J. Bradford DeLong's Blog, page 281

Weekend Reading: The Riot Act of 1714

Wikipedia: Riot Act:

If any persons to the number of 12 or more unlawfully, riotously, and tumultuously assemble together to the disturbance of the public peace, and being required by any justice by proclamation in the King's name in the exact form of the Riot Act, I George I, Sess. 2 c. 5 s. 2, to disperse themselves and peacefully depart, shall to the number of 12 or more unlawfully, riotously, and tumultuously remain or continue together for an hour after such proclamation, shall be guilty of a felony.

**The Form of Proclamation is as follows:���

Our Sovereign Lord the King chargeth and commandeth all persons, being assembled, immediately to disperse themselves, and peaceably to depart to their habitations, or to their lawful business, upon the pains contained in the Act made in the first year of King George the First for preventing tumults and riotous assemblies.

GOD SAVE THE KING.

#shouldread

Nick Rowe: Bicycle Disequilibrium Theory: "Suppose you ne...

Nick Rowe: Bicycle Disequilibrium Theory: "Suppose you need a bicycle to get to work. Suppose bicycles are a common property resource, because bike locks don't work. Every night the workers deposit their bicycles in the bike bank, and in the morning it's first come first served. And suppose that sometimes there aren't enough bicycles to go around. So sometimes the level of employment is determined by the number of bicycles, and not by all the usual stuff. Any individual can always get a bicycle in the morning, simply by getting up early enough. But in aggregate they can't. Fallacy of composition. A theory of when workers wake up might be interesting, and useful for microeconomists wanting to understand the distribution of employment, but it won't help us understand what determines the aggregate level of employment...

... Bicycle disequilibrium theory helps us understand what determines the level of employment and output. It also helps us understand other puzzling phenomena, like why workers sometimes wake up and go to work so ridiculously early. Making the quantity of bicycles endogenous does not invalidate the theory. It just makes it more complicated, because a very simple supply function gets replaced with a more complicated supply function. The level of employment will sometimes be determined by the parameters of that more complicated bicycle supply function, just like in the simple case where the supply function has only one parameter.... Paradoxically, the bicycle disequilibrium theory would be at its most useful, empirically, if the government had a really stupid bicycle supply function. Like tossing a coin to decide how many bicycles to supply....

I think there may be some times and places in the real world where many workers do in fact use a bicycle to get to work, so bicycle disequilibrium theory may in fact have some limited applicability in the real world. But the use of money is more common...

#shouldread #monetaryeconomics

Joseph Schumpeter on the Ricardian and Keynesian vices. T...

Joseph Schumpeter on the Ricardian and Keynesian vices. The echo of bdsm practices���le vice anglais���that you hear is intentional on Schumpeter's part, as is his feminization of Keynesians, and the misogyny. Schumpeter was a very smart but very interesting man: Joseph Schumpeter (1953): History of Economic Analysis https://books.google.com/books?isbn=1134838700: "Ricardo���s��� interest was in the clear-cut result of direct, practical significance. In order to get this he... piled one simplifying assumption upon another until... the desire results emerged almost as tautologies... It is an excellent theory that can never be refuted and lacks nothing save sense. The habit of applying results of this character to the solution of practical problems we shall call the Ricardian Vice...

[...]

[Keynes] rendered a decisive service to equalitarianism in an all-important point. Economists with an equalitarian bent had long before learned to discount all other aspects or functions of inequality of income except one: like J.S .Mill they had retained scruples concerning the effects of equalitarian policies upon saving. Keynes freed them from these scruples. His analysis seemed to restore intellectual respectability to anti-saving views; and he spelled out the implications of this in Chapter 24 of the General Theory. Thus, though his scientific message appealed to many of the best minds of the economic profession, it also appealed to the writers and talkers on the fringes of professional economics who gleaned nothing from the General Theory except the New Economics of Spending and for whom he brought back the happy times of Mrs. Marcet (see Part III, ch. 4) when every schoolgirl, by learning the use of a few simple concepts, acquired competence to judge of all the ins and outs of the infinitely complex organism of capitalist society.

