What Does “Keynesian” Mean?

Last week Simon Wren-Lewis wrote a really interesting post on his blog trying to find the right labels with which to identify macroeconomists. Simon, rather disarmingly, starts by admitting the ultimate futility of assigning people labels; reality is just too complicated to conform to the labels that we invent to help ourselves make sense of reality. A good label can provide us with a handle with which to gain a better grasp on a messy set of observations, but it is not the reality. And if you come up with one label, I may counter with a different one. Who’s to say which label is better?

At any rate, as I read through Simon’s post I found myself alternately nodding my head in agreement and shaking my head in disagreement. So staying in the spirit of fun in which Simon wrote his post, I will provide a commentary on his labels and other pronouncements. If the comments are weighted on the side of disagreement, well, that’s what makes blogging fun, n’est-ce pas?

Simon divides academic researchers into two groups (mainstream and heterodox) and macroeconomic policy into two approaches (Keynesian and anti-Keynesian). He then offers the following comment on the meaning of the label Keynesian.

Just think about the label Keynesian. Any sensible definition would involve the words sticky prices and aggregate demand. Yet there are still some economists (generally not academics) who think Keynesian means believing fiscal rather than monetary policy should be used to stabilise demand. Fifty years ago maybe, but no longer. Even worse are non-economists who think being a Keynesian means believing in market imperfections, government intervention in general and a mixed economy. (If you do not believe this happens, look at the definition in Wikipedia.)

Well, as I pointed out in a recent post, there is nothing peculiarly Keynesian about the assumption of sticky prices, especially not as a necessary condition for an output gap and involuntary unemployment. So if Simon is going to have to work harder to justify his distinction between Keynesian and anti-Keynesian. In a comment on Simon’s blog, Nick Rowe pointed out just this problem, asking in particular why Simon could not substitute a Monetarist/anti-Monetarist dichotomy for the Keynesian/anti-Keynesian one.

The story gets more complicated in Simon’s next paragraph in which he describes his dichotomy of academic research into mainstream and heterodox.

Thanks to the microfoundations revolution in macro, mainstream macroeconomists speak the same language. I can go to a seminar that involves an RBC model with flexible prices and no involuntary unemployment and still contribute and possibly learn something. Equally an economist like John Cochrane can and does engage in meaningful discussions of New Keynesian theory (pdf).

In other words, the range of acceptable macroeconomic models has been drastically narrowed. Unless it is microfounded in a dynamic stochastic general equilibrium model, a model does not qualify as “mainstream.” This notion of microfoundation is certainly not what Edmund Phelps meant by “microeconomic foundations” when he edited his famous volume Microeconomic Foundations of Employment and Inflation Theory, which contained, among others, Alchian’s classic paper on search costs and unemployment and a paper by the then not so well-known Robert Lucas and his early collaborator Leonard Rapping. Nevertheless, in the current consensus, it is apparently the New Classicals that determine what kind of model is acceptable, while New Keynesians are allowed to make whatever adjustments, mainly sticky wages, they need to derive Keynesian policy recommendations. Anyone who doesn’t go along with this bargain is excluded from the mainstream. Simon may not be happy with this state of affairs, but he seems to have made peace with it without undue discomfort.

Now many mainstream macroeconomists, myself included, can be pretty critical of the limitations that this programme can place on economic thinking, particularly if it is taken too literally by microfoundations purists. But like it or not, that is how most macro research is done nowadays in the mainstream, and I see no sign of this changing anytime soon. (Paul Krugman discusses some reasons why here.) My own view is that I would like to see more tolerance and a greater variety of modelling approaches, but a pragmatic microfoundations macro will and should remain the major academic research paradigm.

Thus, within the mainstream, there is no basic difference in how to create a macroeconomic model. The difference is just in how to tweak the model in order to derive the desired policy implication.

When it comes to macroeconomic policy, and keeping to the different language idea, the only significant division I see is between the mainstream macro practiced by most economists, including those in most central banks, and anti-Keynesians. By anti-Keynesian I mean those who deny the potential for aggregate demand to influence output and unemployment in the short term.

So, even though New Keynesians have learned how to speak the language of New Classicals, New Keynesians can console themselves in retaining the upper hand in policy discussions. Which is why in policy terms, Simon chooses a label that is at least suggestive of a certain Keynesian primacy, the other side being defined in terms of their opposition to Keynesian policy. Half apologetically, Simon then asks: “Why do I use the term anti-Keynesian rather than, say, New Classical?” After all, it’s the New Classical model that’s being tweaked. Simon responds:

Partly because New Keynesian economics essentially just augments New Classical macroeconomics with sticky prices. But also because as far as I can see what holds anti-Keynesians together isn’t some coherent and realistic view of the world, but instead a dislike of what taking aggregate demand seriously implies.

This explanation really annoyed Steve Williamson who commented on Simon’s blog as follows:

Part of what defines a Keynesian (new or old), is that a Keynesian thinks that his or her views are “mainstream,” and that the rest of macroeconomic thought is defined relative to what Keynesians think – Keynesians reside at the center of the universe, and everything else revolves around them.

Simon goes on to explain what he means by the incoherence of the anti-Keynesian view of the world, pointing out that the Pigou Effect, which supposedly invalidated Keynes’s argument that perfect wage and price flexibility would not eventually restore full employment to an economy operating at less than full employment, has itself been shown not to be valid. And then Simon invokes that old standby Say’s Law.

Second, the evidence that prices are not flexible is so overwhelming that you need something else to drive you to ignore this evidence. Or to put it another way, you need something pretty strong for politicians or economists to make the ‘schoolboy error’ that is Says Law, which is why I think the basis of the anti-Keynesian view is essentially ideological.

Here, I think, Simon is missing something important. It was a mistake on Keynes’s part to focus on Say’s Law as the epitome of everything wrong with “classical economics.” Actually Say’s Law is a description of what happens in an economy when trading takes place at disequilibrium prices. At disequilibrium prices, potential gains from trade are left on the table. Not only are they left on the table, but the effects can be cumulative, because the failure to supply implies a further failure to demand. The Keynesian spending multiplier is the other side of the coin of the supply-side contraction envisioned by Say. Even infinite wage and price flexibility may not help an economy in which a lot of trade is occurring at disequilibrium prices.

