Just some last pointers to Thomas Humphrey who wrote:
> 2. James calls our attention to Viner's and Knight's book review
> comments on The General Theory regarding Keynes's unnecessarily
> creative coinage of new terms for old concepts. Fair enough. But that
> does not mean that Keynes's classical reviewers, Viner especially,
> judged The General Theory to be misleading and useless. On the
> contrary, as David Laidler notes on page 283 of his Fabricating the
> Keynesian Revolution, Viner, together with Hawtrey, Robertson, and
> Pigou "all endorsed Keynes's claims to have clarified certain
> theoretical questions in a useful way." For the most part, Keynes's
> classical critics judged The General Theory to be a novel, useful, but
> hardly revolutionary, contribution to the ongoing literature on what
> we now call macroeconomics.
>
Rather than relying David Laidler's (1999) view of Keynes's reviewers,
Tom should read the reviews himself. They are particularly scathing,
including Pigou (1936) noting that, for someone "whose powers of
exposition enabled him to write on the philosophy of Probability in a
way that amateurs could follow," Keynes's muddled arguments in the
/General Theory/ were an indication of a confused mind. Robertson
(1937) also called Keynes's definitions of finance and liquidity "verbal
monstrosities." Robertson's /Essays in Monetary Theory/ (1940) and
/Essays in Money and Interest/ (1966) are mostly in criticism of
Keynes's macroeconomics. Another of the Chicago reviewers of Keynes's
/General Theory/ from whom Friedman could have benefited was Henry Simon
(1936) who observed that Keynes "attacks, not the bad applications of
traditional theory, but the theory itself -- with results which will
impress only the incompetent." Certainly, J.R. Hicks and Roy Harrod
were among the exceptions.
> 4. I stand by my argument that the Fed caused the recession by failing
> to expand broad money sufficiently to match the public's increased
> demand for that stock. The "proof" is that the level of total nominal
> spending, or MV (where V is the circulation velocity of money M) is
> well below its pre-slump trend level. Owing to the public's desire to
> hold the safest liquid asset, the demand for money has outrun the
> supply. The resulting excess demand for money has resulted in a
> slowing of expenditures and economic activity as the public attempts
> to build its cash balance and so eliminate the excess demand for
> money. In other words, V (the obverse of the demand for money) has
> slowed to such an extent that even with an increased M, the product MV
> hasn't kept pace with its level on the pre-slump path. The Fed could
> restore spending and economic activity to its pre-slump path by
> increasing M sufficiently to counter the slowing of V.
>
If Tom's reasoning were correct, the price level in the U.S. should have
been falling since the fall of 2008. Again, the data contradict Tom's
claim.
> 5. Paul Krugman is not my hero. He writes a perceptive and stimulating
> blog and column. And I agree with James and Greg Mankiw that David
> Hume was one of the greatest monetary theorists who ever lived, and
> certainly Keynes's equal as a monetary theorist.
>
Keynes (1939, xxxiv) writes: "The following analysis [in the /General
Theory/] registers my final escape from the confusions of the Quantity
Theory, which once entangled me. I regard the price level as a whole as
being determined in precisely the same way as individual prices; that is
to say, under the influence of supply and demand [for output]." This is
in contradiction to Hume's Quantity Theory by which the price level is
determined by the supply and demand for money (currency). And yet Tom
considers "David Hume ... one of the greatest monetary theorists who
ever lived, and certainly Keynes's equal as a monetary theorist"? I
find a contradiction here.
James Ahiakpor
--
James C.W. Ahiakpor, Ph.D.
Professor
Department of Economics
California State University, East Bay
Hayward, CA 94542
(510) 885-3137 Work
(510) 885-4796 Fax (Not Private)
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