Quotation of the Day…

by Don Boudreaux on November 19, 2011

in Innovation, Myths and Fallacies, Seen and Unseen, State of Macro

… is from page 85 of Lionel Lord Robbins‘s 1976 book Political Economy: Past and Present:

Keynes himself can be not unfairly described as a ‘stagnationist’ in the sense that he found it difficult to believe that the propensity to invest, if unaided, was likely for long to remain above what he would have regarded as a danger point for reasonably active use of resources; and this attitude was widely diffused among high authorities in the United States – conspicuously Alvin Hanson [sic].  The days of the frontier were over, it was contended, the probability of inventions, which would offer rates of return likely to evoke a disposition to invest nearly approaching the disposition to save, was remote.

Be Sociable, Share!

Comments

comments

34 comments    Share Share    Print    Email

{ 34 comments }

Daniel Kuehn November 19, 2011 at 9:57 am

“Over” strikes me as a strong word here. Can you justify it or do you know if Robbins ever made any effort to justify it.

Certainly they both thought that the 19th century presented a different – and more investment opportunity rich set of circumstances – than the period they were facing. To say that the opportunities for investment were “over” seems like a different proposition entirely.

Which – of course – makes “stagnationist” hard to swallow.

Anyway, I’m getting whiplash trying to keep up with whether Keynes is supposed to be a stagnationist or a banisher of scarcity – whether he is supposed to be a pessimist or a utopian.

Bastiat Smith November 19, 2011 at 10:54 am

Keynes believed that all rates of return could be manipulated in order to make all investment opportunities equally attractive, and therefor equalize income in the long run. The problem with this is that it requires that demand be KNOWN. This is not just a criticism. This was explicitly part of his The General Theory . Ignoring diverse preferences, such a model may only works in the static. (Doubtful) But a dynamic economy certainly provides too much uncertainty and NEW GOODS, (Not to mention new people) about which nothing can be known except that they have a different return than the present goods. His theory required stagnation and explicitly perpetuated it.

Not socialist. But one hell of a nudger. Pessimistic utopian?

Adam Smith November 19, 2011 at 10:57 am

One of the points for writing posts on Keynes is to argue economists of his Genus and Species are not the best available to helm the ship of state. I fully agree with that.

Perhaps there is a better way to get the majority of the Booboise to concur. While the superior Byzantine splendor of the Austrian Sacerdotal Rite over the blunt cartoon Idiocracy Spoils System cannot be denied, why not design and advocate a Meritocratic Competion System?

The Honourable Usain St. Leo Bolt is unanimously believed to be the fastest human in the world. This is because runs in 100 and 200 meter races with the fastest times. Not because he is a Jamaican, Black, Speedology Professor, Catholic, Michael Johnson appointee, or Labour Party candidate receiving 52% of the Olympic Committee vote.

In the same way capitalism give us the goods, Usain delivers the fast. It’s not diet, fitness regime, running style, shoe selection, or genetics that matters, we see it for ourselves in a public competition with a race clock.

Why not a world wide economic Olympics every four years. The best placing American becomes Chairmen of the Federal Reserve. We can see with our own eyes whether Red Capitalism or our system is better.

This also seems a better idea for our defense. We’ve all seen robot wars. Why shouldn’t NATO hold a robot and drone war each year to select defense contractors.

In short, America would be a far less shit place if all the political races were actually races. Absent the gold standard of Laissez Faire, meritocracy is the silver standard.

muirgeo November 19, 2011 at 11:29 am

Markets give us NO goods without good governance just like Usian gives us no fast without a starting gun, a finsih line, judges and their standarized timing systems.

Jon Murphy November 19, 2011 at 11:33 am

Swing and a miss

muirgeo November 20, 2011 at 10:58 am

OH , OK so we don’t need good governance. Whatever Jon. I’m more and more taking you as a very unserious thinker. One willing to pile on simply based on trying to impress your peers.

I’m really not interested in anything but some good socio-political-economic philosophizing. If you’re not interested keep the peanut gallery comments to yourself.