The microeconomic theory of price adjustment is a theory of price adjustment in a single market. It is a theory in which, implicitly, all prices and quantities, but a single price-quantity pair are in equilibrium. Equilibrium in that single market is rapidly restored by price and quantity adjustment in that single market. That is why I have said that microeconomics rests on a macroeconomic foundation, and that is why it is illusory to imagine that macroeconomics can be logically derived from microfoundations. Microfoundations, insofar as they explain how prices adjust, are themselves founded on the existence of a macroeconomic equilibrium. Founding macroeconomics on microfoundations is just a form of bootstrapping.

If there is widespread unemployment, it may indeed be that wages are too high, and that a reduction in wages would restore equilibrium. But there is no general presumption that unemployment will be cured by a reduction in wages. Unemployment may be the result of a more general dysfunction in which all prices are away from their equilibrium levels, in which case no adjustment of the wage would solve the problem, so that there is no presumption that the current wage exceeds the full-equilibrium wage. This, by the way, seems to me to be nothing more than a straightforward implication of the Lipsey-Lancaster theory of second best.


54 Responses to “What Does “Keynesian” Mean?”

  1. 1 Morgan Warstler February 13, 2014 at 7:32 pm

    OK, that’s it.

    I mean, for Christ’s sake….

    “If there is widespread unemployment, it may indeed be that wages are too high, and that a reduction in wages would restore equilibrium. But there is no general presumption that unemployment will be cured by a reduction in wages.”


    If we take $375B of welfare spending (half of it) and tell the unemployed they can’t have ANY unless they choose a job off the Internet job board. No SNAP, NO SETION 8, NOTHING, unless they CHOOSE A BOSS.

    And we tell American taxpayers, who pay for the welfare check already, they can pay as low as $1 per hour for a $40 work week…

    David, you need to make a real argument where this doesn’t clear the market!

    You need to do the narrative…

    Because until you do – there CERTAINLY IS a general presumption that unemployment will be cured by a reduction in wages. – the reduction can’t be MARGINAL tho it has to be MASSIVE AND there have to be negative consequences.

    Nobody and I mean nobody has argued to me GI/CYB won’t clear.

    The Econ evidence I know of say you can clear anything when you discount its current price by 90%.

    What possible evidence is there for this?


  2. 2 Jim Caton February 13, 2014 at 7:44 pm

    To put the suppositions of the New Keynesians under a Keynesian label is misleading (as is the “Classical” portion of the New Classical label). This is especially true as the fiscal policy implications have moved out of focus. Many of these notions of stickiness and disequilibrium predated Keynes. The characteristic of the Old Keynesians that remains with the new is the notion of suboptimal equilibrium, or to put it another way, persistent disequilibrium where unemployment rate remains elevated for an extended period of time. But this was not a particularly Keynesian observation. The problem was recognized as a monetary issue by those like Hawtrey. He argued that the monetary authority ought to ease policy, which in the case of the gold-exchange standard would decrease demand for gold as base money in addition to increasing the supply of base money in general. The exchange between Hawtrey and Keynes at the Macmillan Commission serves as concise representation of the argument. T

    For those interested, Leland Yeager’s piece, “New Keynesians and Old Monetarists” elaborates on the “name game” associated with New Keynesianism.



  3. 3 Jim Caton February 13, 2014 at 7:46 pm

    Morgan, did you read the rest of the post? He followed up by saying that there may need to be price adjustments rather than wage adjustments.


  4. 4 Morgan Warstler February 13, 2014 at 8:23 pm

    I read the whole thing. Twice.

    And one the glorious things about forcing everyone to work for $40+ to get welfare, is the prices go down! By my napkin math the Purchasing Power Parity of the welfare check increases by 30% in poor areas (that’s THIRTY PERCENT MORE CONSUMPTION) for the poor.

    This isn’t complicated.

    If we took every single person who gets a welfare check and told them they had to go the nearest welfare recipients house to their left and work all day, and the nearest welfare recipient to their right would come over and work for them all day…

    There is no unemployment. I repeat there is NO unemployment.

    Welfare is a subsidy.

    IF we make it a WAGE subsidy, so that to get it, people have to work, there is no unemployment.

    How do we know this? Because we have far more people getting welfare than we have who are unemployed.

    The fact that CURRENT welfare does not require work is uninteresting to this discussion.


    If you take the 10M “unemployed” in America and you add up all the money they would be getting paid if there was full employment, it is LESS than the $375M I’m talking about using from welfare to employ 30M!!!

    Let’s go back to the “work for the welfare recipient on your left” thought experiment:

    Thats inefficient.

    But if we use the magic power of the Internet, to get real efficiencies from our job board, the ghetto is going to be full of massage, yoga teachers, juice shops, coffee shops, daycare, house cleaning, yard mowing – all the SAME STUFF the middle and upper class enjoy. But fancy coffee will cost $1.50, and black coffee will cost $.50

    Look, stop thinking about his like there is a demand problem.

    There is no demand problem.

    BECAUSE ONCE WE PRICE IN THE WELFARE WAGE SUBSIDY – the market prices the labor as it really is – fed and nourished with warm – with our tax dollars!

    The labor has no problem with the $1+ pay – because they are being paid $8+

    Again, what I’m doing here is a VERY LOGICAL WINNING NARRATIVE, and someone needs to explain WHY selling labor for $40 a week doesn’t clear the market….


  5. 5 Jim Caton February 13, 2014 at 9:44 pm


    Thanks for highlighting this post. I’ve posted a response of my own that traces older intellectual roots here:



  6. 6 Benjamin Cole February 14, 2014 at 5:06 am

    All well and good but right now the Fed should print more money…by whatever label…


  7. 7 Diego Espinosa February 14, 2014 at 9:29 am

    Excellent post. Economic history is underrated, especially when it is paired with clear exposition of current thinking.


