Sunday, January 28, 2007

Welcome To The Party

Compare and contrast this:
"When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I'd argue, is a counter-counterreformation." - Paul Krugman (2007). Who Was Milton Friedman?, New York Review of Books, V. 54, N 2 (February 15)
And this:
"What professional economics now needs is a rebellion against supply and demand. We need a rebellion against the idea that people are actually paid in proportion to the value of what they produce. We need a rebellion against the metaphor of the labor market - an entity that no one has ever seen, where no one has ever been, an entity that lacks the mechanishms of price adjustment that would be required for the marginal productivity theory to work. Economics needs a rebellion that is almost less against the system under which we live, as against the sources of our complacency about that system. We need a rebellion, not so much as against existing market institutions, as against the analytical tyranny of the idea of the market, as it applies to pay.

[Footnote:] Such a rebellion almost got going in the 1960s, when a dispute known as the 'Cambridge controversies' challenged the concept of capital as a factor of production and hence the coherence of the notion of marginal productivity. But the marginal productivity theory of the labor market survived that challenge, and its success in so doing is the root of the difficulty today." - James K. Galbraith (1998). Created Unequal: The Crisis in American Pay, Free Press: 265-266


Anonymous said...

Is it just me, or is James K. Galbraith, as he gets older, starting to sound more and more like John K. Galbraith?

Robert Vienneau said...

I've only been aware of James Galbraith's work for about a decade. In that time, I always thought he took his father's work as a tradition in which to work, albeit with more math. Feel free to say more.

The University of Texas at Austin once had a tradition of institutionalist economics (Clarence Ayres, Robert Montgomery, Ruth Allen, Alton Wiley, and Edward Everett Hale). I don't know if this tradition survives, but I wonder if this has something to do with James be at UT.

I think I've read a book with pictures of James as a boy in a crowd of kids at the ambassador's residence in India.

Anonymous said...

I was amazed when I read Krugman's article on Friedman. He ignored Kaldor's destruction of Monetarism; the whole argument over the endogenous nature of the money supply; the basic fact that the Central Banks could *not* control the money supply (and so hiked up interest rates instead); no mention of Chile; or the fact that if Friedman claimed something, the facts were probably the opposition or became so when his ideas were applied (such as on equality, apparently free market capitalism is the most egalitarian system ever). And so on...

Not to mention his ignorance of what "libertarian" originally meant and what "anarchist" actually means...

I can only assume neo-classical economics rots the brain, or at the very least puts intellectual blinkers on you -- even for someone as talented as Krugman. But I do get the impression that economics, as a profession, tends to ignore non-mainstream positions -- particularly if they are right!


Robert Vienneau said...

Thanks for the comment, Iain. I think economists have a problem in how they should comment on their colleagues. So many that are dominant just push exploded and inane views. Should one ignore them, and get on with one's own work? But, if economists actually disagree, shouldn't one be committed to pluralism? If one is always going on about what's wrong with others' views and how the textbooks are just wrong on long-established principles, won't one be ignored? As a tactic, maybe one should welcome moves a millimeter in the right direction.

Krugman and Galbraith exchanged views in Slate some time ago.