Keynes and Keynesianism
By BRUCE BARTLETT
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”
When I began studying economics in the early 1970s, the term “Keynesian” was already losing its luster... ...The point of looking at the deficit on a cyclically adjusted basis, which the Congressional Budget Office calculates regularly, is to avoid cutting spending that is only temporarily high and will fall automatically as the economy expands, or raising taxes that will automatically rise. Such actions would exacerbate the economic downturn.
Conservatives still don’t like calculating the deficit any way except literally... ...
But it wasn’t only those on the right, such as Friedman, who were abandoning Keynes; so were those on the left such as the Harvard economist John Kenneth Galbraith, an early and energetic supporter of Keynesian economics. In July 1971, he said that Keynes was obsolete because big business and big labor so controlled the economy that Keynesian economics didn’t work.
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By 1976, it was common to hear world leaders denigrate Keynesian economics as primarily responsible for the problem of inflation. That year, Prime Minister James Callaghan of Britain, leader of the left-wing Labor Party, gave a speech to a party conference that repudiated the core Keynesian idea of a countercyclical fiscal policy. It only worked, he said, by injecting higher doses of inflation that eventually led to higher unemployment.
The following year, Chancellor Helmut Schmidt, of West Germany’s left-wing Social Democratic Party, likewise repudiated Keynesian economics. The German economy, he said, had avoided inflation by resisting the temptation to implement countercyclical fiscal policies during economic downturns. “The time for Keynesian economics is past,” Mr. Schmidt explained, “because the problem of the world today is inflation.”
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My point was that policy makers in the early postwar era routinely accepted the idea that Keynesian stimulus was justified whenever the economy wasn’t doing as well as they wanted.
I acknowledge that this view derived mainly from economists who called themselves Keynesians rather than Keynes himself. He was, in fact, a strong opponent of inflation who would have opposed many “Keynesian policies” of the 1950s and 1960s, which contributed to the problem of stagflation in the 1970s that ultimately discredited those policies.
Economists and policy makers mostly forgot that Keynes prescribed budget surpluses during economic upswings to offset the deficits that he correctly advocated during downturns. In his 1940 book, “How to Pay for the War,” he advocated balancing the budget over the business cycle.
I think Milton Friedman was right that in a sense we are all Keynesians and not Keynesians at the same time. What I think he meant is that no one advocates Keynesian stimulus at all times, but that there are times, like now, when it is desperately needed. At other times we may need to be monetarists, institutionalists or whatever.
We should avoid dogmatic attachment to any particular school of economic thought and use proper analysis to figure out the nature of our economic problem at that particular moment and the proper policy to deal with it.
in http://economix.blogs.nytimes.com/2013/ ... nesianism/
Enviado: 29/7/2013 16:16
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