Here's a message for the list from Thomas Humphrey. HB


>>> While backing off not one whit from the gist of my message, I must say
>>> that I agree with many of the points James Ahiakpor makes. Namely, I agree
>>> that:  (1) There are weaknesses in the original Keynesian framework,
>>> weaknesses that James identifies splendidly. But many of these weaknesses
>>> have been addressed and corrected by later economists writing in the
>>> Keynesian tradition. And even Friedman, when spelling out his analytical
>>> framework in a JPE article of the early 1970s employed a version of the
>>> IS-LM model that James condemns. (2) Keynes was wrong (and a poor historian
>>> of thought at that) in attributing to classical economists the notion that
>>> the economy is always in full employment. Indeed, contrary to Keynes's
>>> story, early 19th century classicals such as Henry Thornton and Thomas
>>> Attwood, among others, delivered some of the best and most pertinent
>>> analyses of the causes of, consequences of, and remedies for excess
>>> unemployment ever written. Classicals were well aware of unemployment and
>>> the misery and degradation it produces.
>>>
>>> I also as an unreconstructed quantity theorist agree that the price level
>>> is determined by the supply of and demand for real money balances, and that
>>> when the Fed fails to accommodate panic-driven increases in the demand for
>>> real balances, the result in the US economy with sticky nominal wages will
>>> be a decline in the level of real economic activity. The recession of 2008-9
>>> was due to the Fed's failure to increase the supply of broad money
>>> sufficiently to accommodate the public's increased demand for it.
>>>
>>> None of this invalidates my point that research employing the Keynesian
>>> framework was, on net, a substantial advance in economic analysis, an
>>> advance that we shouldn't throw away.
>>> ---Tom Humphrey
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