  8. 8 Diego Espinosa February 14, 2014 at 9:31 am

    Sorry, by economic history, I meant the history of economic thought; the place to which Keynes’s original body of work, I think, has been relegated.


  9. 9 David Glasner February 14, 2014 at 11:49 am

    Morgan, Sorry, what I should have said is that there is no general presumption that after a deep downturn that general unemployment can be cured just by wage cuts. I suspect that you won’t be happy with that formulation either, but it’s the best I can do. Also, I can hear you very well; you don’t have to shout at me.

    Jim, Very good summary of the issues, thanks. Thanks also for the reference to Yeager’s piece. And a great post on your blog.

    Benjamin, As always, we can count on you to keep us message.

    Diego, Many thanks.


  10. 10 Dan Lieberman February 14, 2014 at 2:40 pm

    “If there is widespread unemployment, it may indeed be that wages are too high, and that a reduction in wages would restore equilibrium.’

    Isn’t the purchasing power in the system equal to the total wages? Seems to me that wages determine the price level and only determine unemployment in export industries. Those who perceive that lowering prices and wages will resolve the situation will only be fighting deflation. Isn’t profit, which needs the added kicker of credit to increase demand, the culprit? As credit hits a wall, so does profit, initiating a a spiral of drop in demand, drop in production and an increase in unemployment.

    Another mentioned factor with which I take issue is the casual reference to the Keynesian multiplier. Can it be more than one?

    Let us start with four supply units and an equal four demand units – a normal situation in a balanced economy. Government deficit spending (investment) of one unit purchases trucks and so a trucking company adds an additional production facility for another supply unit..

    Four demand units can purchase the available four supply units ;which allows for re-production of another four units of supply. The government has the other supply unit. So, we are left with one demand unit in the economy. Either one of two occurrences can follow.

    (1) The unused demand unit can be invested in production of another supply unit. We then have five supply units and five demand units. If all five supply units are consumed by the wages paid to the workers (demand), the five units of supply can be repeated.
    Result – The original government investment has increased the economy’s
    demand and supply by only the equivalent of the original investment. The multiplier is one.

    (2) The unused demand unit is only partially invested but also demands some goods.
    Result – The multiplying factor is less than one and because demand is greater than supply, some raise in prices and mild inflation occur in order to equalize supply price and demand.

    The Kenyesian formula may actually state that if total investments are consistently not totally consumed and reinvested, then less than all of the original investment is available for new production, and with time the value of this investment to the economy will fade to nil. The economy will return to four supply units and four demand units.

    Where is a multiplier greater than one?


  11. 11 Tom Brown February 14, 2014 at 4:21 pm

    David, I had the impression you were not a fan of Leland Yeager in general. Am I wrong?


  12. 12 Ludovic Coval February 14, 2014 at 5:33 pm

    Mr Glasner,

    “It was a mistake on Keynes’s part to focus on Say’s Law as the epitome of everything wrong with “classical economics.”

    Here is Keynes in Chapter 2 :

    “Moreover, the contention that the unemployment which characterises a depression is due to a refusal by labour to accept a reduction of money-wages is not clearly supported by the facts. It is not very plausible to assert that unemployment in the United States in 1932 was due either to labour obstinately refusing to accept a reduction of money-wages or to its obstinately demanding a real wage beyond what the productivity of the economic machine was capable of furnishing.”

    I may be wrong but Keynes did not focused on Say Law as such but rather seem to have an observable fact he labeled as involuntary unemployment. Keynes then argue that Classical theory incapacity to match observations lies with Say’s Law.


  13. 13 Digital Cosmology (@DCosmology) February 15, 2014 at 6:14 am


    “But if we use the magic power of the Internet, to get real efficiencies from our job board, the ghetto is going to be full of massage, yoga teachers, juice shops, coffee shops, daycare, house cleaning, yard mowing – all the SAME STUFF the middle and upper class enjoy. But fancy coffee will cost $1.50, and black coffee will cost $.50”

    Could you explain how the reduction in prices will follow the reduction in wages?

    I am an American but live in Greece, where the real experiment of wage reduction is talking place. I can tell you that the problem is not the price of coffee or the price of yoga but the price of energy and taxes. The price of coffee has gone down from about 5 euros for the fancy one to 2 eurors but this makes no big difference to purchasing power because by the time you pay for energy and food, there is no money left to buy coffee. Actually, the number of coffee shops has increased exponentially during the crisis but still unemployment is increasing, to 29% from 28% last month, and in Greece there is no welfare but only for 1 year after losing job and there are no food stamps. I guess same thing is happening in Spain, Portugal and other places. Prices of key items, like groceries and energy do not depend on the willingness of the unemployed to work but on many other factors. More importantly, if prices fall, the tax receipts of the government will fall and taxes must increases, increasing further unemployment. So your proposed solution is not justified. Actually, how many coffee cups, yoga sessions and massages can the middle/upper class have? There is an upper limit to demand.

    This statement:

    “Unemployment may be the result of a more general dysfunction in which all prices are away from their equilibrium levels, in which case no adjustment of the wage would solve the problem, ”

    is true. Empirically. Mathematically speaking, there are no heteroclinic orbits from such state David described to another stable state that clears the labor market. Worse, the initial state can be so far away that reduction in wages can pull it towards a strange attractor. This is what is happening in Greece right now and in other countries. I will try to explain to you how: The wages get too low that voluntary unemployment increases to a point that the government has to increase taxes further to a point that this becomes a positive feedback mechanism with a chaotic mode. Greece is close that that chaotic mode. For one, I do not drink coffee, I do not like yoga and massage and I have no yard. But my electricity bill goes up every month to cover the bill of those who do not pay and threaten to vote for fascists. At some point I may also be forced to stop working because I will work for nothing and it may be better to do the same. Only if my wage goes up I can stay on the job. So the solution is the exact opposite of what you propose and I think the current administration in the US has realized that: increase the minimum wage and make people willing to stay on the job while they pay for the walfare of those that do not. Up to a point of course.


  14. 14 Mike sax February 15, 2014 at 6:54 am

    I also got in on this debate


    I will admit that what Keynesian means to me is that fiscal policy can be used for demand management. This distinguishes it from other schools in a way that other things don’t.


