RE: [OPE] Chris Harman on the spectre of Keynesianism

Date: Mon May 19 2008 - 08:26:55 EDT

> I do not know who has the leading edge in successful prediction for economic events these days. My guess is that many of them would work 
> for hedge funds, since you do not earn such high salaries unless your prognoses translate into hard cash. 
Hi Jurriaan:
I doubt that. Hedge fund managers and economists working for hedge funds are 
generally not _macro_economists and that's what is needed to make predictions
about the overall economy.  Also, I don't think that the way you get and keep
your job as an economist for a hedge fund is based primarily on the ex post
merit of your predictions. You can get a job based on who you know, which is 
affected by what colleges you went to school at, what organizations you are
a member of, and family friends, et al.  Some of the brokers simply recruit people
directly out of graduate school on the basis of their ranking in the graduating 
class of prestigious university programs (Harvard Business School comes to
mind).  I suspect that keeping your job has more to do with fitting-in the 
corporate hierarchy (including 'kissing butt') than anything else.  One's predictions
only have to fall within the range of what is deemed to be acceptable - so,
if your predictions turn out to be wrong and so does everyone else's then 
you're probably not going to suffer adverse consequences. 
In any event, a hedge fund can make tons of money even when the
economy is depressed if  they invest in the 'right' firms and markets:
this requires knowledge of industrial organization, corporate finance
and accounting, etc. rather than macroeconomics.
> My argument is, that we are now dealing not with Keynesianism, but with the "results" of Keynesianism.
Keynesian policy hasn't been practiced in the US economy for many decades.  Supply-side
(and even monetarist) policies have have been adopted far more frequently since 1980.
> The point is, (1) that you cannot explain e.g. the "global savings glut" (sometimes called "excess liquidity") in terms of Keynesian "hoarding", 
> and (2) that financial markets nowadays work in quite a different way than they did in Keynes's own time. 
True. That's why you are probably a lot better off looking at what _Post_-Keynesians
have to say about the crisis than what Keynes wrote.
>  As Marx himself says, foreign trade and 
> the "increase in share capital" are a countervailing influence to the tendency of the rate of profit to fall. But this is ignored in 99% of the Marxist 
> literature.
I don't know about 99% but I think you are basically correct. You can add
a depression of wages below their value to that list. 
> We need a model in which the economy does not just consist of investors and consumers, but also includes producers, dealers (market-
> intermediaries), benefit-recipients, and rentiers.  Once we do this, we are vastly better able to predict what will happen, because we are 
> immediately freed from dumb kinds of economics. 

My thesis for why this has not been done by Marxians is because of 
its mathematical complexity. I.e. there is a strong desire and a methodological
bias  to have simple, determinant models and thereby decrease the amount of 
'unknowns').  This bias is basically an adaptation by radical economists to the
academy and scholarly community since formulas and equations are the
coin of the realm among mainstream economists.  This is not to say - of course - that I 
think that mathematical models are of no merit: rather, I am suggesting that 
in the drive to model phenomena, too much of the 'information'  related to
the subject is lost.
In  solidarity, Jerry

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