In the latest IMF Finance and Development journal (March 2023), there is an interesting article…
Right becomes Left for Paul Krugman
It is Wednesday and I am catching up on other things. But In a rather extraordinary article (May 16, 2021) – Nobel prize-winning economist Paul Krugman explains why he’s more left-wing than the Modern Monetary Theory crowd – we learn about hubris. I provide some brief commentary on that claim before chilling out to some great post minimalist music.
Paul Krugman, the arch-type New Keynesian, seems to continually be seeking attention as someone that is ahead of the curve.
His record of analysis and prediction drawing on that analysis is pretty poor and I started becoming aware of that in the 1990s when he embarassed himself with his recommendations to the Japanese government as they struggled with their commercial property collapse.
Please read my blog post – Balance sheet recessions and democracy (July 3, 2009) – for more discussion on this point.
Since then I have read Krugman try to lead the “deficits are bad” chorus, then claim “deficits are good” to suit a different time, but with both calls being inappropriate at the specific times they were made.
Now he is joining up with another serial offender Larry Summers to ramp up the inflation mania and the overheating hysteria.
One has to be amazed at how these characters continue to make bad calls on economic events and their consequences but still manage to retain their very high platforms (voices) in the public debate.
The article cited above is an example of not only this phenomenon but also the massive disinformation campaign that the mainstream press is running about our work.
It claims that:
Modern Monetary Theory economists are the trailblazing left-wingers in the field.
I am a left-wing economist but MMT evades this type of categorisation or taxonomy.
To confuse the principles with the values is a basic error that those who haven’t done their research properly make.
Nobel laureate Paul Krugman says he’s farther left than them.
Okay, I suppose it means he must be further Left than me, given the article talks in aggregate group classifications (MMT economists).
So that must include me.
The article commits a further error claiming that “Both schools” (MMT and New Keynesian):
… are inspired by the great 20th-century English economist John Maynard Keynes, whose theory of fiscal stimulus influenced not only FDR’s response to the Great Depression of the 1930s, but $5 trillion of federal spending amid the coronavirus recession.
First, MMT is not inspired by Keynes.
Keynes provided me, for example, with zero inspiration. He had more influence on Randy Wray I suspect but not much on Warren Mosler.
His major work is poorly written, opaque at critical junctures, and allowed the Neoclassical synthesis to gain ascendancy, which essentially avoided any of the major insights of Keynes’ work.
The MMT body of work clearly draws on elements that appear in the work of Keynes. But for me the stuff on effective demand was well laid out decades early by Karl Marx in Theories of Surplus Value and later by – Michał Kalecki.
Keynes didn’t come into it.
Second, New Keynesian economics is the antithesis of Keynes. It neuters Keynes and builds its theoretical structure on a denial of the essential insights that were defining features of Keynes (and useful).
By marrying together the classical, long-run neutrality with short-run price inflexibility, the New Keynesians created a fictional world where fiscal policy could not have long-term effects other than to create inflation and the economy would equilibrate around a natural rate of unemployment.
This is the theoretical world that Krugman operates within and is not remotely akin to MMT nor Keynes.
Please read my blog post – Mainstream macroeconomic fads – just a waste of time (September 18, 2009) – for more discussion on this point.
So to even consider that MMT and New Keynesians are comparable with similar roots to Keynes is astoundingly ignorant.
The article reaches the depths of idiocy when we learn that being more Left than not requires one to advocate that a reliance on US central bank, :
… the Fed to handle inflation …[is] … actually a more progressive economic policy.
Apparently, it is more Left to believe that monetary policy is useful and the preferred aggregate policy tool over fiscal policy.
This is because, the reliance on monetary policy to discipline inflation provides the government greater fiscal space to pursue or “go wholeheartedly into progressive policies”.
Now think a bit about that.
First, the inflation risk is in the spending that is required to pursue full employment and particular industry policies.
At some point in the resource usage cycle, spending offsets (taxes, regulations, cuts in subsidies, spending redirection, administrative decisions, etc) will have to be made to maintain the nominal side of the economy (the spending) in tandem with the real side (the productive capacity).