  15. 15 Mike sax February 15, 2014 at 7:13 am

    I can’t resist pointing out that Scott Sumner seems to know what a Keynesian is even if many others find it a complex question and what it is he doesn’t like and has vowed to drive as many stakes through the infamous thing till it falls down dead.



  16. 17 Mike sax February 15, 2014 at 7:35 am

    I definitely don’t get Roger Farmer’s definition of Keynesian

    Roger Farmer on fiscal vs. monetary policy http://diaryofarepublicanhater.blogspot.com/2014/02/roger-farmer-on-difference-between.html


  17. 18 Jason February 15, 2014 at 1:27 pm

    “That is why I have said that microeconomics rests on a macroeconomic foundation, and that is why it is illusory to imagine that macroeconomics can be logically derived from microfoundations. Microfoundations, insofar as they explain how prices adjust, are themselves founded on the existence of a macroeconomic equilibrium. Founding macroeconomics on microfoundations is just a form of bootstrapping.”

    I like the way you put this, although I don’t necessarily completely agree with it. Since many different microfoundations can lead to similar macro outcomes (information is destroyed in the aggregation), it is hard to start from the bottom and work up but not a priori impossible.

    Interestingly, the entropic idea of equilibrium (you’ve lost all the information so every microstate consistent with the macrostate is possible) may be what is behind this difficulty.



  18. 19 Tom Brown February 15, 2014 at 8:00 pm

    Digital Cosmology,

    Do you think that if Greece were free to devalue it’s currency the country would be in any better shape?


  19. 20 Tom Brown February 15, 2014 at 8:03 pm

    Mike, what do you think of Mr. Caton’s article (linked to above)? Do you think the real division might now be between monetarists and non-monetarists?


  20. 21 Digital Cosmology (@DCosmology) February 16, 2014 at 6:48 am

    Tom, this is a very complicated question you are asking. There are currently several movements in Greece in favor of sovereign currency. But Greece joined the euro in the first place because of repeated attacks on its currency in the 1990s due to declining productivity, caused by a collapse of textile and durable goods industry due to cheap Asian imports and a simultaneous move of the huge Greek shipping industry to offshore heavens. The pressures on the currency were so fierce and the devaluation that followed forced the then Counselor of Germany and the PM of Greece to reach a political agreement about Greece joining the euro, using also some accounting cheats with dept swaps. I believe that had Greece not joined the euro area in 2001, it would have been in a worse situation. As you know, printing money is tempting and the fallback solution for politicians when they do not want to sustain the political cost of hard decisions. So, to try to answer your question directly, devaluation of the currency will raise expectation about more devaluation. This will create asset bubbles and eventually hyperinflation and total default. Those who insist on a reversion to sovereign currency are basically ignorant of the past or serve their own agenda IMO. Practically speaking, although exports will increase,net receipts in foreign currency will probably not increase substantially and imported inflation will be detrimental to the majority who are paid in local currency. In a country of the size of Greece, this can work only with the introduction of price controls and limits on capital flows but this will create other complications, even worse.

    Having said the obvious, there is a high probability that Greece will leave the euro if the politicians elect not to say the truth and to keep their positions, something that is normal btw. The mechanism for exit is relatively simple in principle: Greece tries to evade agreements and the ECB turns of the ELA to the banks. There is no other choice than to print local currency to fund the banking gap. Then by default (I think it is article 3 of the EU treaty that is violated) the country leaves the euro.

    But probably to discuss something like this would take days or even weeks and I believe there will not be a clear answer even then. MY opinion, for whatever it worth, is for Greece to stay and try to restructure its economy within the euro area. There is no other route now.


  21. 22 Tom Brown February 16, 2014 at 3:06 pm

    Digital Cosmology,

    Thanks for you thoughtful response.

    Rather than my vague “devalue” what if I’d instead said put Scott Sumner in charge of Greece’s monetary policy and implement a **disciplined** 5% / year NGDPLT? (which would mean breaking from the Euro and devaluing, but not an uncontrolled devaluation)?

    Or do you think that would be impossible or the wrong target or the wrong strategy for some reason?

    How about Scott’s old idea (20 years back) that he’s brought up recently (today and yesterday) and has pointed out that JKH (John Hatzius) has also endorsed recently: targeting the mean nominal wage growth?

    I think that Scott thinks this wage growth target would be superior to NGDPLT in some respects, but more difficult (especially politically) to implement.

    I don’t know what David thinks about it.

    Check out this article and the one immediately preceding it:



  22. 23 David Glasner February 16, 2014 at 7:01 pm

    Dan, Purchasing power is equal to total factor income which is greater than just wages. You obviously seem to have a set of economic relationships of your own. For all I know, your may be the right ones, but you will have to convince the rest of us before we come around to your way of thinking. The Keynesian multiplier is based on the proposition that consumers spend more as their incomes increase, the greater responsiveness of consumer spending to a rise in income the greater the multiplier. Of course there are lots of qualifications that could be added to that, but that is where the idea comes from. In principle, the Keynesian multiplier could be much greater than one, but again that depends on a lot of factors that aren’t explicitly incorporated into the analysis.

    Tom, No, I am not a fan of Yeager’s, but it does not follow that I reject his work categorically. He’s a scholar and a very good economist, a characterization that would fit a lot of people with whom I disagree.

    Ludovic, I am not sure exactly what, if anything, you think we are disagreeing about. Your concluding paragraph seems basically correct to me.

    Digital Cosmology, Actually Keynes’s argument that falling money wages would not eliminate unemployment was based on the premise that competition would businesses to reduce their prices by as much as wages were reduced. So your point is not exactly consistent with Keynes. I don’t think that Keynes’s argument was entirely correct. It seems to me that the key point is that when an economy is not in equilibrium (or even close to equilibrium) it is impossible to know how the feedback effects of any price change will work their way through the system and no guarantee that any change will bring the system closer to equilibrium.

    Mike, Obviously Keynesian is in the eye of the beholder.

