The best known free market economist in Britain after World War II was not F.A. Hayek (who taught mainly in the United States and then Germany), but rather John Jewkes of Oxford.
John Jewkes was the main voice opposing government economic ‘planning’ and the endless taxes, spending programs and regulations of modern Britian.
Jewkes opposed statism in many ways – he tried to show students and fellow academics some of the errors of statist policy in his university work, he sat on official commissions (and tried to make their reports less insane), and he wrote a series of articles and books for the layman. Such books as Ordeal by Planning and The Sources of Invention.
John Jewkes was, in many ways, the best British economics had to offer in the post war world – and he shows that British economics was dying as a serious discipline. How can I say this? Well consider the following.
“It would be idle to deny that the White Paper was a ‘Keynesian’ document. Keynes was, after all, the major prophet of the idea that governments could, by increasing aggregate demand, reduce unemployment. Some of those who collaborated in the preparation of White Paper had been his pupils or had long been his followers. Those who resisted some of his ideas before the war had later gained an enormours respect for and confidence in him as they watched, and collaborated in, his superbly dextrous negotiations with the American Government and its economic officials. Those who had perhaps been most suspicious of the pre-war ideas of Keynes (I was among these) had seen at first hand the horrible consequences of the pre-war high rates of unemployment in the depressed areas, especially among juveniles and were only too ready to concede that, if the doctrine of the White Paper could be made to work, the post-war world might be a safer and more humane place”.
The Government and Economic Policy: A Defence of the White Paper on Employment Policy 1944, page 42.
Essay Three of John Jewkes’ A Return to Free Market Economics (Macmillan Press 1978).
My first concern here is not with the the idea that ‘increasing aggregate demand” (government issuing more funny money) is a good idea (absurd though that is), but the total lack of interest in basic economic theory that John Jewkes shows. ‘Theory’ is not a dirty word, the basic concepts of a discipline (the theory) are its heart – to examine them, to debate them, to be interested in them are basic to a discipline. To leave theory aside and just be concerned with practical advice is to allow a discipline to decay and die.
Keynes as an economist can not be judged by his skill as an negotiator (even he had not been making deals about how best to rob the American tax payer), nor is the seriousness of a problem any guide as to whether we should follow a certain policy – “there is a lot of unemployment, so we must all go and stand on our heads – do not look at me like that, do you not care about the unemployed?”
There may be arguments for the policy that Keynes proposes (for example if government issues more money prices will be higher than they otherwise would have been and if wages do not increase real wage rates will decline and more people can be employed – of course people will want higher wages, but let us forget about this little problem) – but saying Keynes was a clever talker, or that being unemployed is very nasty is not presenting any arguments.
As I have said John Jewkes was about as good as post war British economics got. Lionel Robbins (for example) who had been a good economist before the war, became a degenerate hack (supporting the great Lord Keynes) and ended up arguing for yet more university subsidies (the infamous ‘Robbins Report’). And it is true that as inflation in Britain eat away at economic strength Jewkes was critical of the policy of print and spend and gave some support to the ‘monetarist’ effort to limit (but never end) the policy of issuing more credit-money.
However, Jewkes never dealt with the basic issues of theory involved. He knew of the work of such economists as Hayek and Ludwig Von Mises, but never tackled the basic questions himself.
This neglect by Jewkes (and other people basically favourable to free markets) did not mean that theory openly died in British economics – for without theory (a basic body of ideas) there could be no discipline called ‘economics’. But this ‘opting out’ (by Jewkes and others) simply meant that theory was taken over by developments of Keynesian doctrines – plus lots of mathematics and technical sounding language.
I am not saying that Jewkes approved of this, but he did nothing to fight it. Jewkes did a lot of fine empirical investigation (hence his interest in history) showing (for example) that most modern inventions of economic importance tended to be the work of individuals working with modest resources, and he gave lots of good economic advise against the absurdities of government policy.
However, British economics became more and more dominated by bad (false) theory. How could it be otherwise when men like Robbins and Jewkes either accepted Keynesian concepts or would do nothing to oppose those concepts (whatever their practical policy advice).