If the nominal growth outstrips the real capacity then inflationary pressures can build.
Second, leaving aside the questions about the effectiveness and clarity of outcome of monetary policy shifts via interest rate adjustments for a moment, a reliance on monetary policy to discipline inflation in an environment where the government was “wholeheartedly into progressive policies” (by which I guess we are meaning expansionary spending initiatives in green transition, public health, public education, public transport, water, energy nationalisation, increased public employment, Job Guarantee, etc) would undoubtedly see the central bank continually hiking interest rates.
That would be the logic of the New Keynesian approach that married the central bank inflation priority with a large spending program on the fiscal side.
In other words, the two arms of policy would be working against each other.
Which means that if the monetary policy was effective the outcomes then we would see it pushing against fiscal policy and thwarting the expansionary impact of the policy, thus reducing its scope.
Further debtors would be screwed, home mortgage holders would be screwed, etc.
Third, but then we think that monetary policy actually operates in the opposite way to the New Keynesian conception. By pushing up business costs, it is highly likely that interest rate rises that are designed to be anti-inflationary actually add to inflationary pressures.
However, the idea that you vest the significant counter-stabilising policies responsibilities in a cabal of unelected and unaccountable central bank officials is the anathema of Left thinking.
It undermines democratic accountability by depoliticising essential macroeconomic decision-making.
I will write more about this another day.
Vaccination in Australia
Australia essentially eliminated COVID-19 from the community through restrictions and closing our external border (since March 2020).
The Government is projecting the external border will remain closed until sufficient Australians have been vaccinated, and they project that will be around mid-2022.
For me, personally, the external border closure is a real hassle, given many commitments I have abroad, which are either being put on hold, or being honoured via the Internet, in a less than satisfactory way.
The vaccination process has been a total shambles and despite the Government promising everyone will be done by October 2021, the prospects are that the process will go well into 2022.
There is a clamouring to open the external border from various capitalists who even claim we will just have to get used to people dying.
The vaccination shambles is being driven by a lack of supply (federal government fault), poor organisation (federal government largely to blame), official complacency (feds again), the AZ blood clot issue, and the government’s failure to invest in new manufacturing capacity despite being exhorted last March (2020) by experts to do so.
If the Government has have invested last year in a new plant to produce Pfizer/Moderna type vaccines the AZ reliance would have been overcome.
Their lack of vision and foresight is now the main reason we are in the predicament of having to keep our border shut while everyone else is sensing they can move to more freedom.
There was a survey published today though that suggests that 30 per cent of adults not yet vaccinated are reluctant to do so.
Only 4 per cent of the adult population are anti-vaxxers – so for them it is an absolute.
The report – Almost one-third of adult Australians say they’re unlikely to get COVID vaccination: survey (May 19, 2021).
The projections are that Australia might only reach 60 per cent coverage, which the experts claim is too low to be societally effective.
Only 14 per cent of adults in Australia said they were “extremely likely” to be covered. A further 8 per cent “very likely” and another 13 per cent “fairly likely”.
One of the problems is that Government has relied almost exclusively on the AZ vaccine and were lazy about procuring some of the other more effective and seemingly less problematic options.
Now with the health authorities determining that the risk of AZ for under 50s is too high, the Government has been caught short and is scrambling to get Pfizer for this group.
But in doing so they are now forcing the 50-70 group (me) to have the AZ vaccine, despite the blood clot risk being only a bit lower than it is for the under 50s.
50 per cent of adults said the main reason for hesitancy is the risk of side-effects and a further 38 per cent said the information provided by the Government has been inadequate.
Another 32 per cent are in the “wait until more pople have been vaccinated” category.
There is presumably a lot of overlap here in reasoning.
Further, the Government has become a systematic lying machine about almost everything (with many scandals relating to sexual abuse, monetary issues etc), so people are reluctant to believe them when they say everything is fine and AZ is safe.