Keynes was Ricardo���s peer in the highest sense of the phrase. But he was Ricardo���s peer also in that his work is a striking example of what we have called above the Ricardian Vice, namely, the habit of piling a heavy load of practical conclusions upon a tenuous groundwork, which was unequal to it yet seemed in its simplicity not only attractive but also convincing. All this goes a long way though not the whole way toward answering the questions that always interest us, namely, the questions what it is in a man���s message that makes people listen to him, and why and how...

#shouldread #books #schumpeter #keynes #economicsgoneright #economicsgonewrong #historyofeconomicthought

Weekend Reading: John Maynard Keynes on the Baneful Consequences of Ricardo's Rhetorical Victory Over Malthus

John Maynard Keynes: The General Theory of Employment, Interest, and Money: Chapter 3: "The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo���s doctrine that it was impossible for effective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain...

...Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of effective demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas.

The completeness of the Ricardian victory is something of a curiosity and a mystery. It must have been due to a complex of suitabilities in the doctrine to the environment into which it was projected. That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. That it was adapted to carry a vast and consistent logical superstructure, gave it beauty. That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress, and the attempt to change such things as likely on the whole to do more harm than good, commended it to authority. That it afforded a measure of justification to the free activities of the individual capitalist, attracted to it the support of the dominant social force behind authority.

But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation; ��� a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.

The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a society which was functioning after the manner of the classical postulates. It may well be that the classical theory represents the way in which we should like our economy to behave. But to assume that it actually does so is to assume our difficulties away...

#weekendreading #economicsgonewrong #historyofeconomicthought #keynes #malthus

The New York Times is a sad, sad thing: Kevin Drum: Hey D...

The New York Times is a sad, sad thing: Kevin Drum: Hey David: It Wasn���t ���We��� Who Screwed the Working Class: "I get so tired sometimes. Here is David Brooks today...

...Working-class voters tried to send a message in 2016, and they are still trying to send it. The crucial question is whether America���s leaders will listen and respond.... We in the educated class have screwed up labor markets in ways that devalued work and made it harder for people in the working class to find a satisfying job. Part of the problem is misplaced priorities. For the last several decades, American economic policy has been pinioned on one goal: expanding G.D.P.... But what good is that growth if it means that a thick slice of America is discarded for efficiency reasons?

No. It was not ���working-class voters��� who sent a message in 2016. It was white working-class voters. It was not the ���educated class��� that screwed up the labor market for the non-rich. It was the Reagan/Gingrich/GOP establishment. It was not ���we��� who decided that GDP was the only thing that mattered and low incomes at the bottom didn���t. It was right-wing Republicans.

So, so tired. I get so very tired of conservatives or centrists or bobos���or whatever it is that David Brooks calls himself these days���refusing to acknowledge this stuff. Progressives have been fighting all along for the working class; for equitable labor markets; for higher wages; for labor unions; for taxing the rich; for job training; for workplace regulations; for universal medical care; for equal treatment regardless of race or sex; and a million other things. Have we accomplished much? Not nearly as much as we should. Brooks is sure right about that.

But it���s not because of some amorphous ���we.��� It���s because Republicans have spent the past four decades fighting all these things hammer and tongs and then telling working class whites to vote for them because Democrats won���t let them tell ethnic jokes anymore...

#shouldread

Ian Buruma (2001): : "According to Cannadine, race was no...

Ian Buruma (2001): : "According to Cannadine, race was not everything in the British Raj. It was not even the main point. Class was the main point. Class, status, and rank were more important than skin color, the shape of one's eyes, or the dimensions of one's skull. A Sultan, a Nizam, or a Pasha was equal to British royalty...

