Talk:2008–2009 Keynesian resurgence

Criticism

Although a staunch Keynesian, I can tell the "Criticism" section has been written by strong proponents of Keynesian policies who have had only a half-hearted shot at neutrality. The first paragraph is irrelevant as it does not refer to criticism: it even mentions a few worthy objectives which might or might not be achieved by Keynesian policies (like a shift to a 'green economy').

"It is questioned by commentators on the left whether the Keynesian resurgence has been sufficiently strong" is not criticism of the resurgence, just as criticism on an article called "Cars" would not start by saying that perhaps there are not enough cars around. Similar case with the mention of Germany.

The rest of the criticism is more spot-on, but needs to be expanded and revamped. It feels as though the author did not really understand the points made by the opposing side, and has just gathered snippets from media coverage. "Various other technical reasons" is unacceptable in an encyclopedia.

Hope someone is more productive than myself and makes these changes! Good luck, and keep developing a promising article. 23.40 GMT, 01 Feb 2009 —Preceding unsigned comment added by 129.67.157.249 (talk) 23:42, 1 February 2009 (UTC)

Thanks for the good wishes 157.249 , and you are not wrong about the section being written by a Keynes Fan! FeydHuxtable (talk) 13:27, 5 February 2009 (UTC)

I would like to see a more robust Criticism section as well, since its hard to tell what logic could lead people to claim more tax cuts are the solution. —Preceding unsigned comment added by 66.92.8.47 (talk) 20:45, 10 February 2009 (UTC)

I'll be exspanding and sharpening the Criticism section in the next few weeks if no one else does - i was hopeing for the sake of balance an editor with free market sympatheis would step up! FeydHuxtable (talk) 09:03, 12 February 2009 (UTC)

comparison to early New Deal versus World War II economic mobilization

The entry 2008-2009 Keynesian resurgence fits well, IMO, the facts rapidly unfolding around the world. These facts include the widely held belief that the early New Deal was trial and error not Keynesian - and the only real test of Keynesian power to produce and pay for output was during the period of economic mobilization that gave WW II: money matched to output (not financial debt); heavily emphasized private savings to reduce demand (and reduce concern that high taxes may or may not be in store for a nation's grand-children - depending on productivity potentials and revolutions in technology); criminal process to prevent hoarding and the like; wage and price control, and rationing; and effective long term interest management.

All these tools were necessary to minimize after war inflation - which, nevertheless, on account of pent up demand and ending of controls, unleashed an acceptable high level of post war pricing.

Today's debate universally recognizes that trial and error New Deal-ism asks for considerable time to go from error to new trial. Economic mobilization does not ask for very much time at all. The fact that economic mobilization was the only timely sure cure ever found for deflation (the admitted current condition) is often glossed over.

It is therefore logically necessary for this criticism of the Keynesian resurgence to emphasize: the missing savings aspect of the success from 1942-1946; the missing very low taxes on the middle class in that period (the shift of the tax burden from the rich to the middle class occurred in the post war period, after the Kennedy tax cut); the financial cooperation between the central bank and Treasury which appears to be returning without an agreement or legal basis; the acceptance of government spending in place of private spending - which is presently not accepted - and which is the only way to win wars against real enemies and against global environmental collapse; and the creation of confidence - that all parties (Keynesian and non-Keynesian) cry for - based on patriotism more than fortunate optimism.

It may be that only the President has the power to mobilize the economy. But the intellectual recognition of the power of Keynesian theory has the duty to admit its only proof came when its purpose was clear and its grip was steady.

John, thanks for your interesting perspective and your contribution to the main article. I wholeheartedly agree with you that it would be good to see policies to tackle the issue of debt in general and in particular to avoid additional tax burden for future generations. That said, your section reads more like an essay than an encyclopaedia entry. Also as you seem to admit you're advocating something that no significant sources have been talking about in the media. I'm tagging your entry as original research, with a view to removing it to the talk page in the next week or so. Of course it can stay if you can find references to support that what you're saying is a POV shared by significant sources (even if just a minority). Lots of commentators are advising folk to pay off their personal debt if they're able, but Im not aware of anyone suggesting that we ought to further dampen consumer demand and encourage savings. Im not too sure if that's what you meant, but it read that way. Its actually the opposite of what Keynesian economists are advocating . Successful Keynesian policy as implemented in the 50s and 60s discouraged excessive saving and purposefully stimulated demand. Im not sure how one can argue that measures appropriate during WWII and the immediate aftermath apply to our present situation. Sorry if I have misunderstood what you are saying! FeydHuxtable (talk) 13:31, 5 February 2009 (UTC)