So young economists grow up with absurd concepts planted in the foundations of their thinking and the advice they gave and the knowledge of the general student body that they taught would be rotten.
In the United States most economists will argue that government should issue more money if there is an economic downturn, in Britain almost all academic economists will produce this absurdity. In America there was some resistance to rotten theory (some defence of basic economic thought) in Britain this tradition of resistance has vanished, there is not a university in the country were serious economics is taught.
Certainly there may be a few isolated individuals who oppose the madness (and to call them all ‘Austrian’ economists may well be a error – for example that old fighter W.H. Hutt did not go by this tag), but there are not enough of them to make up a tradition – some good economists went overseas (such as Hayek or Hutt) and some good men just let theory drift away – men such as John Jewkes.
The pass had been dropped, the tradition of economic thought had been broken – economics in Britain is dead.
Let’s not forget E. G. West, whose 1965 book “Education and the State” was, in my view, the greatest single argument for reintroducing a free market in education produced during the 20th century. West’s thinking was not only theoretically sound but also borne out by an effective marshalling of the historical evidence.
This is not to say that West was part of a larger movement toward market education in England–no such movement manifested itself during his lifetime. But his contribution sparked new generations of scholars who may yet build that movement.
Economic thought takes a rather strong will to do well, I think.
Twin temptations of financial-market wizardry and government-think-tank gravy lure all but the noblest economists away from the analysis and testing of theory.
Is it only economics which is dead ? I’m afraid this is part of a general cultural trend. What about Philosophy ? Literature ? Art ?
A lot of things are dead, and not only in Britain.
What about Peter Bauer? I seem to recall many of his articles taking his fellow development economists to task for basic errors in economic theory.
Some reflections on your post:
Economic theory is often found “difficult” by scholars, readers and students, perhaps because it is abstract, sometimes counter-intuitive and much of it is now articulated in maths rather than in literary sentences.
Your implicit account of Keynes’ or keynesian economics is barely recognisable. Counter-cyclical fiscal policy or “demand management” – roughly equivalent, I suppose, to your notion of governments spending funny money to create jobs – is a contentious byproduct of an attempt to explain why:
“..it is an outstanding characteristic of the economic system in which we live that, whilst it is subject to severe fluctuations in respect of output and employment, it is not violently unstable. Indeed it seems capable of remaining in a chronic condition of sub-normal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.”
[Keynes: The General Theory of Emplyment, Interest and Money (1936) p. 249]
Whether and why that attempt of Keynes and some of his contemporaries was successful or not has been the subject of continuing controversy ever since. The virtual continous stagnation of Japan’s economy since 1992 is at least one outstanding instance showing the current relevance of downstream developments of a body of theory which Keynes is generally credited with having started. It is certainly arguable that others deserve part of the credit and that some interpreters deserve criticism for misconstructions but I doubt now that extensive debates about what Keynes “really meant” in 1936, with accompanying textual exegisis, are likely to prove fruitful.
What does matter IMO is whether market economies are capable, under certain contingencies, of sinking to states of low activity equilibria and remaining thereabouts for years in succession in the absence of activist fiscal and monetary policies by governments and central banks. And, if so, what combination of policy options are most appropriate for addressing such situations.
For those interested, an online text of Keynes’ General Theory can be found at: http://www.marxists.org/reference/subject/economics/keynes/
The best short online intro as to where “keynesian” economics has got to IMO is by Alan Blinder at: http://www.econlib.org/library/Enc/KeynesianEconomics.html
Alan Blinder was Alan Greenspan’s deputy at the US Federal Reserve Bank for much of the 1990s.
People have written to me that most economists in the United States no longer go in for the “increase demand” absurdity (it is just that the political and media classes have lagged behind).
If this is so I apologise for my error here.
As for sources to read.
Well I would recomend F.A. Hayek’s essays in his “New Studies” (1978).
For longer works there is (for example) W.H. Hutt “Keynesianism: Retrospective and Prospective”, or Heney Hazlitt’s “The Failure of the New Economics” (1958).
However, just reading Ludwig Von Mises’s “Human Action” should cover the ground.
As for Mr Greespan (and the rest of the gang). Well it violates the nonagression principle, but I rather think that the late Ayn Rand had it right when she shoved her dinner in his face at that restaurant.