...even if the Queen-Empress or King-Emperor residing in Windsor was perched securely at the top of the imperial tree. In Queen Victoria's eyes, King Kalakaua of Hawaii was one of us, so to speak, while a respectable tradesman from Birmingham, though blessed with the pinkest complexion, most decidedly was not. When King Kalakaua attended a grand "do" at Lady Spencer's in 1881, the Prince of Wales insisted that the Hawaiian monarch should take precedence over the German crown prince, who was later to become Kaiser Wilhelm II. When the touchy German protested, the prince held firm. "Either the brute is a king, or he is a common or garden nigger; and if the latter, what's he doing here?" It was not a particularly charming remark; but, as Cannadine rightly says, it was not primarily a racist one either, for "the freemasonry" of rank trumped "the alternative and more recent freemasonry based on the unifying characteristic of shared skin color"...

#shouldread

Hoisted from the Archives: Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923)

Thinking how to talk about Schumpeter's "Ricardian Vice" and the extremely peculiar boosting by economists formerly of note and reputation of the Trump corporate tax cut, and so revisiting this https://www.bradford-delong.com/2013/05/robert-skidelsky-vs-niall-ferguson-john-maynard-keynes-is-not-keha-also-the-us-is-not-greece-and-2013-is-not-1923.html

Hoisted from the Archives: Robert Skidelsky vs. Niall Ferguson: John Maynard Keynes Is Not Ke$ha (Also, the U.S. Is Not Greece, and 2013 Is Not 1923)

And Robert Skidelsky explains what John Maynard "We'll Keep Dancing 'Till We Die" Keynes really meant by "In the long run we are all dead":

True, Keynes cared little about the long run. But that wasn���t because he was gay: The passage��� discusses��� the quantity theory of money: the notion that a change in a nation's money supply causes a proportionate change in prices. Keynes, whose��� Economic Consequences of the Peace��� pointed out that "in the long run," this relationship was "probably true." But, he went on, "this long run is a misleading guide to current affairs. In the long run we are all dead." Keynes always sought to present his ideas in simple, intuitive language. Here, he was only saying more strikingly what Irving Fisher, the American granddaddy of modern monetary theory, had said in 1911: that the proportional relationship between money and prices did not hold in "transition periods"���. But Keynes immediately broadened his attack to economics as a whole. The passage continues:

Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

This was a bold way of criticizing what was and still remains the dominant form of economic theorizing ��� developing long-run models that not only avoid the hard and interesting questions but are largely useless because they don't give policymakers any guide on how to navigate in "tempestuous seasons."

A few years later, Keynes was delighted to come across an exchange���. David Ricardo��� accused Malthus of having:

always in your mind the immediate and temporary effects of particular changes, whereas I put these immediate and temporary effects quite aside, and fix my whole attention on the permanent state of things which will result from them.

To which Malthus replied, with considerable effect:

I certainly am disposed to refer frequently to things as they are, as the only way of making one's writings practically useful to society, and I think also the only way of being secure from falling into the errors of the [tailors] of Laputa, and by a slight mistake at the outset arrive at conclusions the most distant from the truth.

What a shame, Keynes thought, that Ricardo and not Malthus was the stem from which economics had grown! Keynes's focus on the short run was grounded in the philosophical principle of "insufficient reason." If individuals have no sufficient reason to believe that a good situation today will have adverse long-term consequences, it must always be rational for them to aim to maximize their short-term good. In an essay on the conservative philosopher Edmund Burke, Keynes translated this moral principle of individual behavior into the political principle of prudence:

Burke ever held, and held rightly, that it can seldom be right��� to sacrifice a present benefit for a doubtful advantage in the future���. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear���. We can never know enough to make the chance worth taking���. There is this further consideration��� it is not sufficient that the state of affairs which we seek to promote should be better than the state of affairs which preceded it; it must be sufficiently better to make up for the evils of the transition���.