On a personal note, I am in the hesitancy group and despite the Government announcing last week that 50-70s could now get vaccinated, I am many people in my category (50-70, healthy) are holding out because we refuse to be forced to take the AZ option when it appears the Pfizer option is more effective and has less known side-effects.
I would take the Pfizer option immediately as would many others. But I will not be forced to take the AZ option unless the odds change and that would only be if there was an ‘Indian’ type outbreak here.
The Government could solve most of the hesitancy immediately if it made both options available to anyone and stopped trying to force people to take an option that is less effective and higher (albeit low) risk.
But then it would have to admit it completely stuffed up the procurement process in an attempt to save outlays.
And so we are back to the “pay for it” malaise once again.
Music – to make you think about things
This is what I have been listening to while working today.
The German (now living in Britain) pianist/composer Max Richter – is one of my favourite composer/musicians.
Here is an interesting bio about him – Ed’s Notebook: The magic of Max Richter (July 31, 2020).
Max Richter told an audience once that he writes his music to help him think about issues, such as the illegal invasion of Iraq (hence his Blue Notebooks – album, released in 2004), the disaster of Kosovo and the London terrorist attacks in 2005.
This track – Mercy – comes of his new album released in 2020 – Voices – and Max Richter wants us to think about “events around Guantanamo Prison”.
This album is designed to make us think about the UN Declaration of Human Rights.
The violinist is Norwegian – Mari Samuelsen – who appeared on an earlier album – Memoryhouse – which consider the Kosovo conflict.
All his albums are excellent and if you like or want to understand post minimalism in music, you could do no better that starting with his Memoryhouse album.
That is enough for today!
(c) Copyright 2021 William Mitchell. All Rights Reserved.
This Post Has 25 Comments
The problem is that Krugman has not bothered to actually read MMT literature. That and he majored in flunkenomics.
As an Englishman I get the impression that there is a great big corporate conspiracy against AZ. I spent my entire working life in research (I am now 76) and the statistics I have seen show the AZ vaccine to be safe. The problems with the Pfizer vaccine have been far less publicised than those associated with AZ. I came out in a rash over my entire body 2 weeks after my second dose of Pfizer. My lips started to swell and an ambulance was dispatched to my home. Antihistamine sorted the problem, the rash cleared after a week. These sort of problems are commonplace and were reported on the ZOE App. Your response Bill seems out of all proportion to the problem and I begin to wonder about conclusions you draw in economics if you fall in with the hysterical response to AZ. We have the ludicrous situation where the EU are threatening to sue the UK over not exporting AZ but are then refusing to use it. I can’t defend the Johnson government on any aspect of its Covid handling but the NHS appear to have got this right. I don’t give a toss if other countries refuse to use AZ because it means there is more for us and the general attitude in the UK is to get the job done. My wife and daughter have both had AZ with no ill effects, I had Pfizer and a very unpleasant rash. I don’t think the game is by any means over but any problems with any of the vaccines are totally dwarfed in this country by the 130,000 deaths. Our numbers are flattening while those in Europe are still increasing so despite Johnson consistently making the wrong calls he has struck lucky with the vaccination programme.
It’s funny how we can get a free lesson on the relativity of risk and how slightly different circumstances change the perceptions. In the EU, AZ was fine, because Covid was more likely to give you the same type of issues; in AUS, it never was never a favorable trade, and it also isn’t anymore in some places in the EU as situations change (including AZ risk assessment. Meanwhile, we must also take into account the risks of not going back to normal as fast as possible, including lack of trust in democratic institutions, but again we are faced with vastly different circumstances. The US, somehow, keeps not having to deal with hard choices.
I was not very concerned about my father’s vaccine, and still am not, but I can see a having a different opinion in a very different situation.
As to Krugman, oh, look, back to zigging this week, after a while pretending to be for nice things. If doing this still works for him, why change it now, am I right?
Krugman headache (as for the rest of the mainstream crowd) is the shadow of loosing credibility, as proof mounts, on an everyday basis, against the lies they are selling for the last 40 years.
