Monday, December 12, 2016

You remember John Nash, right?


From: Ideal Money and Asymptotically Ideal Money (PDF, 8 pages), a lecture by John F. Nash Jr. Under the heading "Keynesians", quoted for context:

The thinking of J. M. Keynes was actually multi-dimensional and consequently there are quite different varieties of persons at the present time who follow, in one way or another, some of the thinking of Keynes. And of course SOME of his thinking was scientifically accurate and thus not disputable. For example, an early book written by Keynes was the mathematical text "A Treatise on Probability".

The label "Keynesian" is convenient, but to be safe we should have a defined meaning for this as a party that can be criticized and contrasted with other parties.

So let us define "Keynesian" to be descriptive of a "school of thought" that originated at the time of the devaluations of the pound and the dollar in the early 30's of the 20th century. Then, more specifically, a "Keynesian" would favor the existence of a "manipulative" state establishment of central bank and treasury which would continuously seek to achieve "economic welfare" objectives with comparatively little regard for the long term reputation of the national currency and the associated effects of that on the reputation of financial enterprises domestic to the state.

And indeed a very famous saying of Keynes was "...in the long run we will all be dead...".


This is the part of that quote that I want to focus on:

... a "Keynesian" would favor the existence of a "manipulative" state establishment of central bank and treasury which would continuously seek to achieve "economic welfare" objectives with comparatively little regard for the long term reputation of the national currency ...

A Keynesian would continuously seek to achieve "economic welfare" objectives with little regard for the national currency.

Got it?


John Maynard Keynes wrote in the New York Times of 10 June 1934:

I see the problem of recovery, accordingly, in the following light: How soon will normal business enterprise come to the rescue? What measures can be taken to hasten the return of normal enterprise? On what scale, by which expedients and for how long is abnormal government expenditure advisable in the meantime?

... for how long is abnormal government expenditure advisable in the meantime?

In the meantime. Got it? Not "continuously". Only at times when policy has done so much damage to the economy that a Great Depression ensues. Then, and then only, said Keynes.

Nash was wrong about Keynes. Nash was careless.

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