Greetings.

"And Chicago school economics is not a religion?"  (Sumitra Shah)


I would have said a cult, rather than a religion, 
except that these days Milton Friedman is 
regarded as a moderate compared to the later 
champions of the policy ineffectiveness postulate.

Steve Kates correctly writes, "The history of 
economics is a necessary part of economics." More 
specifically, may I ask about Chicago and their 
position on what Keynes really said in relation, 
directly or indirectly, to Say's Law? Among many 
of the claims made recently about Keynes and 
Keynesians during the on-line debate at the 
Economist on whether we are Keynesians now,
John Cochrane contributed:

1.
“Nobody is Keynesian now, really. Keynes 
distrusted investment [this means what?! BL] and 
did not think about growth. … Keynes recommended 
that Britain pay for the second world war with taxes.”
[BL Contrast How to Pay for the War! What are 
they teaching at Chicago? Serious question.]

2.
“Robert Barro's Ricardian equivalence theorem was 
one nail in the coffin. This theorem says that 
stimulus cannot work because people know their 
taxes must rise in the future. Now, one can argue 
with that result. Perhaps more people ignore the 
fact that taxes will go up than overestimate 
those tax increases. But once enlightened, we 
cannot ignore this central question… [G]overnment 
must fool people into forgetting about future 
taxes, an issue Keynes and Keynesians never thought of.”

Is this true? Was Ricardo’s discussion entirely 
overlooked in the late 20s and the 30s? Were 
conservatives not making this rhetorical point at 
the time? Did classical economists of the era likewise never think of this?


Bruce Littleboy