Keynes vs. Hayek, Now With More Boxing…

You may have seen this already as its been on a lot of blogs, but this has a little twist in that Econogirl (the author of this repost) is actually in the video.

Not a bad rap.

You may recall from earlier that I went down to New Jersey a couple of weekends ago to attend the taping of the second installment of the Keynes/Hayek rap video. (You can see some background and commentary on the first video here.) You probably don’t recall that I had a bit of a Twitter spat with John Papola, the director of the series of videos:

me: John Papola: “This is not an unbiased production. When Hayek speaks, you’re like ‘yes.’ When Keynes speaks, you’re like ‘no.’” Sigh.
John: I’m proud to be honest about my position instead of put forward some pretense of “objectivity” that is clearly impossible.
John: reserve judgment on the treatment of Keynes until you see the final video. On-set direction is not the same thing as editing.

Fair enough, and John’s not wrong. Most of the words are, in fact, accurate- the only thing that really caught my attention was the statement that Keynes didn’t care where government spending goes. I would like to think that reasonable Keynesians would agree that it’s strictly better to spend on useful things than on stupid things. That said, I am not sure what Keynes himself had to sat on the matter. I also think it’s appropriate that I watched this immediately after going to a talk by Greg Mankiw about how there is a “case for humility” in macroeconomics, since there is still a lot that we don’t know about trying to regulate business cycles. He likened the economist/economy relationship to a doctor/patient relationship in which the doctor hasn’t seen enough patients like the current one in order to do a proper clinical trial. If the medicine that the doctor gives initially doesn’t work, is it because the doctor prescribed the wrong medicine or is it because the patient was sicker than the doctor realized and the dose wasn’t high enough? It’s a difficult problem, and it kind of makes me want to see Dr. House as an economist.

Anyway, without further ado, here’s the new video:

Yep, that’s my name in the credits. Did you see me? Yeah, me neither. I’ll give you a hint- I’m in the crowd in the boxing scene, and I’m wearing the same dress as in the picture on my Facebook page. I had asked if I could be one of the congresspeople and was told that I could be an intern or a girlfriend. I guess that’s a compliment in a weird way, but I would like to reiterate that I am in fact old enough to be a member of congress.

I would also like to point out that, given that I saw what John had to work with in terms of number of extras and such, the video is very, very well done. The main actors (Billy and Adam) are super nice, and apparently they make the rap thing a habit. I think the best part was watching the boxing coach teaching Billy and Adam how to fake box, since, despite not being “real”, it looked completely exhausting. Oh, and I got to give out stickers:

I’m not sure how I feel about that combination of stickers, but I guess I’ll take it.

Keynes vs. Hayek, Now With More Boxing…
econgirl
Sat, 30 Apr 2011 17:18:44 GMT

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Did Keynes Support Having a “Central Plan”?

Keynes seems to a an all purpose leftist boogeyman in the conservative/libertarian narrative these days.  He certainly believed in using the power of state to augment “demand” broadly speaking, but that not equivalent to wanting micromanage the private economy with the power of the state.  See the following:

That he did is charged by "Hayek" in the freshly released "Keynes versus Hayek: Round 2" at http://www.youtube.com/watch?v=GTQnarzmTOc , put out by Russ Roberts and John Papola, with backing from the Mercatus Center at George Mason. Like its predecssor, it definitely sides with Hayek, but is also highly hilarious, with pretty much anybody able to enjoy Papola playing Bernanke handing out wads of cash to bankers, and some other goofy stuff, such as libertarian anarchist Ed Stringham eagerly interviewing "Keynes" after he is declared the winner in a boxing match after being knocked down by "Hayek."
However, I do find it disturbing that increasingly Austrians and some others have taken to charging Keynes with having supported "central planning," as indeed done in this video. Is this correct? I think that the answer is largely "no," with it certainly being that answer if one means by that command central planning of the Soviet type that Hayek criticized in his Road to Serfdom (which Keynes praised, btw, when it first came out).
I think the strongest evidence for Keynes supporting central planning comes from two sources, which I shall quote. The first comes from his 1920s essay, "The End of Laissez-Faire," which has been identified as the inspiration for the movement for indicative (non-command) planning that was seen after WW II in such countries as France, Japan, India, South Korea, and some other places, although not UK or US.
After noting that uncertainty can lead to inequality of wealth and the unemployment of labor, he states: "I believe that the cure for these things is partly to be sought in the deliberate control of the currency and of credit by a central institution, ans partly in the collection and dissemination on a great scale of data relating to the business situation, including the full publicity, by law if necessary, of all business facts which it is useful to know. These measures would involve Society in exercising directive intelligence through some appropriate organ of action over many of the inner intricacies of private business, yet it would leave private initiative and enterprise unhindered." (p. 318 from Essays in Persuasion)
One can argue that Keynes is offering a hopeless contradiction when calling for this "directive intelligence," probably the closest he came anywhere to command, with his simultaneous limit on that regarding leaving "private initiative and enterprise unhindered," this latter certainly not fitting with the full-blowin command socialist model at all.
Regarding the information gathering, well, of course that is now generally done in most higher income economies, and many have argued that this was the essence of the indicative planning operations carried out in many countries, when they worked at their best, as some claim was the case in France in the 1950s, when businesspeople needed some sort of external push to revive their animal spirits, to use Keynesian language, and that seeing projections of demands by others helped provide this.
The other passage that some have pointed to as possibly suggesting a central planner tendency by Keynes comes from the final chapter of the General Theory, p. 378:
"Furthermore, it seems unlikely that the influence of of banking policy on the rate of interest will be sufficient by itself to determine an optimum rate of investmenet. I conceive, therefore, that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which publich authority will co-operate with private intiative. But beyond this no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community."
One can argue again here that Keynes is setting himself up for some sort of impossible contradiction, and Hayek may well have argued that such control of investment would lead to his road to serfdom slippery slope. However, it is clear from later passages that what Keynes had in mind was ultimately the control of the aggregate of investment rather than of its specific forms or details.
These almost certainly provide the strongest evidence for Keynes supposedly supporting there being a "central plan." But it looks at most, putting the two together, like one that involves lots of provision of information and data along with some sort of control of aggregate investment, while leaving most of the decisions up to "private initiative." This hardly constitutes a "central plan," and certainly not one of the sort that the actually existing Hayek criticized. The fictional one in the video should have spoken more carefully.

Did Keynes Support Having a "Central Plan"?
Barkley Rosser
Fri, 29 Apr 2011 19:12:00 GMT