Sunday, July 26, 2020

"The difference is not in the policy itself..."

A fragment from Raising Keynes: A General Theory for the 21st century by Stephen A. Marglin, at ScienceDirect:
Take Jacob Viner, the great Chicago (and later Princeton) economist, who had written in 1933 (Viner, 1933, p. 130)
If the government were to employ men to dig ditches and fill them up again, there would be nothing to show afterwards. But, nevertheless, even these expenditures would be an indirect contribution to business recovery. Their major importance would not be in the public works or the unemployment relief which immediately resulted, but in the possibility of hope that a substantial expenditure would act as a priming of the business pump, would encourage business men by increased sales, make them more optimistic, lead them to increase the number of their employees, and so on.
Compare this with what Keynes wrote in the General Theory:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it private enterprise on well tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is (General Theory, p. 129).
The difference is not in the policy itself, but in the fact that for Viner the policy relies on the imperfections and rigidities that characterized the American economy in 1933, whereas for Keynes, the policy is the logical extension of his theory of employment.
I'm not sure I see the difference Marglin points out. But I found his remark most interesting.

2 comments:

jim said...

Hi Art,
I was a bit concerned about your long silence. Good to see you posting again.

In regard to your digging holes and filling them up again post - there is a lot of that sort of activity that has been slowed down by the covid virus. For example, professional sports or Hollywood movies.

Revolving credit looks like another one that has taken a nose dive
https://fred.stlouisfed.org/graph/fredgraph.png?g=ttvE

The Arthurian said...

Thanks Jim. I was concerned, too! Good to hear from you.