I suppose the correct libertarian response would be to give Mr Greenspan and the other central bankers a fair trial and then a long prison term for counterfeiting on a massive scale – but I prefer the Rand option (it is cheaper).
Some, of course, may need more convincing that dinner plates in faces and a few references to aged texts pass for rational discussion but then there seems to be no limit to human fallibility.
Part of the problem, I suppose, is that economists are apt to believe that changes in tax rates, whether up or down, in tax and welfare structures, in government spending and in the fiscal balance may influence the pace of economic activity, as will changes in interest rates set by central banks, depending on how open an economy is and its exchange rate regime, as well as other factors. Many, very likely most economists are inclined also to think it makes sense to analyse as best they can the the likely influence on economic activity of policy changes before the changes are implemented but then that can be, and sometimes is, dismissed as just a self-serving cause.
Readers who might like tastes of current mainstream texts in macroeconomics, perhaps mathematically demanding in cases, might like to know about: David Blitzer: What’s the economy trying to tell you, McGraw-Hill (1997); Brad DeLong: Macroeconomics, McGraw-Hill (2002); Auerbach and Kotlikoff, Macroeconomics, MIT Press (2nd edition 1998); Rudi Dornbusch et al: Macroeconomics, McGraw-Hill (8th edition 2001); Olivier Blanchard: Macroeconomics, Prentice-Hall (3rd edition 2003).
Well, of course, in the case of Rand and Greenspan there was personal betrayal involved. Mr Greenspan is harldy a person who has just made the intellectual error of thinking that issuing a lot of money is “good for the economy”.
Mr Greenspan is a person who sold out his beliefs in exchange for personal success. Now if Ayn Rand were still alive one could mention to her that this is what most people mean by “selfishness” – but one would have to make this comment from a safe distance.
If you want a longer arguement than I have given you then read the works I have suggested.
You seem unable to understand that most of us have read the “mainstream” stuff long ago – it is YOU who will not read the Austrian stuff (or even the work of nonAustrians like W.H. Hutt).
Paul,
To make a painfully obvious point that might otherwise be in danger of getting overlooked, as your bibliographic references are to an aged, marginal literature, it inescapably follows that it will not have absorbed what has happened since it was written.
Economies and their institutions evolve and develop. New tools and studies come into the ideas market to help us better understand what is going on, very likely influencing the policies of both governments and companies. Economics is not akin to the eternal truths of political philosophy and nor are its historically seminal texts to be regarded as holy script which only heretics question.
I’m told that I should have mentioned a popular introduction to macroeconomics by Mankiw, widely recommended in student reading – sorry about that.
Oh dear, Whigism.
The subject develops onward and upward and all that is good in the past is incorporated into the new.
Actually this is false, but there we go it is what people are taught.
Actually I have read the modern textbooks, I just DO NOT AGREE WITH THEM I regard them as old fallacies in modern covers.
New tools – maths and models? Like Sir William Petty in the 17th century, or even more divorced from reason and reality?
However, if you insist on books that have been written in the last few years then please contact the Ludwig Von Mises Institute at Auburn University, Alabama.
I tend to prefer the old classics – no doubt this is because I am bald.
>Actually I have read the modern textbooks, I just DO NOT AGREE WITH THEM I regard them as old fallacies in modern covers.
Fine, you are entitled to an opinion but perhaps you might let us in on the secret as to why you disagree with all the modern mainstream economics texts. Citing an ancient literature is not going to provide an answer since it will not have taken account of what has happened since in either the world or in economics.
Moreover, you have not responded on Keynes’ basic objective in writing the General Theory, namely to explain how and why market economies might sink to a low activity equilibrium and remain there for years in succession. Nor have you focused on the inevitable interest of policy makers in government as well as business in assessing the influence on activity levels of changes in tax rates and government spending, the fiscal balance, and interest rates contingent on the exchange rate regime. To just keep mentioning Von Mises by name in response is a straight cop out.
As I have told you before (both here and in direct e.mails), a bust is caused by the credit-money boom that comes before it. If you wish to prevent the bust then do not have the credit-money boom.