Ferguson was quite right to say that Keynes discounted the future--but it was not because of homosexuality, it was because of uncertainty. Keynes would have rejected the claim of today's austerity champions that short-term pain, in the form of budget cuts, is the price we need to pay for long-term economic growth. The pain is real, he would say, while the benefit is conjecture.

The principle of not sacrificing the present for the future can be seen in Keynes's intolerance of persistent mass unemployment--sacrificing the current generation of workers to secure long-term improvements in the labor market. It emerges in his rejection of "debt bondage"--the imposition of crushing long-term obligations on borrowers, undermining their prosperity. "The absolutists of contract," he wrote, "are the real parents of revolution."

Personally, I think Keynes's view of the future - as radically uncertain - is too sweeping���. But in many matters, politicians would be well advised to follow Keynes's advice and prefer the present generation to future ones. There is only so much pain voters will tolerate. And there is insufficient reason to believe that today's austerity will bring tomorrow's prosperity.

Larry Summers and I would go considerably further than Skidelsky: in our view, those who think there are any long-run benefits from further steps toward austerity today simply have not done their arithmetic, which they could easily do by plugging current interest rates and the impact of austerity on human and physical capital on long-run economic potential into their formulae.

And I, at least, would not say that Keynes cared "little" for the long run. You cannot read his "Economic Possibilities for Our Grandchildren" or, indeed, Skidelsky's Keynes biography without recognizing how desperately he wished to help make a world in which the progressive Edwardian civilization of pre-1914 could be restored and persist down the ages. I would say that Keynes cared "appropriately" for the long run.

#keynes #austerity #historyofeconomicthought #skidelsky

Hoisted from the Archives: Niall Ferguson Is Wrong to Say That He Is Doubly Stupid: Why Did Keynes Write "In the Long Run We Are All Dead"? Weblogging

Thinking how to talk about Schumpeter's "Ricardian Vice" and the extremely peculiar boosting by economists formerly of note and reputation of the Trump corporate tax cut, and so revisiting this https://www.bradford-delong.com/2013/05/niall-ferguson-is-wrong-to-say-that-he-is-doubly-stupid-why-did-keynes-write-in-the-long-run-we-are-all-dead-weblogging.html:

Niall Ferguson:

An Open Letter to the Harvard Community: Last week I said something stupid about John Maynard Keynes.�� Asked to comment on Keynes��� famous observation ���In the long run we are all dead,��� I suggested that Keynes was perhaps indifferent to the long run because he had no children, and that he had no children because he was gay. This was doubly stupid. First, it is obvious that people who do not have children also care about future generations. Second, I had forgotten that Keynes��� wife Lydia miscarried.

Niall is wrong. His suggestion was not doubly stupid. There is more.

Niall speaks of Keynes's "In the long run we are all dead" as if it is a carpe diem argument--a "seize the day" argument, analogous to Marvell's "To His Coy Mistress" or Herrick's "To the Virgins"--and Ferguson sees his task as that of explaining why Keynes adopted this be-a-grasshopper-not-an-ant "party like we're gonna die young!" form of economics, or perhaps form of morality.

But that is not it at all.

Go to Keynes's Tract on Monetary Reform.

[Read pages 80-82, so you see the "in the long run we are all dead" quote in context.

It is not part of any carpe diem argument. Two sentences earlier we find:

If, after the American Civil War, that American dollar had been stabilized and defined by law at 10 per cent below its present value, it would be safe to assume that n and p would now be just 10 per cent greater than they actually are and that the present values of k, r, and k' would be entirely unaffected.

Six sentences earlier we find:

[T]he [Quantity] Theory [of Money] has often been expounded on the further assumption that a mere change in the quantity of the currency cannot affect k, r, and k',--that is to say, in mathematical parlance, that n is an independent variable in relation to these quantities.

Two sentences later we find:

In actual experience, a change in n is liable to have a reaction both on k and k' and on r.

And six sentences later we find:

There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way.