Economics is not science.
Nothing can model with mathematical precision how millions of people interact with which other.
We have, however, many tools to predict economic evolution (statistics) and tools to fight back bad outcomes (policies).
Mainstream economists know this and they work with those tools, but deny the need to use policy to fight back bad outcomes, unless the top elites are in trouble.
And then they will uphold deficits, debt or even inflation, if that is necessary to sustain their good life and the good life of those they work for.
That’s the fundamental diference with MMT.
MMT is there for everybody, and nobody is worried about loosing credibility, because nobody is trying to sell lies.
Bill, I think we can allow Keynes a little latitude for not nipping the neoclassical synthesis in the bud, as it were. It could be argued, and has been, that he was thinking about the revisions he was going to make to his General Theory when he produced the revised edition. But war work and his death intervened.
As for his influence on FDR, I have read a letter he wrote to Roosevelt in the early thirties which basically contended that no one actually knew what would really work in addressing the depression so experimentation, which he thought Roosevelt was undertaking, was a reasonable way to go. It is doubtful Roosevelt read the General Theory nor is it likely that Harry Hopkins, Roosevelt’s most influential aide, did either. Its writing style would be offputting if nothiing else. So, any influence by Keynes would have been personal.
I would like to put in a vote for Abba Lerner and Wynne Godley as MMT-relevant, though I know you have written about them before.
First, we in the UK, quite rightly drew some comfort at our vaccinations compared to the idiocy of the EU with their about-turns over the AZ vaccine, with its risks for both over 50s and under 50s miniscule in comparison to covid-19. Then our government, whose response to the covid crisis has been, let’s chance it until forced otherwise, suddenly got possessed of a vision of ambulance chasing lawyers, and decided that for those adults under 30 and not with underlying health conditions (which rules out a lot that are already obese before 30), the risk of dying from covid was so low that it was even lower than the risk of post AZ jab blood-clots. So these people may now make their ‘informed’ choice to refuse to be vaccinated, as with more staunch anti-vaxers, until they can get their vaccine of choice. And rather more importantly, it has sown an unnecessary seed of doubt in the minds of 30-50 year olds and those 50+. Here’s hoping I’ll be rather safer as the Indian variant takes over as the dominant strain here shortly, having had two shots of the AZ, and my mother too, who had a first shot of Pfizer and a 2nd shot of AZ (due to cock-up rather than for test purposes).
MMT revealed the unexplored fiscal space that governments were forced to occupy by the pandemic. If the pandemic now wanes, then there will be a retreat back into familiar, austere monetary territory. If the pandemic doesn’t wane but returns in intense, unpredictable waves (yes, possibly even in Australia), then the fiscal space revealed by MMT will become the new governmental normal. Whichever way it goes, people like Krugman will claim they had been there all along.
To be fair, the Australian government has managed the covid crisis far better than the US and most European governments. That is what gives you the luxury to be hesitant about a particular vaccine. I suspect that if you were in the US or UK you would do like I did- get whatever vaccine was available ASAP.
Maybe it would be more productive if great minds were thinking along the lines of what to replace a system too few people can participate in as players with? The entry level price of reproducing fresh new capitalists has become too high for nearly everyone, nominally as individuals, and collectively in real terms.
Once the environmental and societal impacts of a system that can’t function without excessive material production and consumption to support growth+profits are fully accounted for, what we’re doing doesn’t meet any reasonable measure of fitness for purpose economically and Nobel prizes notwithstanding can’t be reconfigured so it does.
I held out for my Pfizer jab too. It is clearly the more effective vaccine and somehow it seems inappropriate to deliver anything but the most effective available treatment to all.
Government will “go wholeheartedly into progressive policies.” Pigs can also fly. =)
If I think about it, its actually pretty silly to make inflation out to be a huge deal other than a few selected goods/services with 21st century technology in an advanced country. Even with those few selected goods, supplies will go up to match demand over the long run. It is silly to presume capitalists won’t seek to produce more when demand is high over time (see what length they’d go in industrial England to chase profits). I think Marx laid it out pretty well in Value, Price, and Profit. Also, the most prominent feature of capitalism is capitalist crises and they are created by OVER-production.
