Papola's Second Masterpiece

Regarding the criticisms of “planning” in our film…

Keynesianism has a much closer intellectual, methodological and historical connection to central planning than your post or modern keynesians wish to acknowledge.

First off, our “Keynes” is not meant to be an exact replication of the historical Keynes. Such a thin is impossible. How, for example, could our Keynes talk about the Great Recession, given that he’s been dead since 1946? It’s called “creative license”. Our “Hayek” isn’t a pure Hayek either. There’s a ton of Robert Higgs in our “Hayek” verses regarding WWII. But that’s also besides the central point. There’s much more to our lyrics and I really have no need to pull the “creative license” card at all.

Our “Keynes” is an amalgam of the Keynesian view as we see it. Keynes did go much farther than a narrow technocratic goal of nominal spending stabilization (something which Hayek had actually also advocated via monetary policy aka nominal income targeting). Keynes also called for the complete “socialization of investment”. More importantly with regard to our lyrics, Keynesians like Abba Lerner, James K. Galbraith (and his son) made and make explicit calls for planning. Keynesian economist Abram Bergson apparently believed that the market socialists were right. Paul Samuelson was most certainly an apologist for central planning in his textbooks, noting repeatedly how fast the USSR was growing (and continually moving his graph forward regarding when the USSR would overtake the US in GDP). Some “science”.

Here’s Samuelson from his 1985 text (!!!):

But it would be misleading to dwell on the shortcomings. Every economy has its contradictions and difficulties with incentives—witness the paradoxes raised by the separation of ownership and control in America. . . . What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth.

Here’s an excerpt from James K. Galbraith’s 2008 Harpers article “Plan”:

“Markets do not design new systems—new patterns of transport and housing, new technologies for electric power, for vehicles, for heating and cooling. To design a system, to put the pieces together, to identify the most promising lines of attack and take steps to achieve them: that is the planner’s role.”

This statement appears to me to be quite easily falsified. Apple’s iPad is reshaping the way information is consumed and created. It is an entirely new “system”. No need for the “planner” there. White LED lighting was not the product of a state planner. The pathway of the internet itself and the emergence of the protocols and standards in use today are not the product of a planner. They are emergent through a competitive process. This top-down view of economics as a “system” is absolutely the fatal conceit we are criticizing.

Moreover, when a keynesian claims that fiscal stimulus can restore full employment, there is an assumption that the structure of production this spending produces will be self-sustaining. If keynesian administrators are capable of systematically of deciding where to allocate resources while disregarding (or at least downplaying) prices and profits, socialism itself should work. The socialist calculation debate applies to the administrators of keynesian multi-trillion dollar spending programs. In reality, however, a program like “cash for clunkers” or the “affordable homes” subsidies provide little more than a temporary bump, pulling decisions into the present and leaving the future poorer and more indebted. That keynesian will handwave away this point and claim that they don’t care where the spending goes doesn’t change the fact that it will, in fact, go somewhere and have real impacts.

As Hayek pointed out, “Mr. Keynes aggregates conceal the most fundamental mechanisms of change”

Did Keynes advocate totalitarian central planning with his theory? No. Did he say it was more easily adapted to a totalitarian state? Yes. Have many of his most prominent followers advocated central planning? Yes.

So when our “Hayek” says “not your central plan” and “the question I ponder is who plans for whom”… we are entirely within the realm of this broader debate and completely within the context in which Hayek delivered his famed “The Pretense of Knowledge” lecture.

Lastly… yes is sure sounds lovely to claim that you have an answer for “what would YOU do to help those unemployed”. Our answer, which is hayekian and in my opinion more accurate, is that the question itself assumes that one man, group or set of government policies can actually provide a real answer when it is quite probably that there is no answer at all. The economy is organic. It is like a rainforest, not a machine or a “system”. Instead, our answer is to provide stable rules and allow real market prices so prosperity can emerge and cut short the crisis. That is a real answer. There are real policy implications for that answer. That’s no cop-out, even if it is frustrating for “policy makers” who stand to personally benefit from looking like they are “doing something”.

Never mind that the “doing something” that actually got done surely hasn’t worked by any reasonable measure. Unemployment is higher now than the “if we do nothing” projections. The “things would have been worse” analysis coming from the Blinders and Zandis of the world appear to be an unscientific backward revision, inputing the real results into a failed model and spitting out computer-generated counterfactuals (or counterfiction). Real science re-examines the model when predictions fail. But, as Hayek pointed out, what we’re really dealing with here is “scientism”.

I am reminded of the famous ‘Yes Prime Minister’ quote:

“We must do something. This is something. We must do this.”

The questions I ponder are “who is we”? How do “we” know what to do? And, yes, “who plans for whom”? Nobody is getting “Punked” here, David. At least, not by us.

p.s. – it would have been nice to see an excerpt from Keynes regarding Marx that actually contained some economic analysis instead of this obnoxious attack on the Koran. Keynes had a sharp tongue, but he was also a brilliant and deep thinker. Surely he’s written more thoughtful criticisms of socialism than this tasteless screed."

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"johnpapola // Apr 30, 2011 at 12:49 pm