Keynes is discussing not how to "seize the day" for pleasure, but rather how to use the quantity theory of money. What he is saying is that you cannot assume that you can analyze the consequences of an altered time path of the quantity of cash in the economy--n, in Keynes's notation--without considering whether the public's demand for real cash balances k, the public's demand for real checking-account balances k', and banks' desired reserves-to-deposits ratio r will also change. This is a principle that today's economists call the "Lucas Critique". (No, it is not clear to me why they do not call it the "Keynes Critique.) And this critique is correct: assume that those three other variables are not themselves altered when you consider an altered path for the money stock is, as Keynes says in the sentence after "in the long run���", for economists to set themselves too easy a task--it sweeps all the problems of analysis under the rug--and too useless a task--it generates predictions that are simply wrong.

In this extended discussion of how to use the quantity theory of money, the sentence "In the long run we are all dead" performs an important rhetorical role. It wakes up the reader, and gets him or her to reset an attention that may well be flagging. But it has absolutely nothing to do with attitudes toward the future, or with rates of time discount, or with a heedless pursuit of present pleasure.

So why do people think it does?

Note that we are speaking not just of Ferguson here, but of Mankiw and Hayek and Schumpeter and Himmelfarb and Peter Drucker and McCraw and even Heilbronner--along with many others.

I blame it on Hayek and Schumpeter. They appear to be the wellsprings.

Hayek is simply a bad actor--knowingly dishonest. In what Nicholas Wapshott delicately calls "misappropriation", Hayek does not just quote "In the long run we are all dead" out of context but gives it a false context he makes up:

Are we not even told that, since 'in the long run we are all dead', policy should be guided entirely by short run considerations? I fear that these believers in the principle of apres nous le d��luge may get what they have bargained for sooner than they wish.

And Hayek's bad-faith writing yielded a lot of fruit: cf. Himmelfarb:

[S]omething of the "soul" of Bloomsbury penetrated even into Keynes's economic theories. There is a discernible affinity between the Bloomsbury ethos, which put a premium on immediate and present satisfactions, and Keynesian economics, which is based entirely on the short run and precludes any long-term judgments. (Keynes's famous remark. "In the long run we are all dead," also has an obvious connection with his homosexuality - what Schumpeter delicately referred to as his "childless vision.") The same ethos is reflected in the Keynesian doctrine that consumption rather than saving is the source of economic growth - indeed, that thrift is economically and socially harmful. In The Economic Consequences of the Peace, written long before The General Theory, Keynes ridiculed the "virtue" of saving. The capitalists, he said, deluded the working classes into thinking that their interests were best served by saving rather than consuming. This delusion was part of the age-old Puritan fallacy:

The duty of "saving" became nine-tenths of virtue and the growth of the cake the object of true religion. There grew round the non-consumption of the cake all those instincts of puritanism which in other ages has withdrawn itself from the world and has neglected the arts of production as well as those of enjoyment. And so the cake increased; but to what end was not clearly contemplated. Individuals would be exhorted not so much to abstain as to defer, and to cultivate the pleasures of security and anticipation. Saving was for old age or for your children; but this was only in theory - the virtue of the cake was that it was never to be consumed, neither by you nor by your children after you.

Never mind that Himmelfarb cuts off her quote from Keynes just before Keynes writes that he approves of this Puritan fallacy--that he is not, as Himmelfarb claims, ridiculing it, but rather praising it:

In the unconscious recesses of its being Society knew what it was about. The cake was really very small in proportion to the appetites of consumption, and no one, if it were shared all round, would be much the better off by the cutting of it. Society was working not for the small pleasures of today but for the future security and improvement of the race,���in fact for "progress." If only the cake were not cut but was allowed to grow in the geometrical proportion predicted by Malthus of population, but not less true of compound interest, perhaps a day might come when there would at last be enough to go round, and when posterity could enter into the enjoyment of our labors���

So if you do read Himmelfarb, do so with great caution: this is a strange woman indeed[1].