Dear Feyd,

Thank you for your accurate appraisal of current Keynesian pro-private-spending strategies. They are, in by view, similar to "guns and butter" models during the Vietnam war. They will, in my view, risk too high inflation too soon -- and ought to be challenged now. The absence of calls for economic mobilization now to rapidly deliver what Obama promised is sad. The current congressional criticism of Obama's recovery plan has raised all the issues BUT NONE OF THE SOLUTIONS I have introduced into this article. If you remove it to the discussion page, it may not attract the help it needs to be brought to the attention of the world's currently floundering experts on how you substitute planned government spending for consumer and profit-seeking spending when the fate of humanity hangs in the balance. I know Wikipedia is young and is learning to accomplish its purposes. Fortunately for poor people, Wikipedia's fate is also at risk if we drift away from effective communication of knowledge to pursuit of the unrelated ideal of avoiding anything new. There is nothing original about the way economic mobilization looks at supply, demand, cost accounting, and the power of Keynesian thought to influence monetary systems of production. The knowledge is seventy years old and older. Its application is a matter of logic not research or opinion.

Signed: John Gelles

introducing new article

The entry for the Keynesian Resurgence began as a sub-section of the influence section of the main John Maynard Keynes article. Several editors contributed to it and more than likely there will be many more relevant developments as the year unfolds. Rather than unbalance the main bio article I thought it might be nice to have a separate article so editors are more free to help us capture this very important phenomena. FeydHuxtable (talk) 20:10, 19 January 2009 (UTC)

Dubious

I have not yet heard the term "Keynesian Resurgence" or "Keynesian Revival". The bold introductory paragraph needs support from reliable sources.

I'm especially surprised to hear about a "Resurgence" because to the best of my knowledge variations on Keynesian economics have always been the main stream of macroeconomic thinking ever since Keynes. Keynesian economics has been challenged by a number of competing schools: Monetarism in the 1960s-70s; New Classical Macroeconomics in the 1980s; and Real Business Cycle Theory in the 1990s. You might argue that in the late 1970s or early 1980s Keynesianism was really out of fashion and Monetarism was somewhat more influential. But versions of Keynesianism really never disappeared and never ceased to be influential. A good history of all these recent economic debates is given by Michael Woodford in 'Revolution and evolution in 20th century macroeconomics'. His overall point is that Keynesianism has been the predominant viewpoint in macroeconomics ever since the Great Depression, though it has repeatedly absorbed insights from competing schools of thought.

To say that Keynesianism came back in 2008 especially shows ignorance of New Keynesian economics. The development of New Keynesian DSGE models of the macroeconomy has probably been the main area of macroeconomic research for the last ten years, and these are now widely accepted and used by policy makers (especially in central banks). The main reason newspaper editors think something is new in 2008 is that we are facing a really deep recession (possibly depression) for the first time in decades. The standard Keynesian prescription in that sort of circumstance is massive fiscal policy stimulus. The reason it's happening now is not because Keynesianism just returned, it's because mainstream Keynesian policy requires this kind of action in the circumstances we face today. --Rinconsoleao (talk) 15:09, 23 January 2009 (UTC)

Hello there Rinconsoliao, that’s an interesting perspective.I’ll grant Keynesianism never really went away, in that neo-Classical economists used some of Keynes work to make their new synthesis. I understand what you’re saying about New Keynesian economics, and I’ve skimmed through the Woodford presentation. If this article was written from an academic perspective I’d agree the implication of a recent paradigm shift would be highly dubious.

This article is written with a view to capture changes in policy making, and to a lesser extent there practical implications. The coupling between economics as a discipline with government policy making is far looser than many academics appreciate - influences much closer to actual decision makers are the key global institutions like the IMF, World Bank and influential normative media like the FT and Economist ( Ravenhill 2005) . As you imply independent central banks do indeed tend to make decisions more in line with current reccomnendations from accademia, and the very fact they have the independence to do so is one of the remaining victories of Monetarism. As per the article and various references, senior individuals in those orgs are not merely advising different policies to suit different conditions, they are at least partially admitted their previous ideological commitment to free market was mistaken. I haven’t yet added links for Green span admitting his mistakes or u-turn by IMF boss - okay I am titleing those a bit more loosely than i would on a main article page, lol.

