Keynes: The Return of the Master
Selected Book Details
- Hardcover
- Author: Robert Skidelsky
- Publisher: PublicAffairs
- Release Date: September 2009
- ISBN-10: 1586488279
- ISBN-13: 9781586488277
- List Price: $25.95
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Summaries and Customer Reviews provided by Amazon
SummaryThe ideas of John Maynard Keynes have never been more timely. No one has bettered Keynes's description of the psychology of investors during a financial crisis: ‘The practice of calmness and immobility, of certainty and security, suddenly breaks down. New fears and hopes will, without warning, take charge of human conduct… the market will be subject to waves of optimistic and pessimistic sentiment.' Keynes's preeminent biographer, Robert Skidelsky, Emeritus Professor of Political Economy at the University of Warwick, brilliantly synthesizes from Keynes's career and life the aspects of his thinking that apply most directly to the world we currently live in. In so doing, Skidelsky shows that Keynes's mixture of pragmatism and realism – which distinguished his thinking from the neo-classical or Chicago school of economics that has been the dominant influence since the Thatcher-Reagan era and which made possible the raw market capitalism that created the current global financial crisis – is more pertinent and applicable than ever. Crucially Keynes offers nervous capitalists – and Keynes never wavered in his belief in the capitalist system – a positive answer to the question we now face: When unbridled capitalism falters, is there an alternative? "In the long run," as Keynes famously said, "we are all dead". We may not have time to wait for the perfect theoretical operation of capital as the neo-classicists insist will happen eventually. In the meantime, we have Keynes: more supple, more human and more magnificently real than ever. |
Customer Reviews
Average Rating: 
Good on Keynes but weak elsewhere
Rating:
Skidelsky is strongest when talking about the man himself. Keynes was something of a renaissance man, colorful and a good writer. In fact the author does not really regard Keynes as an economist in the traditional sense.
The application of Keynesian ideas in advancing the reconstruction of economics is an interesting section.
His comparison of the economic performance of the Keynesian and Post-Keynesian eras is disputable. For example a chart by Angus Maddison of world real GDP growth shows a decline post-1980: evidence of the superiority of the Keynesian system? But Maddison himself interprets this as: "to a significant degree, this was due to a deceleration of technical progress in the United States, the country operating closest to the frontier of technology."
A running theme of the book is the contrast between Keynes and the classical economists. I was surprised that he did not write more about the relationship between Hayek and Keynes.
For some reason Skidelsky despises Milton Friedman. While Keynes's thoughts on everything from the good life to the ethics of capitalism are treated with utmost respect and reverence, Friedman elicits bursts of vitriol: "Friedmanite doctrine", "the high priest of the classical counter-attack", "the gnome of Chicago"(!), and much more in the same vein. Yet the far more extreme "rational expectations" school is treated less harshly. Is it because Skidelsky views Friedman as the scoundrel who led the faithful astray from the true faith?
Good in parts.
Worthwhile But Flawed
Rating:
I am going to be charitable and give this book four stars. Actually Mr. Skidelsky's book has several outstanding positive features. First there is the annunciation and defense of John Keynes economic model including the concept of uncertainty about the future and how this uncertainty effects Investment (or Keynes' investment function and its changeability). John Keynes believed that economic models should reflect reality, even if much mathematical elegance is lost. In the present period when Keynes and much of his concept of uncertainty is often ignored this exposition is highly commendable. Mr. Skidelsky is acutely aware of Keynes' contributions to economics and his role in establ;ishing macroeconomic theory. Mr. Skidelsky is also to be congratulated for his presentation of Keynes' theory of probability with its three types of certainty. This theory is not often found in economic courses. Third, Mr. Skidelsky also presents a wealth of material concerning Keynes and his personal life and views. Mr. Skidelsky demonstrates that Keynes was often the consummate moderate.
Moreover it should be noted that Mr. Skidelsky's work is quite readable, well within the purview of the average reader. And Mr. Skidelsky provides good references to the books by John Keynes.
Yet there are grave deficiencies in this work. First there is the use of the Rational Expectations concept. Far from pervading economics most economic books I have read lately never mention this concept. Of course Keynes never used this concept. Supposedly this concept means consumers and purchasers have a rational expectation of what the future holds. Actually this statement is kind of a junk truism. A person who purchases a radio thinks the radio will actually work (or at least he/she can return it if it does not). But obviously he/she does not really know the future because he/she does not have total knowledge of the product being bought. The consumer only knows the brand name and perhaps its reputation of reliability. Similarly with a consumer who purchases a stock for investment purposes. The consumer may think he/she will probably get a seven percent of so return. But the future remains opaque. As Mr. Skidlesky so readily pointed out economic conditions can change. Moreover maybe unknown to the consumer the stock is really a fraud. Again consumer can only use probabilities based on past experience and present knowledge to determine the future. The expectations are rational only considering the actual knowledge the consumer possesses. Economist Thomas Sowell in his book Knowledge And Decisions points out the role of knowledge. The rational expectations concept in the loose form Mr. Skidelsky uses the term ignores the role of knowledge and how consumers can and often do add to it. Thus rational expectations becomes a nebulous and surreal phantasm.