As for Schumpeter, in Schumpeter's Keynes obituary Schumpeter is working as hard as he can to try to minimize Keynes's global influence:

[England's] social fabric had been weakened and had become rigid. Her taxes and wage rates were incompatible with vigorous development, yet there was nothing that could be done about it. Keynes was not��� in the habit of bemoaning what could not be changed��� not the sort of man who would bend the full force of his mind to the individual problems of coal, textiles, steel, shipbuilding���. He was the English intellectual, a little deracine and beholding a most uncomfortable situation. He was childless and his philosophy of life was essentially a short-run philosophy. So he turned resolutely to the only "parameter of action" that seemed left��� monetary management. Perhaps he thought that it might heal. He knew for certain that it would sooth--and that return to a gold system at pre-war parity was more than his England could stand. If only people could be made to understand this, they would also understand that practical Keynesianism is a seedling which cannot be transplanted into foreign soil: it dies there and becomes poisonous be- fore it dies.

["Childless"] is a truly classless move given Keynes's wife Lydia Lopokova's two miscarriages--the best we can hope for Schumpeter is that his self-absorption in the 1920s, 1930s, and 1940s had kept him from ever learning about them. There was when I was an undergraduate an oral tradition that Schumpeter's "childless" was a sotto voce synonym for "homosexual"--I presume Himmelfarb picked that up from similar sources to those I heard it from.

But Schumpeter, at least, does not cite "In the long run we are all dead" as evidence for the proposition that Keynes's "philosophy of life was essentially a short-run philosophy". Instead, he simply asserts that Keynes's "philosophy of life was essentially a short-run philosophy".

Is there any evidence that Keynes's "philosophy of life was essentially a short-run philosophy" that unjustly neglected the long run? Keynes would have denied it: Keynes would have said that he gave proper balance to the short run and the long run. But, he would have added, it is also the case--as Skidelsky quotes him in The Economist as Saviour--that:

Burke ever held, and held rightly, that it can seldom be right��� to sacrifice a present benefit for a doubtful advantage in the future���. It is not wise to look too far ahead; our powers of prediction are slight, our command over results infinitesimal. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear���. We can never know enough to make the chance worth taking���

So here we have it: not Herrick or Marvell or decadent Bloomsbury. Instead, Edmund Burke. Not a heedless disregard for the future, but a sober acknowledgement of the limited power of the brains of jumped-up East African Plains Apes like us to even see the long-run, and a plea not to sacrifice those currently alive to the Dreadful Moloch of Utopian Fantasies of the Future.

Schumpeter has, I think, considerable explaining to do.

As does Hayek.

As does Himmelfarb.

The rest--the Fergusons and the McCraws and the Druckers and the Heilbronners and company? At the very least, they need to explain why they didn't check their "In the long run we are all dead" quotes against the context, and why doing so did not then lead them to have an Inigo Montoya moment as they said: "wait a minute--this doesn't mean what I thought it meant".

[1] Himmelfarb, writing in 1960:

The familiar racist sentiments of Buchan, Kipling, even Conrad, were a reflection of a common attitude. They were descriptive, not prescriptive; not an incitement to novel political action, but an attempt to express differences of culture and colour in terms that had been unquestioned for generations. To-day, when differences of race have attained the status of problems--and tragic problems--writers with the best of motives and finest of sensibilities must often take refuge in evasion and subterfuge. Neutral, scientific words replace the old charged ones, and then, because even the neutral ones--"Negro" in place of "nigger"--give offense, in testifying to differences that men of goodwill would prefer forgotten, disingenuous euphemisms are invented--"non-white" in place of "Negro". It is at this stage that one may find a virtue of sorts in Buchan: the virtue of candor, which has both an aesthetic and an ethical appeal���

That somebody could--in 1960--write of how "to-day... differences of race have attained the status of problems--and tragic problems" as opposed to 1920, when presumably differences of race were not problems? Feh!