    Jason, Thanks. Seems very interesting, but I can’t say that I follow what you’re saying. Maybe I will catch on after a while.

    Tom, In my book Free Banking and Monetary Reform, I proposed, taking up the suggestion of Earl Thompson, stabilizing an index of money wages. Ralph Hawtrey was also a proponent of stabilizing money wages.


  23. 24 Digital Cosmology (@DCosmology) February 16, 2014 at 11:54 pm

    Tom, you asked: “Or do you think that would be impossible or the wrong target or the wrong strategy for some reason?”

    I don’t think preannounced devaluations are prudent because they put foreign investment decisions on halt. Recall that for Greece foreign investment is the key now. Why invest today and not wait for a few devaluations down the road when prices will be cheaper? On top of this, profits for repatriation will be decreasing with devaluation when converted to foreign currency. Therefore, I think that stable currency is very important for a country that wants to attract foreign investments. Furthermore, unless there are capital flow controls instituted, then it will be very expensive for the Greek central bank to maintain the currency within target levels and that will probably exhaust all foreign currency from exports leaving nothing for imports and as a result causing high inflation. I also think wage targeting will not work with sovereign currency because wages will get out of control anyway with the increasing inflation. Therefore, I see no other way but for Greece struggling to stay in the euro area and committing to difficult an painful reforms. If the reforms do not take place, Greece has no chance with or without own currency. Thanks and all the best.


  24. 25 Dan Lieberman February 17, 2014 at 7:45 am

    Thanks for your reply.
    I guess I should explain my statement that “purchasing power is the wages in the system.” I am referring to the purchasing power derived from the production process.

    Total factor income = Employee compensation + Corporate profits + Proprietor’s income + Rental income + Net interest

    Employee compensation is definitely purchasing power.
    To me corporate profit is not actually purchasing power. It is the surplus value that is only realized from purchasing power outside the production process, which consists of private borrowing, government deficits, positive balance of trade and re-circulation of dividends (essentially paying dividends with surplus product). These are all unknowns and can even be negative (negative balance of trade, repayment of loans, government having surplus rather than deficit.)
    Savings and use of retained earnings can be added but they are also unknowns outside of the production process.
    Proprietor’s income, if I interpret it correctly, is outside the production process and its income is derived from others, which only transfers purchasing power and does not create new purchasing power.
    Rental income and Net interest are in the same category. If someone receives a rent or interest then another person pays the rent and interest – purchasing power is transferred and not originated.

    So, I am left with Purchasing Power = Wages.

    As for the Keynesian multiplier. There may be many subjective multipliers, but I am only referring to the Keynesian multiplier, as outlined in his formula in Chapter 10 of his General Theory of Money. This formula is cited in Economics text books, by economists, government officials and recently by Secretary of Agriculture, Tom Vilsack, who claims “that $1 in food stamps yielded $1.84 in total spending.”

    For reference purposes, I mean Keynes’ multiplier formula, which is:
    Multiplier = 1/(1-MPC), where MPC is original propensity to consume. If MPC is 0.5, the multiplier is 2.0. Note that if MPC is one (all investment is consumed), the multiplier is infinity, which is impossible.

    Many interpret the formula to state that if 1/2 the investment is consumed (1/2 may go for imports or into speculation) then miraculously the contribution to GDP is double the original investment in one production cycle. I maintain, the formula actually states that if all the investment is constantly consumed, then the investment contribution to supply and demand can be repeated indefinitely and the GDP will always reflect the unit increase in supply and demand. If only ½ is constantly consumed, the contribution to GDP will be 0.5 units in the first production cycle, will gradually diminish to zero, and the total contribution to GDP over infinite production cycles will be double the original investment.

    I used my simple analysis to prove my point.
    If I am correct, then the analysis is not trivial: Textbooks, government officials, economists and others are reflecting a wrong interpretation, and should be corrected.

    However, I am not dogmatic and may be wrong. I’m looking for someone to prove me wrong. Some have agreed.


  25. 26 Tom Brown February 17, 2014 at 9:57 am

    David, what do you think of the comment by Digital Cosmology above, especially this part?

    “Therefore, I see no other way but for Greece struggling to stay in the euro area and committing to difficult an painful reforms. If the reforms do not take place, Greece has no chance with or without own currency.”

    I’m certainly no expert, but in it I hear an echo here of what I interpret to be the Austrian response to the 1st part of the Great Depression: let nature take it’s course: the economy has to correct after a period of excessive speculation, etc. I don’t even know if I have it correct that this is how Austrians thought at that time, but that’s my impression. I also have the impression (in retrospect) that this was a masochistic view of sorts and that at least one Austrian later regretted his “embrace” of the downturn in 1929 and 1930: Hayek. I certainly have the impression that stimulative policy between 1933 and 1937 was making some significant inroads in the US (and maybe the UK?) towards reducing unemployment and creating positive GDP growth.

    I realize that the situation in Greece may not be comparable to the world economy in the early 1930s, but what struck me is Digital’s tone of resignation that there’s no way around the suffering: it just has to be done. This reminded me of the Austrians. I’d love to know you view, especially in light of Digital’s list of reasons why he thinks what he does.


  26. 27 Tom Brown February 17, 2014 at 10:00 am

    Above I wrote “let nature take it’s course” but this is not a fair comparison to Digital’s comment. He specifically mentioned actively undertaking “painful reforms.” That is certainly different!


  27. 28 Tom Brown February 17, 2014 at 10:03 am

    David, O/T: what do you think of this quote:

    “…the goal of good monetary policy is to try to make Say’s Law true.”

    I’m sure what is meant here is not to make Say’s Law literally true, but to produce circumstances in which it appears to be true.


  28. 29 Tom Brown February 17, 2014 at 10:05 am

    … also, is “The Fluttering Veil” an example of a Yeager work that you would recommend?


  29. 30 Tom Brown February 17, 2014 at 11:19 am

    “Yet there are still some economists (generally not academics) who think Keynesian means believing fiscal rather than monetary policy should be used to stabilise demand. Fifty years ago maybe, but no longer. Even worse are non-economists who think being a Keynesian means believing in market imperfections, government intervention in general and a mixed economy. (If you do not believe this happens, look at the definition in Wikipedia.)”

