2014-02-13
New Keynesians are a variant of old monetarism. They are grappling with the same macroeconomic questions. Why does the economy experience extended periods of disequilibria? One New Keynesian answer, for example, is sticky nominal price and real wages. Despite a newly proposed answers, the question itself is not a Keynesian question. This brings me to the problem that Simon Wren-Lewis at Mostly...
2014-02-12
A few excerpts from Fundamental Thoughts in Economics will suffice to make this point. Cassel was highly skeptical of political power and believed that economic analysis was necessary to check the efforts to expand government's scope when that expansion was unwarranted and the goals of the expansion were unrealistic. The observance of this rule [to minimize assumptions in modeling] enables us to...
2014-02-11
When Keynes wrote his General Theory , he emphasized solutions to the problem of depression and did not worry himself with the reason for the Great Depression. This is understandable as a change in policies contemporary to Keynes might have helped fend off further deepening of the Depression. As the gold standard was intimately tied to problems, Keynes perception of its operation might provide...
2014-02-07
One might find it peculiar that economists, professionals whose primary focus is on models of equilibrium, expend a tremendous amount of intellectual effort in attempt to explain the occurrence of non-equilibrium phenomena known as business cycles. Jason Potts observes that “it is widely held that bubbles are inconsistent with the theory of stable general equilibria in markets, and conventionally...
2014-02-01
Hawtrey and Cassel correctly explained, and even predicted, the cause of the Great Depression, but their explanation was missed overshadowed as Keynes won over his peers during the Great Depression. (If you need to get clued in on Hawtrey and Cassel, see my paper and Doug Irwin’s work ). David Glasner and Ronald Batchelder explain , However, the success of the General Theory was such that it...
2014-02-01
In 1933, Ralph Hawtrey wrote “ Public Expenditure and the Trade Depression ” in which he presented a thorough analysis of the effects of fiscal policy. The reader should note that, in it, he refers to government expenditures as “capital outlays”. Hawtrey did not meet Keynes proposal of fiscal expansion with cheer. He notes that the complications inherent in fiscal policy make it a vehicle...
2014-01-24
In his critique of the standard interpretation of the interwar gold standard, Richard Timberlake claims that “the Fed and other central banks’ deliberate management of the gold-exchange standard prevented monetary adjustment in the period 1929-33 from resembling the pattern of equilibrium of the classical gold standard ( 2007 , 326).” He goes on to equate a “true” gold standard with the classical...
2014-01-23
Hayek’s theoretical preference was to stabilize MV. This was not a policy suggestion. He wrote in Prices and Production, Such a change in the “velocity of circulation” has rightly always been considered as equivalent to a change in the amount of money in circulation, and though, for reasons which it would go too far to explain here, I am not particularly enamoured of the concept of an average...
2014-01-16
As I continue my study of the Ralph Hawtrey's analysis of the classical gold standard in The Gold Standard in Theory and Practice , I notice that he sets forward in his narrative an argument that implies the problem that I am currently extrapolating upon in an upcoming paper. (I hope to get it up on SSRN in the next week or two.) He writes: The immediate effect of the suspension of the free...
2014-01-12
I was surprised to find that Hayek proposed some of Alex-Jones-sounding talking points before the man was born. The problem assumes the greatest importance when we consider that we are probably only at the threshold of an age in which the technological possibilities of mind control are likely to grow rapidly and what may appear at first as innocuous or beneficial powers over the personality of...