Of course, I am going by MMT’s view of inflation.
if supplies cannot rise to meet demand, then its a real resource problem, which can be remedied with governmental planning and direct training/investing, which of course cannot be done because we live under a bourgeois dictatorship. Unlike alot of people, I really think USA has a huge real resource problem as in we do not have enough people who are well trained or good plants to manufacture things. We simply have ruined our youth with huge debts and low pay jobs that does NOT allow them to afford to improve their skills. However, unlike a lot of people, i don’t think lack of real capacity is a strictly bad thing because USA is largely a rogue state. For those goods that we buy from other countries, its not like Americans cannot rely on free lunch as we always have. Other countries MUST buy our treasury bonds to keep the game going. Finally, I think the 16th century mercantilists in power and plenty of intellectuals are too caught up by money (which is simply said to be certificates entitling one to social wealth by Lenin) to worry about real resources.
Certainly, its pretty clear that the first constraint is going to be Earth&climate and not labor-power or technological level. Last time i checked, unemployment & underemployment still huge in every country.
The thing with vaccines is that at some point you have to consider what are your responsibilities to society in general. I did not get the vaccine because I was extremely concerned about my own health if I contracted the disease- relatively few people of my age and health status suffer the worst effects of the corona virus. But I did not want at all to end up being a cause for other more vulnerable people to contract it and that outweighed my dislike of getting stuck with needles.
At the same time I think everyone should be free to make their own evaluations of their personal risk and social responsibilities regarding this. And it just so happened that they were giving the Pfizer shot the day I got scheduled for- so I don’t want to imply that others should settle for what they consider a substandard product if they have made their own evaluations.
As far as the Pfizer shots- I had no side effects besides a sore arm for a few days after each shot and it has been 5 weeks since the second shot. I very much hope the thing works and that the vaccines become available throughout the world quickly.
One of the few things Donald Trump did right as far as this pandemic was having the federal government help pay for vaccine development and promise to buy any effective product. It boggles my mind that US Republicans seem to be more averse to the vaccines that Trump’s policy helped deliver.
My parents (in their 70’s) also had concerns about the AZ vaccine but have received their initial jab around 5 weeks ago with no ill effects at all.
The chances of them dying if they contracted Covid are probably around a thousand times greater than the chance of suffering blood clots from the vaccine – Dad in particular has respiratory issues and his chances of surviving Covid would have been slim at best. His chances are probably already much better after the dose he has received and will be better again following the second shot.
The media has unfortunately distorted the issue to such an extent that an effective vaccination programme now appears threatened. I hear little now about the millions who have died (and continue to die) of Covid but continually hear about the tiny handful who have died from vaccine complications – a massive inversion of clear perspective is being pushed.
It’s similar to a situation I brought to Bill’s attention many years ago when the Australian government introduced a home insulation programme as part of it’s stimulus package to ward off the Global Financial Crisis – the media generated mass-hysteria regarding a number of fires and electrocutions as a result of the programme, convincing the public – Bill included at the time – the the programme was a disaster that fried people and burned down houses everywhere. What they “conveniently forgot” to mention was the discrepancy between the amount of insulation work normally done and the amount done under the programme. The facts transpired that we were not seeing an out-of-control disaster unfolding, we were merely seeing around 15 normal years worth of insulation work – and therefore, 15 years worth of unfortunate and even tragic but statistically normal incidents – occurring in the space of 12 months, under the intense scrutiny of a hostile media.
Nothing more untoward than that. And yet it caused the shutdown of something that was in fact doing good by stimulating the economy in an economically-shocked world and helping make Australian houses more energy-efficient for the longer term.