    I think Simon is correct about that regarding the popular media. Thus in conservative popular media, Keynesians are the bad guys: fools that think government is always the answer. Even amongst those who are not really ideologues: look at any use of the term by David Stockman, Peter Schiff, Misch Shedlock, or Chris Whalen for example.

    Similarly, Simon’s definition holds in the liberal media: Keynsians are the good guys: the mainstream that the “fringe” is irrationally critical of.


  30. 31 Ludovic Coval February 17, 2014 at 10:23 pm


    “Ludovic, I am not sure exactly what, if anything, you think we are disagreeing about. Your concluding paragraph seems basically correct to me.”

    I’m not economist and have probably read you wrong, but your post seemed to me to support the idea that either Keynesian or at least Pr Wren-Lewis reduce ‘Keynesian’ label only to Say Law and wage where the starting (and probably central) idea is involuntary unemployment :

    “Here I do think New Keynesians are too deferential to the always silly idea of trying to explain movements in unemployment as simply a labour supply choice. ”

    Is to be found at the end of Pr Wren-Lewis post you discuss about with a link to another post of him :”Microfoundations and Evidence (2): Ideological bias” in which involuntary unemployment is discussed at length especially toward RBC.

    As far as I can read (and understand) the same stand true for Pr Krugmand and DeLong.


  31. 32 Digital Cosmology (@DCosmology) February 18, 2014 at 3:15 am

    Tom, you wrote: ” realize that the situation in Greece may not be comparable to the world economy in the early 1930s, but what struck me is Digital’s tone of resignation that there’s no way around the suffering: it just has to be done.”

    Maybe you are not familiar with the situation. The problem of Greece is structural. It cannot be fixed by creating or keep on creating deficits. If you have an economy that creates huge deficits and your currency is not a reserve one, like the US dollar, then at some point the markets will stop lending and you have to print to finance the deficits. Then inflation will take off. Thus, I believe that the route of reforms is necessary, either with the euro or with own currency. This is not matter of masochism. It is a matter of common sense, although common sense is painful reality at certain times and it may be perceived as masochism.


  32. 33 Benjamin Cole February 18, 2014 at 5:17 am

    OT but worth nothing:

    From BLS 2/6/14

    Unit labor costs in nonfarm businesses decreased 1.6 percent in the
    fourth quarter of 2013, as the 3.2 percent increase in productivity
    was larger than a 1.5 percent increase in hourly compensation. Unit
    labor costs fell 1.3 percent over the last four quarters. (See table


    Okay, unit labor costs are falling, commodities are dead, and there is global competition in most markets.

    And the Fed is worried about inflation?


  33. 34 Jason February 18, 2014 at 9:08 am

    David, thanks for reading my comment. I’m probably failing to heed Paul Krugman’s recent advice:


    In analogy what I was saying is that Oxygen molecules, Nitrogen molecules, Hydrogen molecules, etc (“microfoundations”) all result in the same ideal gas law (“macro theory”). The information in the details (O2, N2, H2) is lost, but that may be a good thing: your macro theory is independent of those details!

    But the flip side of that is that your macro data can never really tell you if you have N2, O2 or H2.

    The link I gave in the comment was showing the consequences of assuming ignorance is actually pretty useful at a very basic level — it gives you supply and demand diagrams:


    I.e. assuming ignorance of the microfoundations is the same as using basic supply and demand arguments.


  34. 35 Tom Brown February 18, 2014 at 9:41 am

    Digital, I certainly don’t understand the situation in Greece, and I do thank you for your perspective: but I hear the same arguments here from some quarters (granted the situation in the US is very different than Greece): but some people think we need to stop any kind of stimulus and just take our lumps: that we’re only delaying the inevitable by not having a transformative depression or longer recession. They think a nice severe recession is just what we need to get back on track. I think they are crazy!

    Now, like you say, I have no idea about Greece: which is why I’m so interested in David’s opinion.


  35. 36 David Glasner February 18, 2014 at 8:42 pm

    Dan, I don’t understand what you are saying. You seem to recognize that there are other factors of production besides labor that receive remuneration, but then you dismiss them. You say that corporate profit is “the surplus value that is only realized from purchasing power outside the production process.” Unless you believe that labor is the only factor of production, I don’t know why it is outside the production process. Your discussion of proprietor’s income and renter’s income and net interest are equally incomprehensible to me unless you believe that labor is the only productive factor.

    I have no reason to believe that the 1.84 estimate of the multiplier is accurate, but I don’t understand your theoretical argument that it cannot exceed 1. I don’t know what you mean by consuming investment. Investment is investment and consumption is consumption. They don’t overlap.

    Tom, I think he makes some good points. The way I would paraphrase what he is saying is that Greece and perhaps certain other countries now in the Eurozone are so mistrusted that if they were to leave the euro and set up their own currencies, there would be a substantial risk of collapse in the absence of very draconian exchange controls which would violate obligations under European Union. In addition, the mechanism by which a country could withdraw from the euro is so fraught it may simply not be feasible. It is far more difficult to withdraw from the euro than from the gold standard, since countries under the gold standard still retained national currency units. National currency units no longer exits for countries in the Eurozone. The problems of the southern European countries, and especially Greece, could be mitigated by a sufficiently loose and inflationary policy by the ECB, but Germany will not allow the ECB to provide the necessary inflation to allow the southern European countries to reach a high employment equilibrium.

    About Say’s Law, I am not exactly sure what the quote means so I can’t really comment.

    The Fluttering Veil is a collection of many essays written over quite a long period of time. I have criticized at least one of the essays in the volume on this blog in which Yeager criticized James Tobin’s classic essay “Banks as Creators of Money.” I don’t have specific recollection of the other essays, but I am guessing that there are probably some that I would like.
    I don’t get that at all. If there are other factors of production in addition to labor, e.g., land and capital, those factors are presumably also receiving remuneration and that remuneration is reflected in total income.