Dan J November 20, 2011 at 8:00 pm

Where is this good governance? Doesn’t exist. Hadn’t existed. Even when you think legislation (governance) is done in benevolence, the governors are not acting in good faith, as Peter Schwiezer as shown (what most of us knew… But some only believed was a partisan effort to be corrupt).
Obamacare…… Affordable Health blah blah….. Give it a nice name with some Christmas ornaments (like for 26 yr old ‘children’ …. Children?….. To stay on parents plan by mandate) in order for mindless doles to declare it as a godsend. Then, have thousands of accounting errors, contradictions, legal errors, illegal maneuvers, etc.,… All while investing secretly in advance on what businesses will benefit from their legislation.
Simply amazing! Everyday, we get more proof of government malfeasance and cronyism, yet Muirgeo and his ilk, advocate their advancement in powers……..
Where’s the stupid stick?

Invisible Backhand November 19, 2011 at 11:18 am

Alvin Harvey Hansen (August 23, 1887 – June 6, 1975), often referred to as “the American Keynes,” was a professor of economics at Harvard, a widely read author on current economic issues, and an influential advisor to the government who helped create the Council of Economic Advisors and the Social security system. He is best known for introducing Keynesian economics in the United States in the 1930s. More effectively than anyone else he explicated, extended, domesticated, and popularized the controversial ideas embodied in Keynes’ The General Theory. In 1967, Paul McCracken, chairman of the President’s Council of Economic Advisers, saluted Hansen: “It is certainly a statement of fact that you have influenced the nation’s thinking about economic policy more profoundly than any other economist in this century.”

http://en.wikipedia.org/wiki/Alvin_Hansen

W.E. Heasley November 19, 2011 at 11:19 am

“The days of the frontier were over, it was contended, the probability of inventions, which would offer rates of return likely to evoke a disposition to invest nearly approaching the disposition to save, was remote”.

The above scenario is repeated periodically by certain politicos, talking heads, media types, and pundits. It’s a rerun of sorts that plays well to certain crowds during certain periods of times. It plays well among the economically uninformed.

Generally, you hear the rerun during economic downturns then it disappears during upturns. It a cousin of protectionism, class warfare, and the other blame-game reruns that are dusted off and replayed during downturns as there must exist some exogenous item to blame.

muirgeo November 19, 2011 at 11:24 am

It’s amazing to see a blog on economics never even mention the historical economic events unfolding in Europe as we speak. Just keep attacking Keynes and Krugman but don’t watch the news or look outside the window. The anti-Keynesian austerity experiment is going horribly afoul over there so lets keep our faithful focused on old irrelevent quotes.

Jon Murphy November 19, 2011 at 11:34 am

So, the European crisis, caused by too much government spending, is actually caused by too little government spending?

W.E. Heasley November 19, 2011 at 11:44 am

JM:

“So, the European crisis, caused by too much government spending, is actually caused by too little government spending?”

Apparently the horse and the cart become the cart and the horse which become the horse and the cart and so on. Unfortunately the wheels fell off the cart and the horse ran off. One could surmise that when you run out of other peoples’ carts and horses things fall apart rather quickly.

Jon Murphy November 19, 2011 at 12:37 pm

The European crisis is caused by a lot more than just spending. There is not enough time for me to explain suffice to say:

Monetary union without political union

Inability to adjust currency

No sovereign bonds (bonds are denoted in Euro but sold by individual countries, so spending on bonds affects other countries ability to sell bonds)

Methinks1776 November 19, 2011 at 2:21 pm

Right. About that political union…..the crisis is, in effect, putting Germany in control of Europe. The very thing this experiment was supposed to prevent. I can guess how that will go.

Mesa Econoguy November 19, 2011 at 4:08 pm

Bingo, plus varying degrees of socialist behavior without any remediation or moderation process (full political union), allowing various nations to siphon other nations’ productivity.

muirgeo November 20, 2011 at 10:32 am

“Monetary union without political union

Inability to adjust currency

No sovereign bonds (bonds are denoted in Euro but sold by individual countries, so spending on bonds affects other countries ability to sell bonds)” JM

Hmmm and maybe a financial market contaminated with toxic financial derivatives? Hmmm ? Maybe a little of that. That you leave that out tells me how unserious you are.

Jon Murphy November 20, 2011 at 10:34 am

I left that out because it’s unrelated to the Greek sovereign debt crisis.

muirgeo November 20, 2011 at 10:30 am

Jon,

It wasn’t caused by too much spending. You have bought into the propaganda and are so far off base in the premise you make as to be useless to assume further discussion could be fruitful. You are exactly the kind of malleable mind they love.

Jon Murphy November 20, 2011 at 10:31 am

So, then, how is debt accumulated if not through spending?

muirgeo November 20, 2011 at 10:33 am

Decreased revenues.