#hoistedfromthearchives #ferguson #keynes #historyofeconomicthought #moralresponsibility #racism

Apropos of the very strange Gertrude Himmelfarb, cf. the ...

Apropos of the very strange Gertrude Himmelfarb, cf. the attitudes of Edward VII Saxe-Coburg-Gotha "Bertie": Lucy Moore : : "From 1875, when the Prince had been allowed to make a state visit to India, he had begun to grow into his role as King-in-Waiting.... The two main elements... were the magnificent ceremonial... and big game hunting.... Bertie also took his first halting steps in statecraft. He had learned how far his genial charm would carry him; he saw how popular his approachable, easy style could be, and he was thrilled with the response....

...But he was displeased by the way many British treated the Indians, outraged, for example, by their casual use of the word n----r. Less than three weeks after his arrival in Bombay, the Prince protested formally to Lord Granville, then Foreign Secretary, that just 'because a man has a black face and a different religion than our own, there is no reason why he should be treated as a brute'. This progressive tolerance increasingly marked Bertie's attitudes, albeit always within the conventions of his class and times. His close friends were as often Catholic or Jewish, nouveau riche or foreign, as old-school British aristocrats; the common thread between them was that they were fun-loving and rich, not respectable and grand. He was concerned for the poor���his attitude that of a paternalistic landlord rather than a reformer���and always interested in new things, from electricity to motorcars...

#shouldread #history

"In the Long Run We Are All Dead" in Context...

John Maynard Keynes (1923): A Tract on Monetary Reform", pp. 80-82: "[T]he [Quantity] Theory [of Money] has often been expounded on the further assumption that a mere change in the quantity of the currency cannot affect k, r, and k',���that is to say, in mathematical parlance, that n is an independent variable in relation to these quantities. It would follow from this that an arbitrary doubling of n, since this in itself is assumed not to affect k, r, and k', must have the effect of raising p to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form...

...Now "in the long run" this is probably true. If, after the American Civil War, that American dollar had been stabilized and defined by law at 10 per cent below its present value, it would be safe to assume that n and p would now be just 10 per cent greater than they actually are and that the present values of k, r, and k' would be entirely unaffected. But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again.

In actual experience, a change in n is liable to have a reaction both on k and k' and on r. It will be enough to give a few typical instances:

Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of n had been totally without reaction on the value of r.

In agricultural countries where peasants readily hoard money, an inflation, especially in its early stages, does not raise prices proportionately, because when, as a result of a certain rise in the price of agricultural products, more money flows into the pockets of the peasants, it tends to stick there;���deeming themselves that much richer, the peasants increase the proportion of their receipts that they hoard.

Thus in these and in other ways the terms of our equation tend in their movements to favor the stability of p, and there is a certain friction which prevents a moderate change in n from exercising its full proportionate effect on p.

On the other hand a large change in n, which rubs away the initial friction, and especially a change in n due to causes whichset up a general expectation of a further increase in the same direction, may produce a more than proportionate effect on p. After the general analysis of Chapter I. and the narratives of catastrophic inflations given in Chapter II., it is scarcely necessary to illustrate this further,���it is a matter more readily understood than it was ten years ago.

A large change in p greatly affects individual fortunes. Hence a change after it has occurred, or sooner in so far as it is anticipated, may greatly affect the monetary habits of the public in their attempt to protect themselves from a similar loss in the future, or to make gains and avoid loss during the passage from the equilibrium corresponding to the old value of n to the equilibrium corresponding to its new value. Thus after, during, and (so far as the change is anticipated) before a change in the value of n, there will be some reaction on the values of k, k', and r, with the result that the change in the value of p, at least temporarily and perhaps permanently (since habits and practices, once changed, will not revert to exactly their old shape), will not be precisely in proportion to the change in n���

John Maynard Keynes (1923): A Tract on Monetary Reform https://delong.typepad.com/keynes-1923-a-tract-on-monetary-reform.pdf

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