    Ludovic, No I don’t think that being a Keynesian is just about rejecting Say’s Law.

    Benjamin, So why do you think, with labor costs dropping by 1.6% in the fourth quarter, that measured inflation was not even lower than about 1.5%?

    Jason, Please forgive me, I just can’t spare the time and energy right now to try to figure out what you are saying.


  36. 37 Blue Aurora February 18, 2014 at 9:53 pm

    This is a good post David Glasner, and it could’ve been turned into a much longer piece on the role of the Keynesian Revolution in the history of economic thought. I have a few minor comments though:

    1.) I wouldn’t say that the economics of Keynes (and arguably even the Neo-Keynesian synthesis) truly abandoned the Quantity Theory of Money. Keynes does provide a “generalisation” of the Quantity Theory in Book V of his magnum opus. (He provides the first step in Chapter 20, then he provides the rest of the exposition in Chapter 21.) So in one sense, for a good part of the 20th century one could say: “We are all monetarists now.”

    2.) One could also make the argument that it was Arthur Cecil Pigou who created modern macroeconomics as we now know it. I don’t mean to say that concepts like the circular flow or national income accounting didn’t exist prior to the 20th Century – those ideas from earlier contributors were important milestones. But there is a good reason why A.C. Pigou’s 1933 book, The Theory of Unemployment, was targeted by J.M. Keynes. The Theory of Unemployment was written partially because it was a powerful response to A Treatise on Money – and that book was something J.M. Keynes himself could not dismiss so easily. (If one compares the mathematical expositions of The Theory of Unemployment and The General Theory of Employment, Interest, and Money, one will notice the strong parallels.)


  37. 38 Dan Lieberman February 19, 2014 at 9:10 am

    A reply to your statement,
    “I don’t know what you mean by consuming investment. Investment is investment and consumption is consumption. They don’t overlap.”

    Consuming investment means that all the investment is used (consume means use) so that all can be reinvested. If not all of the investment is domestically consumed (goes into imports, savings, circular speculation), then less and less is available for reinvestment.

    From my perspective, many in the economic community interpret the Keynesian multiplier to mean that one unit of exogenous investment (government deficits) can be multiplied so that it enables more than one unit of new employment at one time. As an example, if 80% of the investment is consumed, then the multiplier is 1/(1-0.8), which equals to 5. The adherents to the multiplier claim that the investment will stimulate 5 units of employment at one time.

    I believe this is wrong. A multiplier of 5 only means that over an infinite time of the investment, the total employment of all investment cycles will be five units, only one unit at the beginning of the investment cycles, and less and less in each production cycle.

    As an example, we have:
    Investment generates one unit of employment.
    Re-Investment #1 generates 0.8 units of employment.
    Re-Investment #2 generates (0.8 X 0.8) or 0.64 units of employment.

    Add the series: 1 + 0.8 + 0.64 +….. and the series sums to 5.
    Only at the beginning is the employment one.

    If all of the investment is consumed, then the multiplier is infinity, which means in each investment cycle the employment is one unit and never decreases.
    However, the employment is never greater than one unit at a given time, and the employment multiplier can not be greater then one.

    I am not totally sure if my analysis is correct, but I believe it is. And if it is correct, it questions what textbooks, economists and government soothsayers are claiming – government deficits can stimulate the economy by a multiple of the exogenous investment. And we have a Secretary of Agriculture who throws around numbers but might not know what he is talking about.


  38. 39 Dan Lieberman February 19, 2014 at 11:21 am

    A reply to your comments on factors of production.
    During the production process, the only new purchasing power that is generated is the wages – to workers, administrators, sales people, advertisers, etc. Other purchasing power (rents, interest, etc) come from savings and retained earnings which owe their origins to previous production cycles. I stated in my message that they exist as purchasing power. Other spending (borrowed money, deficit spending, etc) are exogenous to the production cycle. They add to the money supply and become purchasing power if used. In reality they provide the profit – the surplus value of the production, which is not consumed by the recipients of the wages.

    Look at it another way.

    Price (P) = Cost (C) + Profit (Pr)

    If the cost due to all factors of production is wages then the Price is:

    Price (P) = Wages (W) + Profit (Pr)

    Let Profit = 10% of the cost of production or, stated in another way, 10% of the goods produced are intended for profit. Price then equals 1.1W. This means that after 90% of the goods are sold, the cost is obtained, and the remaining goods (10% of production) will be profit.

    Lower the wage by 10% and keep the profit, in absolute terms, the same.
    Profit is then 11.1% of the new cost of production and 11.1% of the goods produced are used for profit. Price is lowered to accommodate the powering of the original wage.

    The wage earners always have purchasing power to purchase the production that is not part of the profit, no matter the wage. However, the profit, which depends upon unknown and exogenous factors, become a greater part of the production and therefore becomes more difficult to obtain as the wages are decreased. The profit must fall in order to more assure all of the surplus production can be sold.

    Certain companies may be forced to lower wages in order to lower costs so they can compete.
    Certain export and import industries may be forced to lower wages in order to lower costs so they can compete.
    However, in the total economy, lowering wages will have no effect on ability to sell the product. The wage earners will always have the ability to purchase their share of the total production, regardless of their wages. In a closed system, in which there were no international trade, the total wage may be superfluous – no matter its value, the total wage will purchase the total production less the profit (surplus value).

    So, why do we have recessions and unsold product? It is because the profit cannot be made – insufficient contributions to the money supply by credit, deficit spending, etc.
    When credit drops and repayments of loans occur (deleveraging), the government fills the gap. Yes, deficit spending finances the profit, allowing for reinvestment and keeping the economy going.

    That’s my contribution to the debate of how wages affect the economy.
    Wages can be a problem, but are not the problem.
    The problem is how to make a profit with a negative balance of payments (purchasing power leaves the domestic economy and is countered by government sale of securities to foreigners) and when credit hits the wall (stimulating more deficit spending to compensate for the drop in credit).


