Why "I must say". Hastings broke in, fuss with Keynes if there is no real "that meddling by the supply siders had problem? something to do with it." "Enfin, to complete our list, we "Precisely. As usual. you have hit have the optimistically titled the nail on the head. Keynes' view - 'developing' world who are that if demand was correct, supply disillusioned with the widening gap would look after itself, infuriated Say's between rich and poor. Unfulfilled cronies. They retaliated by using expectations were created by the structural obsolescence and industrial Keynesian concentration on fixed concentration as a means of blunting capital investment. It seems Keynes the edge of traditional Keynesian fiscal failed to appreciate the effects of an and monetary instruments. Their coup increasing population in soaking up de grace, so to speak, was the decay of the gains from capital accumulation market discipline produced by and technical improvements that would Keynesian economic rigidities - par otherwise have increased incomes and exemple, the commitment to full wages." employment would aggravate cost push inflation. " After a moment he said absentmindedly, "Ratchett." Poirot regarded his friend with amusement. "You are baffled, hein? "Eh, what's that, Poirot?" Always. mon cher, you think with emotions. We must consider the "You will recall, Hastings, the theories with dispassion. To continue murder of Ratchett aboard the Orient with our suspects - we must of course Express - an intriguing little mystery. consider Schumpeter who distastefully But an instructive one, no?" Poirot compared democracy to a political raised his eyebrows humorously as he market place where large groups pursue studied the face of his faithful friend. their self interest without the presence of budget constraints. Thus Keynes' "Of course, Poirot! That's what short run money creation failed to gave you the clue!" account for the political nature of decision making. The result-excessive. "Precisely. They all killed unsustainable deficits. Keynes!" 114 .
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