Doctors have pointed out that the chances of developing blood clots from taking the contraceptive pill are hundreds of times higher than from the AZ vaccine, yet very large numbers of Australian women continue to take the risk without questioning it. This is the level of distortion of perspective we have reached over the AZ vaccine. https://theconversation.com/blood-clot-risks-comparing-the-astrazeneca-vaccine-and-the-contraceptive-pill-158652
Not only am I at vastly higher risk of dying from Covid if I contract it than from extremely rare vaccine side-effects, I also risk infecting others and being part of a chain of infection that may sicken and kill other people and throw the normal functioning of society into disarray. I think I will elect to accept the vaccine when it becomes available to me.
While major vaccine hesitancy and dangerously low vaccination rates persist in this country, it’s pointless talking about re-opening international borders – the outcome would be a given.
I’m afraid Bill that you appear to have misunderstood the position regarding not giving the AZ vaccine to younger people. This has nothing to do with the fact that younger people are more likely to develop blood clots but rather that the risk of dying from clots outweighs the risk of dying from covid in younger people. As a previous commenter has said this does mean people may cast aspersions on your understanding of economics (which I do not).
Dear All (at various times)
I think those that have indicated I am ignorant of the realities of the AZ vaccine have misrepresented what I wrote. It is about odds and costs/benefits. The purpose of what I wrote was to illustrate how worrying about the fiscal impacts (trying to ‘save’ public money in the belief that it is in finite supply) has created a dysfunctional situation in Australia with respect to the vaccine rollout such that now a huge proportion of Australians are reluctant to participate for the time being.
The odds and cost/benefits situation is this.
1. I have a much lower probability of getting COVID or spreading it at present, given the success of the lockdowns, that I have of getting sick from having the AZ vaccine, even though the latter probability is small but not non-zero. The probability of death from taking AZ is small but not non-zero. The probability of getting COVID at present for me is probably zero.
2. The benefits from AZ are lower, so the science tells us, than if we had Pfizer. It appears that later in the year, there will be increased supply of Pfizer and therefore the probability of people being given a choice. At present, the government is using the small stock of Pfizer to inoculate the under-50 age group, which they have assessed is at greater risk from AZ side effects. So a reasonable expectation is that there will be broader availability of Pfizer later in the year and that the Government will keep the external borders closed well into 2022.
3.It doesn’t make sense to therefore take the small risk and take the AZ option at present given the odds and the costs/benefits. It makes much more sense for people in my age group to wait for the increased availability of Pfizer later in the year, given the expectation of risk of infection is unlikely to change between now and then.
4. However, if the probabilities of getting and/or spreading the virus changed for me then the decision-making parameters are altered and the decision that is sensible now might change. If I was in the UK, US, India etc then the decision parameters would be very different to the current situation in Australia.
5. If the Government had done the right thing last year and invested in local Pfizer/Moderna or related manufacturing and/or procured supply when they had the chance, the take up in Australia would be much higher.
6. They tried to ‘save’ money and by forcing my age group to only have the AZ option, they have created a situation where individuals like me do the calculations as above and wait.
Simple as that.
I am not an anti-vaxxer. Far from it.
Yes maybe you have a low chance of contracting the virus- but that is because your government didn’t fuck up and you haven’t had nearly 600,000 people die from it. Occasionally you have to give credit where it is due and Australia seems to deserve some credit.
To Bill’s point about relative risks, in Canada I took the AZ when it was offered early to my age cohort (55-65) because unlike Australia, we were not successful at preventing the virus from taking hold (so my risk of infection was real, and the health outcomes for our age group contracting the virus are not promising). The alternative would have been to wait for Pfizer or Moderna to become available for my age group. It’s still not clear whether or not AZ will be available for my second dose or if I’ll end up with a mix-and-match pairing.
As for influences on FDR’s policies, one to investigate is Marriner Eccles, a Utah banker who went to the US Treasury briefly and was appointed by Roosevelt as chairman of the US Fed, serving 4 terms.
eg, I meant to mention Marriner Eccles along with Harry Hopkins in my comment on FDR but forgot. Sorry, but thanks for bringing him up.
A mix and match of vaccines is not recommeded in general.
I took the AZ vaccine, too, because the situation in the UK is terrible. An executive where every minister lies about everything. You can’t believe a single thing they say about anything. As Bill did, you have to make your own risk assessment. And some people are better at it than others, which leads to differiing individual outcomes, which doesn’t help the social sphere, does it. Infuriating and depressing simultaneously.
Dear Jerry Brown (at 2021/05/20 at 1:04 pm)
Much of the credit for eliminating the community transmission in Australia is due to State governments not the Federal government. It was they who imposed the lockdowns and internal border restrictions.
The neoliberal Federal government berated them for doing so.
To add some additional info that affects people´s opinions in Australia.
Number of deaths from Covid in Australia in 2021 – 1 (on April 13)
Number of deaths from blood clots confirmed as being caused by AZ vaccine in Australia in 2021 – 1
Number of people on ventilators in Australia today being treated for covid – 0
Number of people in ICU in Australia today being treated for covid – 2
Number of deaths being investigated in Australia as being caused by blood clots cause by AZ vaccine – 1
Number of people in ICU in Australia today being treated as suspected blood clots from AZ vaccine – 1.
Norway and Denmark have stopped using the AZ vaccine based on a risk/benefit assessment.
At least 10 other countries have placed restrictions on using it
Australia is in a relatively good position regarding this virus because government, at whatever level, acted effectively to protect its citizens. Unless Australians are just naturally way tougher than the rest of us…
So your evaluations of risk involved with vaccines is very rationally different. You are in an enviable position and can afford to take some time and sort out what you want to do because you don’t have hundreds or thousands of people dying every day from it. But if you want to complain about your travel restrictions at the same time as complaining about your vaccination options- well I don’t know what to say about that.
“The benefits from AZ are lower, so the science tells us, than if we had Pfizer”
That has been updated today with the field results in the UK. There is no significant difference.
I tried the URL to businessinsider.com.au in order to play the video of the Krugman interview, but was prevented from doing so by virtue of being in the U.S. I then tried businessinsider.com — but the U.S. page did not contain the video at all!
The reason I was so eager to watch the video is that in such interviews there’s always a little dance between interviewer and interviewee, and unless you can read a transcript or watch a video, it can be difficult to determine who’s leading in that dance and who’s following. This past week, for example, there was a Bloomberg podcast interviewing Jared Bernstein, member of Biden’s Council of Economic Advisors. The interviewers seemed insistent on trying to get Bernstein to say that the Biden administration was “doing MMT.” While Bernstein criticized MMT, for the most part he did not take the interviewers’ bait.
Roosevelt read the Keynes letter before it was published in the NYT and replied to Keynes through Felix Frankfurter (who had asked Keynes to write it) in late 1933. (FDR basically agreed with Keynes.) Elliott & James Roosevelt also attest to Roosevelt’s early interest in Keynes- who was the leader, or first among equals, of a great number of other thinkers (& even more cranks and flakes 🙂 ) – anyone not brain-dead, really – trying to think about how to deal with the Depression.
Roosevelt’s main early (from his candidacy on) economic advisers/theorists were his Brains Trusters – Raymond Moley & Rexford Tugwell, Tugwell especially sympathetic to Keynes’s ideas. A bit later, and to the end, his main economic adviser, the model of the modern Council of Economic Advisers was Lauchlin Currie, who called himself “a Keynesian from way back” (that is before the General Theory) – and who wrote a book partially anticipating it. Roosevelt himself did commit to deficit spending if necessary for employment before he was elected, in his Forbes Field and Commonwealth Club speeches.
The upshot is that while it was mostly not -directly- inspired by Keynes’s General Theory – how could it? – the New Deal started in 1933, the General Theory was published in 1936 – the most serious, trusted and powerful relevant New Dealers respected, read and/or knew Keynes. Surely Roosevelt and they became more confident and decisive (and attentive once the ideas worked) because their pragmatic actions were backed up by recommendations from and the theory being developed in the most respected halls of academia.