Then there is the gold standard. For most of his book Mr. Skidelsky neglects the role of the gold standard and the adherence to it by many countries in aggravating the Great Depression. A lot of discussion about the Great Depression concerns money supply. But Mr. Skidelsky does not indicate how the gold standard stopped nations from increasing their supply of money. Finally on page 180 Mr. Skidlesky provides a succinct statement of the effects of the adjustment process under the gold standard. Thus Mr. Skidlesky quotes Keynes that adjustment under the gold standard and fixed exchange rates "is compulsory for the debtor and voluntary for the creditor". The a deflationary bias is built into the gold standard. If Mr. Skidelsky wishes to discuss recent economic history he should utilize much more the valued works of Charles Feinstein, Peter Temin, and Gianni Toniolo The World Economy between the Wars; Barry Eichengreen Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 (NBER Series on Long-Term Factors in Economic Development), and Liaquat Ahamed Lords of Finance: The Bankers Who Broke the World among others.
Then there is Mr. Skidelsky's disparagement of the use of mathematics in economics. In some cases Mr. Skidelsky is right. There have been economic models that are over refined with too many variables that can not be measured that have very little theoretical value. However mathematics enables the economic modeler to clarify his economic variables and the relationships between these variables. Mere verbal description can only provide the reader with a small number of economic quantities. And the relationships between even this small number of economic quantities are often nebulous. And economic graphs can distort how quantities relate to each other. Very special cases can be displayed as quite normal on a graph. With mathematics the precise relationships between a large number of variables become apparent. With calculus the rates of changes of economic quantities are within the view of the research. And proper use of statistics and econometrics provide the researcher insight into whether he/she has actually found the right relationships. Mathematics is a very powerful tool that should be in the toolkit of every economist.
In sum, Mr. Skidlesky has written a very informative, worthwhile book, but has made some glaring errors in doing so.
We need a new Master
Rating:
Robert Skidelsky paints an appealing picture of Keynes as a moral philosopher of broad erudition and uncommon insight into the "real world" of human affairs. He contrasts this with the moral and scientific bankruptcy of today's mainstream economics, dominated by the neo-classical ideology of free market capitalism. Skidelsky sees the their obsession with mathematical models as obfuscation, a scientific veneer to hide assumptions that don't match how the real world works. Skidelsky calls us back to Keynes' vision of the "good life", not the material life, but the lives of good people.
Keynes correctly identified "uncertainty" as a central fact of economic life that cannot be captured by conventional mathematical models. Keynes knew this because he had studied classical mathematics at Cambridge and was very good at it. Thus he distinguished "uncertainty" from actuarial "risk", for which there is enough data and stability to compute probabilities by conventional statistical analysis. But there is another kind of mathematics, unknown to Skidelsky, which can capture "uncertainty", in a qualitative way that is somewhat akin to Keynes' relational or "ordinal" probability.
This is the mathematics of chaos, such as the non-linear dynamical systems used in the famous Limits to Growth studies. Here the concept is to identify key macro variables, such as their 5 variables of industrial output, food production, population growth, resource usage, and pollution. Then explore the consequences over long periods of time of different possible relationships, often non-linear and time-dependent, between these variables. The resulting scenarios give a good sense of the range of possibilities and which are more likely if different developments occur or different policies are pursued.
The best current example of how to apply this kind of mathematical thinking is given by global climate modeling. The overall framework is chaotic, but intense studies can refine the accuracy of a host of submodels that go into determining the relationships between the macro variables.
Likewise a new discipline of global economic modeling is needed, based on non-linear dynamical systems and aimed toward developing a variety of realistic scenarios, not toward making simplistic predictions. Many of today's economic models will act as submodels for particular circumstances, with intense scrutiny of these circumstances, finally transforming economics from ideology to real science.
However the Limits to Growth variables direct us to another glaring error, an error made by Skidelsky and most economists, including Keynes. This is the fact that economics is fundamentally rooted in the natural world, so that issues of resources, environment, and population must be at the very core of economic theory, not relegated to "factors of production" or "externalities". For example, in today's world the classical economic goals of increasing growth and consumption have become economic evils to be reduced to sustainable levels.
Some people are even beginning to understand that technology is not a cure-all, but consists of ever more clever ways to make use of abundant resources, especially cheap energy. When key resources, such as oil, become over-exploited and go into decline, then the technology based on them becomes less useful, less productive. And you can't assume, as mainstream economists do, that alternative resources will be as abundant or that the technology developed for them will be as productive.
Keynes was a true master, not just because he had a first class mind, but because he came into economics from the outside, with a grand moral and practical view of the world. But even he did not see how humanity would overrun the planet so quickly, nor how to transform economics into a true science. We need a new master.
Current Economic Crisis brings the Master Back ! ! !
Rating:
Author is a died-in-the-wool advocate of John Maynard. This is a good read, tying Keynes "General Theory" into what is happening to us today.
Required reading?
Rating:
Skidelsky argues, that like Keynes, all prospective economists should study ethics, philosophy, and political economy. I would go further, and say that society would benefit if the chapter on "Keynes and the Ethics of Capitalism" were required reading by everyone with sufficient education to comprehend it. The book has concise, insightful analyses of the current economic crisis and of the Great Depression. As a college student of the 1960's, who learned Keynesian economics through the introductory Samuelson text, I learned very little about economic theory that I didn't know, but I blame this on the profession, not Skidelsky. Not emphasized then was that the government and Federal Reserve have to be very wary of the impact of their decisions on inflationary expectations. Those readers who have read Taleb's book "The Black Swan" will find several of Taleb's ideas here, and he is referenced several times, once incorrectly (p.43) - but the importance of uncertainty as contrasted to probabilistic risk turns out to be a central idea of Keynes.
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