Nor does a free market economy stay bust. Once the malinvestments are liquidated the economy will progress. Of course if prices and wages are NOT ALLOWED to adjust (by pro union laws and “collective bargaining” and-or by direct government intervention such as the misguided actions of Herbert “the forgotten Progressive” Hoover) things will not go well.
If a market is not allowed to operate this can harldy be called market failure.
The reason that I mentioned Ludwig Von Mises (and I accept that I should have mentioned the “Theory of Money and Credit” [1912] as well as “Human Action” [1949]) is because you said you wanted a longer argument and I was stupid enough to believe you.
Paul,
I have not responded before because your replies simply ignored the issues I had raised and other online issues seemed to merit more attention.
Booms may well be caused and financed by credit expansion and that is why central banks have various inflation targeting policies to address just that. The detail of the targeting policies and their effectiveness in achieving and maintaining low inflation – as well as the outcomes, intended or otherwise, for other economic variables of public concern, such as unemployment – are certainly a fruitful focus for discussion. There is a huge, recent research literature on this and I simply don’t believe that recourse to aged texts from the early 20th century would serve any constructive purpose in a current context where market institutions and economic structures have changed greatly since those texts were written. Unfortunately, you felt impelled to reject all earlier references to the present mainstream literature so there appears little scope for productive dialogue.
Historically, it has been true that economies do not not necessarily stay depressed forever but on occasion they have remained depressed
to low activity levels for a sequence of many years at a time and that is something we at least need a mainstream theory to account for. This passage from Moggridge: Maynard Keynes (1992)[p 539-540] relates:
“In January 1932, Keynes made his first visit to Germany since he had passed through on his way to Russia in 1928. This time his destination was Hamburg where he was to give a lecture . . . Keynes found the German economic situation and the prospective political situation very depressing. He published his broad reactions
in the New Statesman: ‘Germany today is in the grips of the most powerful deflation any nation has experienced. A visitor to that country is offered an extraordinary example of what the effects of such a policy may be . . Nearly a third of the population is out of work . .'”
You doubtless recall that after a succession of national elections in Germany during 1932, by the end of January in the following year, Hitler had become Reich Chancellor.
Just to pick up on a few of the lacunae, almost at random:
(1) It is seriously misleading to imply or even suggest that “inflation targeting” by central banks is practised after some uniform fashion. It isn’t, as anyone who has followed the exchanges in the public domain between Britain’s Treasury and the European Central Bank or Commission over the distinctive differences between the inflation targeting of the Bank of England compared with that of the European Central Bank would recognise. To lump the lot together as one homogenous method just indicates a lack of understanding about a matter that is among the outstanding fundamental issues relating to whether Britain might sign up to join the Euro or not. Additionally, the US FED famously has a broad statutory remit from the US Congress which enjoins the Board of Governors of the FED to consider other factors, besides the inflation rate, when making policy decisions, such as (un)employment. Other differences in central bank performance relate to the transparency, accountability and predictability of their policy decisions, the last of these being the research focus of a very recent IMF working paper at: http://www.imf.org/external/pubs/ft/wp/2002/wp02233.pdf
(2) As for regard for the classics, I have just posted a longish piece relating to Adam Smith in a thread about him on Brad DeLong’s website. It is not part of my argument that von Mises or Hayek were wrong in their attacks directed against socialism or central planning. Contrary to widespread misunderstandings, Keynes was not an advocate of socialism or for central planning in a command economy. He was quite explicit in the General Theory in favouring capitalism. What I am saying is that Keynes, with others, initiated a revolution in the way economists theorise about market economies and that he offered a theoretical account of how market economies might stabilise at a relatively low activity equilibrium and stay there, perhaps for years at a time. His explanation has been the subject of continuing controversy since. However, a relevant, current example is the virtually continuous stagnation of Japan’s economy since 1992. Since Japan’s economy is the second largest economy in the world, this is more than just a passing curiosity.
