Do you respect John Maynard Keynes, as a thinker, as an economist, as a man?
I do.
"I'm not a fan of Murray Rothbard." -- David D. Friedman
The important thing is that keynes pulled together many different threads to weave a coherent story of economic fluctuations that many people found convincing.
How long ago did you read the GT? I grant that Keynsianism is coherent, but the GT was not. It took a lot of cleaning up by Hicks to get models like the IS-LM. He contradicts himself on many occasisions in the GT and constantly confuses real and nominal units.
"I cannot prove, but am prepared to affirm, that if you take care of clarity in reasoning, most good causes will take care of themselves, while some bad ones are taken care of as a matter of course." -Anthony de Jasay
@Student
np. it's true. just ask around.
Again, however, the output of one business is the input of another---that is, the "price" fetched by the one business is the "cost" born by the other.
Precisely. When the aggregate demand for final goods and services falls, total revenue falls for each stage of production, but not in a proportional manor. The higher stages of production are effected less relative to the lower stages that yield the finished product or nearly yield the finished product. But, at the same time, a reduction in the aggregate demand for finished goods must, ipso facto, mean a higher demand for future goods, i.e., saving. This lowers the interest rate and the financial system funnels real savings towards investment activities (the higher stages are more sensitive to changes in interest rates). This lengthens the structure of production and lowers marginal costs at each successive stage (see Prices and Production). In other words, an elevated savings rate facilitates the division of labor and capital.
But this only holds if the interest rate is actually reduced. If it remains elevated above the natural rate, then total revenues will fall, but the structure will remain arbitrarily constricted (relative to where it should be if it truly expressed real time preference), and marginal costs will not fall by a sufficient degree, or at all.
So Hayek expands upon Wicksell's endogenous view of money, by treating money as exogenous?
No. Keynes originally began with an endogenous view of money and the Wicksellian framework in his earlier works. Unfortuantely for Keynes, Hayek absolutely obliterated his Treatise on Money, and showed that Keynes fundamentally misunderstood Wicksell. Keynes, in response, retreated from many of his original positions and treated money as an exogenous policy variable in the GT.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
You are describing a hampered market, one with a natural rate of interest and an artificial rate of interest. This still fails to prove your thesis (and Keynes') that prices and costs, to use your terminology, must by necessity remain apart in a free market.
Edit: remain apart, that is, at certain points and for materially detrimental periods.
Student: i wonder how many people responding to this thread have read Keynes and not simply his detractors. of those who have read Keynes, i wonder how many approached his work already knowing how they would react.
i wonder how many people responding to this thread have read Keynes and not simply his detractors. of those who have read Keynes, i wonder how many approached his work already knowing how they would react.
I read essays by him - most notably 'the end of laissez-faire' and tried to read the General Theory, but it has as muddled as they say. I'm interested in reading the consequences of the peace; apparently; that one ought to be good.
The state is not the enemy. The idea of the state is.