Jon Murphy November 20, 2011 at 10:34 am

*facepalm*

Dan J November 20, 2011 at 8:06 pm

Decreased revenues??? Every year the spending increases…… Dramatically, at times….. And the revenues are expected to increase, because of the failed theory that increased GOVT spending increases economic activity. All of these countries spent future dollars. Like SS, they spent money on a credit card and with revenues expected further and further into the future.
They have the ‘wimpy’ syndrome time ten. I’ll gladly pay you Tuesday, 14yrs from now for a hamburger today.

vidyohs November 19, 2011 at 11:55 am

Ah, so my little muirhuahua, yo mama let you out on the porch again.

So, muirhuahua you agree with the other socialist troll that John S. was wrong, and you say you are stupid enough to beat more dead horses instead of just burying the dead and getting on with things?

John S. August 20, 2011 at 1:03 pm
Krugmanian logic: Beating one dead horse didn’t work. Let’s hitch up an entire team of dead horses and flog them good and hard this time!
Reply
Invisible Backhand August 20, 2011 at 2:24 pm
I notice a tendency towards simplistic absolutes in your thinking.

SmoledMan November 19, 2011 at 2:11 pm

These “historical events” pale in comparison to 1848, 1914-1918, 1939-1945. But keep trying.

Jon Murphy November 19, 2011 at 2:15 pm

And, I am fairly sure Don and Russ have both done posts about Europe.

Thing thing with Europe is, we are not actually that exposed should the countries default. Most of our exposure to European banks are in French and German banks. Neither one of those banks have large exposure to Greek debt. France does have exposure to Italian debt, but there is no reason to assume a Greek default will lead to an Italian default.

Really, only a select number of states would be affected by European default: Massachusetts, CT, RI, NY, and Utah.

That being said, we should keep an eye on Europe, but an European recession does not necessarily mean we will slip back into recession.

Dan J November 20, 2011 at 9:50 pm

And what shall happen in a California Default? $13 billion deficit this year to add to a well over $100 billion deficit and counting. Who takes the hit? Obama and the Feds can’t inflate our dollar enuf to make that deficit go away, especially since California continues to pursue Keynsian policies that hinder business and positive economic growth. Like the city of Detroit, The state of California is due to pay the piper. Detroit gets taken over by the federal GOVT in less than 60days.
The real question, is if city and state bankruptcies is the goal?

Jon Murphy November 20, 2011 at 9:56 pm

If California should default, those most affected would be the creditors of California (in other words, those who own CA municipal bonds, mostly the pension system, different unions, etc). Remember, the Federal government is under no obligation to rescue states.

Dan J November 20, 2011 at 10:15 pm

They will. Especially, under Obama. Redistribute, redistribute, redistribute……. And Cali. Is a preferred loyal customer.

Invisible Backhand November 19, 2011 at 6:34 pm

“…but don’t watch the news or look outside the window.”

This blog is not about intellectual discourse, it is part of a well funded advertising campaign by Ford, Coors, Olin, Scaife et. al. You might think you get to participate because you got a secret decoder ring in the mail, but your real purpose is to…

http://www.youtube.com/watch?v=zdA__2tKoIU

Eric Hosemann November 19, 2011 at 1:02 pm

“The days of the frontier were over, it was contended, the probability of inventions, which would offer rates of return likely to evoke a disposition to invest nearly approaching the disposition to save, was remote.

Now I more clearly see the Keynes-Cowen connection.

Jon Murphy November 19, 2011 at 1:05 pm

Cowen never said innovation was over. He just said we’ve not advanced in a while.

Daniel Kuehn November 19, 2011 at 5:35 pm

Well neither did Keynes.

Ricardo wrote about broad trends in investment opportunities like this too – and it’s certainly in Cowen. I’m not sure why it’s ridiculed by so many people. Granted, making sweeping statements about historical periods is always hard while it’s happening. And critics will always be able to pick out small counter-examples – thereby missing the forest for the trees. But the claim of Keynes, Ricardo, Cowen, and others is simply that in some periods circumstances offer a lot of low hanging fruits, and sometimes we pick all those fruits. That’s shouldn’t be that controversial of a point.

Jon Murphy November 19, 2011 at 5:56 pm

I agree Dan

waitaminute November 19, 2011 at 8:13 pm

Damn you, double negatives!

Previous post:

Next post: