December 20, 2015

Quixotic Keynes exegesis

Comment on David Glasner on ‘Keynes on the Theory of the Rate of Interest’


Keynes was a political economist and he said many things on many occasions “It is well known that John Maynard was born anew every morning; for this reason, his colleagues at Bretton Woods commented that he was too intelligent to be consistent.” (Valentino, 1988, p. 239)

Logical consistency — one essential criterion of science — has never been Keynes’s main concern. Just the contrary, Keynes’s natural habitat has always been the wish-wash zone where “nothing is clear and everything is possible.” (Keynes, 1973, p. 292)

Accordingly, Keynes has been the most outspoken proponent of the Cambridge School of Loose Verbal Reasoning “Another danger is that you may ‘precise everything away’ and be left with only a comparative poverty of meaning. ... Such a problem was avoided, said Keynes, by Marshall who used loose definitions but allowed the reader to infer his meaning from ‘the richness of context’.” (Coates, 2007, p. 87)

So, here you have it: the reader is allowed to infer his meaning. This invitation to free ink-blot association gave rise to the great palaver about ‘what Keynes really meant’. It should have been clear from the very beginning to every person of average wit and life experience that this palaver could never ever have a worthwhile outcome. And it has not until this very day. Nonetheless, David Glasner heroically carries on with the interpretation of Keynes’s interpretation of what the classicals could have meant.

The methodological moronism of the Cambridge School of Loose Verbal Reasoning has been carved in stone for the amusement of posterity with this statement: “Marshall followed the maxim: Better to be ambiguous and relevant than precise and irrelevant.” (Colander, 1995, p. 283)

This phony trade-off exists only in the minds of economists. Science is qua definition precise and relevant. Because Keynes and the After-Keynesians never understood this they are out of science (2011).

There is no use to refute Keynes’s employment theory or his theory of interest or the multiplier or the ex ante/ex post equality of I and S or what not. Keynes’s profit theory is provable false, and that is enough. If the core concept profit is false then the whole theoretical superstructure falls apart.*

Because Keynes has been logically inconsistent the attempt to find out what he really meant has always been a quixotic enterprise. Keynes cannot be saved. There is one passage in the General Theory that is — in contrast to the usual verbiage — formally crystal clear and it says “Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment.” (Keynes, 1973, p. 63) This two-liner is provable false and no amount of interpretation and exegesis can talk this away.**

That Keynes as political economist produced not much of scientific value is bad but what the neoclassical maximization-and-equilibrium sect has produced then and now is worse. “I consider that Keynes had no real grasp of formal economic theorizing (and also disliked it), and that he consequently left many gaping holes in his theory. I none the less hold that his insights were several orders more profound and realistic than those of his recent critics.” (Hahn, 1982, pp. x-xi)

What Keynes and Fisher had in common was a false profit theory and this is the worst thing that can happen to an economist. In addition they applied the nonentities constrained optimization and equilibrium. More than 80 years later economists are still occupied with making sense of what had no sense right from the start. Not very efficient all this loose verbal reasoning, to say the least.

Egmont Kakarot-Handtke

Coates, J. (2007). The Claims of Common Sense. Moore, Wittgenstein, Keynes and the Social Sciences. Cambridge, New York, NY, etc.: Cambridge University Press.
Colander, D. (1995). Marshallian General Equilibrium Analysis. Eastern Economic Journal, 21(3): 281–293. URL
Hahn, F. H. (1982). Money and Inflation. Oxford: Blackwell.
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Valentino, R. (1988). Discussion. In H. Hanusch (Ed.), Evolutionary Economics. Applications of Schumpeter’s Ideas, pages 238–249. Cambridge, New York, NY, etc.: Cambridge University Press.

* See ‘How the intelligent non-economist can refute every economist hands down
** See cross-references Refutation of I=S