(3) Repeating references to an archaic literature that has been overtaken by developments is not fruitful. By contrast, Adam Smith does have a continuing resonance in that debates about market systems versus command economies or socialism are at least still warm and the optimal policy mix for making transitions from predominantly subsistence farming economies to a fully-functioning industrialised, market economy is both topical and contentious. The popular anti-globalisation movements, in so far as any have coherent agendas, display preferences for trade protection, import substitution as against export oriented policy, and on behalf of extensive state regulatory intervention to achieve populist political demands. All that is in marked contrast to Smith and the laissez-faire stance of the government in Britain during its pioneering industrial revolution in the period following publication of Smith’s Wealth of Nations.
I did not know that you were writing here – stupidly I thought you were writing to me directly (I hope you got my replies).
Well now.
Gemany – a credit money expansion followed by a bust (the same as most major nations in the late 1920’s – early 1930’s). The central banks and governments mostly claimed there was no problem because the “price level” was not going up – but it is the credit-money expansion (not prices in the shops) that is the actual inflation.
All central banks the same – no, some are worse than others. The E.C.B. (the Euro people) is looking at a money supply expansion (“broad” or “narrow”) of about 7% at the momemt (if memory serves) – which is better than some fiat money regimes and worse than others.
The economic problems were made a lot worse by the trade war (and by Gernmany’s addiction in the 1920’s to borrowing money from the United States) however the basic problem was the lack of a free labour market.
The “social politics” and “social rule of law” had led to the death of the labour market. The unions simply would not allow real wages to fall in line with falls in output (true what counts is the situation in each firm – indeed in each job, but I am playing it crude here).
So you get a depression but wages are not adjusting = unemployment.
Now you can issue more credit-money and then borrow it back and spend it (Keynes style) but if the resulting money just gets pushed into higher wages you will make no long term dent in unemployment.
You could try in the long run we are all dead and just carry on increasing the rate that prices are rising (the inflation is the credit-money expansion is the inflation but it can have this effect) – however this will eventually lead to crack up (and it may not be that “long run” either – certainly within most people’s life times).
Keynes (in the introduction to the German edition of the Gerneral Theory) seemed to support the Nazi policy of direct control of wages (the Nazi’z crushed the unions on May 2 1933).- however this leads to all sorts of relavtive distortions.
Adam Smith – interesting man. Although (in that period) Turgot was probably a better economist.
Keynes and new economics. Well a lot of people were going about saying there was a need for more “demand” (J.B.Say wrote in vain as far as political folk and their desire to print prosperity are concerned), but these people (who also used the term “multiplyer”) wanted to print the money direct and spend it or hand it out (Major Douglas Social Credit Style). Keynes wanted to encourage a credit money exapansion, have the government borrow the new money and then spend it (on public works and other such)..
As economics this is absurd, but as politics it is very clever indeed. It gets many bankers on your side (more credit money expansion to bail out their old expansion) and it get the political folk on your side – more spending, no new taxes, and one can say you are just printing money and spending it (although, in effect, that is what you are doing).
Keynes the free market man – well he was generally in favour of ever more government spending (see his New York Times articles – in those days the N.Y.T. had Henry Hazlitt as a counter weight to this stuff – these days they do not bother with balance). Certainly I know of no time that Keynes ever supported deregulating the labour market – which is odd for a man who claimed to be interested in unemployment (perhaps he thought that politics just made restroring the labour market impossible).
However, if you mean that Keynes was not Stalinist nationalize everything in sight person – well yes you are correct (which makes him better than many people in Cambridge at that time).
Japan – well they tried print and spend to the max and it did not work very well. However, Japan is not finished – there are some good manufacturing companies there, if they could only free themselves – from the political-financial system.
As for modern books (as you refuse to read Mises). Hanz Sannholz’s “Age of Inflation” (1979) or “Money and Freedom” (1985).
If you only want things published in the last few years then simply go to Mises.org and get a list.
Remember I have read the modern print-spend stuff, it is you who refuses to read books that oppose your point of view.
>I have never said that all Central Banks are equally bad – some inflate more than others. By the way – by “inflate” I mean promote credit-money expansion (I am not talking about the “price level”).
Credit expansion isn’t necessarily inflationary. In Japan, interest rates on bank credit are presently near to zero because the central bank there wants to encourage borrowing and spending to arrest and then reverse the recent downward price spiral.