To appreciate the sea change in policy making terms, consider how here in Britain the recession of the early 80s and the early 90s were largely allowed to run their course with no substantial fiscal intervention, despite the jobless total exceeding 3 million in both cases (a lot higher than it is now) - okay you could argue that and granted there was no comparable financial dimension. But what about the 1997 Asian Financial Crisis  ?- they were literally crying out for a Keynesian style solution but it was denied partly as the dominant view among decision makers was strongly pro free market – not the Keynesian / neo classical syntheses that’s consistently been taught at most universities. .

A difference between those earlier recessions and today, is that during early - mid 2008 folk like myself were hard at work having face to face meetings and written communication with senior politicians up to and including Mr Brown himself, who as you know was leading the world wide response in the crucial period after October. The ability to influence decision makers isnt a function of academic expertise as much being in the right place at the right time and the grace of the Holy Spirit. So though it might look like Im following newspaper writers, thats not really the case, Im just following wikki protocol. To see a blog post where I predicted the revival and the agency of Mr Brown before Keynes was being widely talked about just search for 'farewell to capitalism'.

Did you read the FT article which strongly implies in the first two paragraphs that the whole world is adopting Keynesian remedies, with only Germany having reservations ? I havent heard anyone else question the existence of a Keynesian revival, though as per criticism section many American politicians fear it isnt as strong as it needs to be, and here in Britain for example many MPs are rightly disappointed at the governments failure to Nationalise our troubled banks, with zero compensation to shareholder and a purge of senior management as was done in Norway in the 90s.

If you search for Keynesian revival / resurgence / renaissance there are hundreds of articles about the current phenomena, many are critical but none of the ones I’ve skimmed question the reality? I'll put a citation on the opening sentence as you requested. I hope you dont mind me removing your tags. With great respect there's nothing desperate about this article, the desperate ones are the rentier class who rue the now inevitable erosion of their wealth that will result from the elevation of prosperity for the disadvantaged and the long term relatively high (but managed) inflation that will result from the Keynesian Revival.

Sorry for going on so much, Im just not expecting to be online much these next few days so have tried hard to settle the discussion.

FeydHuxtable (talk) 17:10, 23 January 2009 (UTC)

Just in case anyone still doubts there has been a Keynesian Resurgence in terms of Policy making, a good FT article to check out is titled The undeniable shift to Keynes and says:

“ The sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades, which held that efforts to use fiscal policy to manage the economy and mitigate downturns were doomed to failure. Now only Germany remains publicly sceptical that fiscal stimulus will work . ”

FeydHuxtable (talk) 10:50, 26 January 2009 (UTC)

Danger of inflation?

The article seems OK on a first glance. But what about the danger of inflation? No word! Economy should be a quantitative  science, and the question is, whether the present Keynesian policy of the states really suffices quantitatively, or whether the somewhat hesitating policy of Germany, exceptional as it looks, does not have serious quantitative reasons? In other words: do the states have enough money, to solve the problems (e.g., the car selling problems, will they be over next year?), or does one need another "new deal" which was succesful, but only after a decade? If the state does not have enough money (and the interest rates are already now on an historical depth) there is the danger that the money-printing machines will be working again, as Europe has experienced two times. - The article spreads optimism. Let us hope that this is relevant. - With regards, 87.160.125.51 (talk) 20:27, 24 January 2009 (UTC)

Thanks for the corrections 125.51 and your thoughts on the article , they are much appreciated. Ive expanded the criticism so it mentions inflation, most likely other editors will further expand that section over the next few weeks, which might address any concerns you might have about the article being over optimistic.

Ive no doubt youre right these policies will cause at least modest inflation, although their will be determined efforts to stop inflation getting too high. From a Keynesian perspective , modest inflation is often an unavoidable price when you want to raise general prosperity and deliver close to full employment. It's a difficult concept, but the General Theory argues strongly that too much concentration of wealth is not good for the majority. Clearly inflation will hurt those who depend on interest from capital , and those who arent in a good position to achieve wage rises, but this can be mitigated by appropriate government action. Essentially we seen the pain as being clearly offset by the reduction in misery to the unemployed and the impoverished. In recent history even modest inflation could offset potential gains from fiscal stimulus due to the adverse affect on balance of payments – but this should be less of a problem now Keynesian policies are being pursued globally, and especially once the key global institutions adopt measures to penalise high trade surpluses , something Keynes had pushed for back in Bretton Woods.

Germany has a favourable balance of payments comparable to China and unlike the Chinese doesn’t depend on high growth to check underlying social problems. Im not exspecting them to act against the best interests of the planet in the long term, they'll come round soon! FeydHuxtable (talk) 10:57, 26 January 2009 (UTC)