Some Guy, we mustn’t forget that Roosevelt lost his nerve in 1937, which resulted in a recession, whereby R applied more fiscal stimulus once again soon after whereupon the economy improved. His truly Keynesian moment came when he began war preparations and the spending shot up dramatically. It could be argued that he was somewhat timid previously. Whatever the case may be, FDR was a hell of a lot better than Hoover.
Larry: I disagree with such “mustn’t forgets”. For they are heard everywhere, they are NOT what is forgotten. While what I have been saying is. The “truly Keynesian moment” was the beginning of the New Deal, with the work programs like the CCC which started hiring in the first months. Coming from the higher New Deal base, the WWII increase in government was not as dramatic as the Pre-New Deal to New Deal increase.
As Richard Walker says in From the New Deal to the Green New Deal at his Living New Deal site.
“Nevertheless, the economy recovered smartly under the New Deal – which did not ‘fail’ to solve the Great Depression, as often claimed. (By most every writer, past and present, of all political stripes, creating one of the most pernicious myths about the New Deal.) GDP grew at an average rate of around 9% and reached the peak of 1929 by 1939 and the pre-depression trajectory by 1941 – before the US entered the war. Contrary to popular opinion, the war did not solve the Great Depression, but it did absorb the last of the unemployed by recruiting millions into the military.”
or Mario DiNunzio- Franklin D. Roosevelt & the Third American Revolution- Praeger (2011)
“It is often repeated with only casual attention to accuracy that the New Deal failed to end the Great Depression, whose malaise was cured only by the massive spending for World War II. It is a distortion that resists amendment.”
But these are very rare corrections to omnipresent distortions.
The Roosevelt Recession was more from over-optimistic misjudgment and other unfortunately coincidental factors rather than losing nerve exactly. The new economic understanding was not sufficiently deep, so Roosevelt prematurely favored withdrawing economic support when it seemed recovery was nearly complete.
Today’s dominant narrative of pernicious myths is propagated under the guise of dispelling accurate history which it smears as “myths” & “nostalgia”. It is so bad that it even infects good researchers. Example – Richard Walker’s lines immediately before my quote from have errors (anti FDR/New Deal of course) which my first comment here refuted! Basically, the more you study the era, the better Roosevelt looks and the worse almost all modern historians and economists of all political stripes look.
Currie was Eccles’s protege. Hopkins was the most important figure of all and he was always on the big – quick- spender Keynesian side – because he was administering the spending. But he wasn’t the most influential at the beginning, when he was executing policy more than formulating it.
Concerning Bill’s imho misguided history of Keynes, Kalecki and Marx and their influence – not shared by most other MMTers: That Keynes “allowed the Neoclassical synthesis to gain ascendancy” is unjust, at worst a flaw much smaller than his contributions. And which had trivial influence compared to the catastrophic ones of Marx’s own gross errors in monetary theory, whose damage continues to the present day! Britain, France & Germany had all had chances for a “New Deal” under labor or Marxist/socialist governments. But largely from dogmatically following Marx’s worst blunders and ignoring his insights, unlike the USA they obeyed sound finance. With catastrophic results culminating in WWII. Marx’s fetishism of gold and sound finance allied his followers with the deepest reactionaries, to the bemusement of commentators of the 30s. Kalecki (or say Wladimir Woytinsky) was in an obscure minority of soft money (Western) Marxists, just as post-Keynesians or MMTers are a minority of self-styled “Keynesians” or economists today.
It took some time for the New Deal economists, for Keynes, for Roosevelt to completely arrive at genuine Keynesian economics. But they did – by the end, they were all at a good working approximation of MMT. The bible of the late New Deal (FDR’s description) was “An Economic Program for American Democracy- Vanguard Press (1938)” by Richard Gilbert, George Hildebrand Jr, Arthur Stuart, Maxine & Paul Sweezy, Lorie Tarshis, John D. Wilson. It is available at the internet archive and at the site Reviving Growth Keynesianism web site, which I highly recommend. Short and still very worthwhile reading, much more so than any economic history of the era.