>Actually the E.C.B. (which everyone denounces as terribly conservative) is having a nice credit-money boom right now (something like a 7% money supply growth rate [“broad” or “narrow”] if I remember correctly).
There are valid causes for criticising the ECB’s chosen way of inflation targeting and also for its lack of transparency in the way it makes its rate setting decisions but it would be wrong IMO to blame the Bank for the combination of a higher inflation rate and a higher unemployment rate in the Eurozone compared with Britain. The ECB is under political pressure to cut interest rates to stimulate credit expansion and spending in the Eurozone in order to promote increased economic growth and thereby reduce the high prevailing unemployment rate.
The ECB has been resisting that pressure on the grounds that the average annual inflation rate in the Eurozone has been running above the ECB’s target maximum of 2% – and rightly so IMO. Given the poor record of some national economies in the Eurozone to maintain low inflation in the post-WW2 period, the ECB has to establish a credible commitment to maintaining low inflation. If it doesn’t achieve that, firms and trade unions will revert to building in expectations of higher inflation in their market decisions.
>I suppose that all these fiat money regimes compete (although they also cooperate) so it is better to have many of them – rather than (as Keynes wanted) just one great big fiat money regime for the whole world.
Keynes (rightly or wrongly) believed that fixed exchange rates were more conducive to promoting international trade expansion than flexible or floating exchange rates but recognised an economy could come to suffer chronic trade imbalances at a particular fixed exchange rate if its government acted through fiscal and monetary policies to maintain a reasonably high level of employment. In those circumstances, devaluation of the exchange rate would usually become a preferred course to the alternative of maintaining sufficiently high levels of unemployment to constrain imports to the value of that country’s sustainable exports plus any capital inflows it could attract. The other option of introducing import licenses or raising tariffs is apt to incite retaliation by trading partners and thereby hinder growth of trade with the benefits that brings. The post-WW2 settlement negotiated at Bretton Woods in 1944, with Keynes participating, provided for pegged though adjustable exchange rates, a regime which lasted through to the early 1970s.
>Keynes and free enterprise. Well I know of no time when Keynes argued for lower government spending or less regulations . . However, Keynes was all over the place on policy advice during his adult life (for example he writes both for and against free trade) so it many be that you can dig up some free market writing from somewhere.
True – but I’m not in the position of regarding everything Keynes wrote as holy script. As I keep posting, the main focus of interest is to understand how and why a capitalist market economy may sink into a low-activity equilibrium and stay there for a succession of years. Keynes ventured a new theory as an explanation and that has been the subject of controversy since. His explanation contrasted with the preceding conventional wisdom which tended to regard unemployment as either voluntary or the regretable outcome of some temporary glitch in the ways product or labour markets function – hence much quotation of Keynes’ remark: “..in the long run we are all dead.”
As there are many modern textbook discussions of development in macroeconomics since Keynes’ General Theory, it is not particularly fruitful now, except as a scholarly exercise, to approach the main issue with an unswerving dedication to proving everything that Keynes ever wrote or said is correct. However, I do believe he was basically correct in his observation that it is possible for a market economy to sink into a low-activity equilibrium and stay there for sufficient length of time to inflict substantial social misery. To understand how that can happen, and what can be done about it, is one of the main themes of modern macroeconomics.
>Of course we can always play in the long run we are all dead – and keep increasing the rate at which prices rise in order to fool the unions (till full crack up occurs), but this is unwise.
And that is a fair, implicit criticism of what “keynesian” demand management through fiscal activism often came to mean through to the 1970s. I recall attending a seminar in the early 1960s when the late Frank Paish was saying that if we accepted stabilising the UK economy with a margin of 2.5% unemployment, that might reduce Britain’s relatively high trend inflation rate and also possibly avoid boom and bust cycles as governments stimulated and then reined back the pace of economic activity by almost continually manipulating taxes, public spending and credit restrictions. At a time when the average unemployment rate was usually less than 2% in Britain, Paish was then widely regarded as almost wildly heterodox.
Today, we would still regard Paish’s prescription as heterodox but for different reasons. The currently preferred policy frame is to have independent central banks setting interest rates to maintain inflation at a low, predictably steady rate. It is up to job market participants to act so as to ensure prevailing unemployment rates are at socially tolerable levels with governments facilitating that through market liberalisation, skills training where appropriate and such reforms of tax-welfare systems as are necessary to remove disincentives to working.
However, there remains the hopefully remote contingency that a market economy could suffer a shock that would send it into a deflationary spiral of falling prices towards stagnation at some low-activity equilibrium. In those conditions, fiscal activism to stimulate demand may be appropriate if the basic cause is demand deficiency although that can hardly be argued if inflation is already accelerating, a combination which characterised much of the 1970s and which came to be dubbed “stagflation”.
Well first I must apologise to you for my poor typing.
For example (in explaining the political advantages of following the keynesian policy of encouraging a credit-money expansion and then borrowing the money back and spending it – rather than just printing the money and spending it direct) I typed that “and one can say that you are printing money and spend it” what I meant to type was that “and no one can say that you are printing money and spending it”.
In effect what governments do is “print and spend” but FORMALLY that it is not what are they are doing.
On Japan – as I have said many times, an inflation of credit-money may not lead to an increase in the “price level”.
The example of America in the late 1920’s is a good one. A large scale inflation but no rise in the “price level” (as calculated by the various index measures of the goods people buy).
So the Federal Reserve (and it seems you) can say “there is no inflation”.
The credit-money inflation will do its boom-bust work whether prices in the shops rise or not.
Japan has tried the policy of large scale credit money expansion and government deficit spending – and this policy has not turned out well.
Now one need not be an empiricist to say that the Japanese example should make you think again about the policy of credit-money expansion and deficit spending.
An historical example (or even many of them) on its own does not prove a case – but you should be open to the logical arguments against your beliefs.
Now it may well be that you will come back (after having read them) and be able to refute the “Austrian” attack on your position, but to continue to refuse to read the “Austrian” attack (even when presented by people who have tenured positions at universities) is not good.
As for unemployment and price rises. Actually unemployment is a labour market matter – very high and rising levels of unemployment may coexist quite happily with a very high and rising levels of price rises.
In short (in your language) inflation is no way to cure unemployment.
If the labour market is broken then issuing more credit-money, in the hope of pumping up prices, will not fix it.
The only way to deal with long term unemployment (and in the long run we are not all dead) is to find out what government interventions have broken the labour market and repeal them.
>As I said when I use the word inflation I am not talking about a rise in the “price level”.
Fine. You are entitled to use terms in the sense you wish to. OTOH in order to minimise the risk of compounding confusion between symptons or effects with their causes, I propose to follow the usage of the term “inflation” in the mainstream texts:
“Inflation is the rate of change in prices, and the price level is the cumulation of past inflations.”
from: R Dornbusch, S Fischer et al: Macroeconomics; McGraw-Hill (1998), page 33.
“Inflation: A sustained increase in the general price level over time.”
from: RJ Barro; Macroeconomics; MIT Press (1997), page 264.
“Inflation is a sustained rise in the general level of prices.”
from: Olivier Blanchard: Macroeconomics; Prentice Hall; (1997), page 29.
I already know that you will only read “mainstream texts” (that is what makes this discussion so pointless).
I to read such works, but I also read works that are critical of them – you refuse to read the critical works (even when they are written by economists with positions in universities).
The word “inflation” has a rather older and more complicated history than you seem to understand – I am not using some new definition.
I made it quite clear (several times) that a credit money inflation need not lead to a rise in the “price level” (the credit-money inflation will still cause problems – the boom-bust cycle).
It is not my fault if you did not bother to read what I wrote.
Discussion is apt to become tedious and unproductive if you insist on attributing arcane meanings to familiar technical terms while I follow the mainstream usage.
There is more than enough mainstream literature for me to follow without getting sidetracked on to aged eccentric texts that have long since been passed by.
You have still conspicuously failed to pick up on the main focus of the Keynesian revolution, that of providing a theory to explain how and why a market economy could sink into a low-activity equilibrium and remain there for sufficiently long to inflict substantial social misery and about policy options for dealing with that. So be it.