  39. 40 Tom Brown February 19, 2014 at 11:41 am

    David, thanks for your responses. It sounds like Greece and other Southern European countries are in quite a jam then. I thought Digital made a good argument, but I wanted to be sure that I wasn’t getting an overly pessimistic view. What about the possibility of splitting the Eurozone in two: North and South: then the South could at least formulate a policy better for their immediate interests. Or would the new Southern Eurozone experience the same fate collectively that Greece would if it tried to go off on it’s own individually?

    Re: the Say’s Law quote. That quote was from Nick Rowe in response to me asking him to summarize what good monetary policy means. I suspected you would not be in favor of that quote as you and I had a discussion about Say’s Law and MM once before, and in a much more round-about manner I stated the same thing and you wondered why I’d brought up Say’s Law. However, my previous comment on the subject was not articulate and I figured that perhaps it was not clear to you what I was saying. Plus I’ll admit that I was less clear myself on what I was saying!

    I pointed Nick to that previous exchange between us (on your “About” page) and he read it but was not surprised, saying essentially that he and Brad DeLong held that view about Say’s Law, but he expected very few others to agree. He was correct about Brad DeLong (Brad says something to that effect all the time on his blog), but he was wrong about at least one other economist that he mentioned by name: Scott Sumner said he actually agrees with Nick and made a similar point on his new blog (Econoblog) just recently. I also found where Lars Christensen made a similar point recently, except he stated it wrt RBC theory rather than Say’s Law:

    “PS As I have stressed before all the different models of the business cycle are basically about different assumptions about the monetary policy rule. Hence, we would in fact be in something, which looked like a Real Business Cycle world if the central bank targets nominal GDP. So if the central bank had got it “perfectly right” then Prescott would have been sort of right, but we of course know that central banks tend to get it horribly wrong.”


    So I guess I don’t really know what Lars would say about Nick’s quote until I ask him directly, but somehow I think his statement here makes it more likely he’d agree.

    I also asked JP Koning, but have not yet received a response, and Cullen Roche (who’s not an economist, but runs a popular econ oriented blog called pragcap). Roche did not answer directly, but responded with a Hayek quote (unusual for Roche since he’s not really an Austrian fan), which indicated to me his ambivalence. Thus I’m putting you and Roche in the “What? That’s a weird thing to say about Say’s Law” category. 😀 … the category that Rowe predicted most economists would fall in. I’ll keep JP in there too as long as he doesn’t answer. Also I asked Mark A. Sadowski… and I don’t know if he answered directly, but I’m pretty sure that whatever he said essentially indicated that he agreed w/ Nick. An interesting mix!

    Thus I’m on a mini-quest to see how various economists react to that Say’s Law quote. I assumed you’d say something like you did, but I just wanted to be sure. Thanks again for responding.

    Can you summarize what you think the goal of good monetary policy is in one sentence? Or do you think that it’d be foolish to try?


  40. 41 Tom Brown February 19, 2014 at 11:53 am

    BTW, I’m so interested in that Say’s Law quote because I was very happy to see that Nick had the same idea I did (but of course he expressed it much more concisely and directly!). Nick’s quote makes sense to me, and I thought it made a wonderful one liner. So naturally I’m curious to hear an argument against it too (since I’m by no means any kind of expert!).


  41. 42 Becky Hargrove February 19, 2014 at 12:13 pm

    I did not make it through all these comments and so would not venture to suppose exactly where you stand on Say’s Law – except that the way you expressed it was helpful to me.

    I had been thinking about the dynamics of heat and cold on equilibrium, and this most helpful post from you, encouraged me to compete those thoughts. Admittedly there is only a partial connection between my post and yours but the interaction between micro and macro is so important, I felt you might like the analogy I used.



  42. 43 Tom Brown February 19, 2014 at 12:55 pm

    Becky, what do you think of Nick’s quote on Say’s Law (see my short comment above):



  43. 44 Becky Hargrove February 20, 2014 at 6:16 am

    I am completely sold on Say’s Law. However, I feel that it works optimally when the finite and fixed nature of our time is arbitraged locally, and then contrast with the random (macro) nature of resources separate from time.


  44. 45 Tom Brown February 20, 2014 at 2:03 pm

    Becky, I responded on your blog, however, I’m surprised to see here that you’re sold on Say’s Law!… very surprised!

    If Say’s Law were true, we wouldn’t have AD problems (shocks), would we? And MMs all are believers in AD problems aren’t they?

    Nick Rowe says that an excess demand for MOA (combined with sticky wages and prices) will cause a recession. This is a simple explanation that I thought all MMs (and a number of other economists) agreed on. This makes sense to me, but Say’s Law says that this can never happen. An excess demand for MOA is a lack of demand for everything else (a general glut) and that is precisely what Say’s Law say’s can’t happen, and the reason is because Say thought that excess demand for “money” (MOA) was irrational and thus impossible. Nick claims that even Say himself changed his mind on this later in life.

    Of course my expertise on Says Law is limited to the Wikipedia article on it. Haha… and of course what I’ve been able to surmise based on other people’s treatment of it.

    I figured that if you actually believed that Say’s Law was always true, you must either deny that an excess demand for MOA can occur or you must deny that wages and prices are sticky (or you must be talking about a barter economy). I figured an RBCer might fall into the “wages and prices are NOT sticky” category.


  45. 46 Becky Hargrove February 20, 2014 at 2:25 pm

    Say’s Law isn’t presently true. However it needs to be true for (finite) time use, because random resource quantities – even when they appear as infinite – do not compensate for aggregate time use to the degree that people hoped they could. Hence David’s discussion of non optimal pricing.


  46. 47 Pablo Paniagua Prieto February 21, 2014 at 2:25 am

    Hello Dr. Glasner as always very insightful and great posts, you should consider in publishing a recollection of blogposts on macro, probably it will be the first of its kind and maybe it will help to democratize the academic and economic discussion (just a thought)

    I was reading Leijonhufvud’s thesis “On Keynesian Economics and the Economics of Keynes”, although I must admit that several parts of the book where above me, I found this particular passage that I think is attached to your comment: “If there is widespread unemployment, it may indeed be that wages are too high, and that a reduction in wages would restore equilibrium. But there is no general presumption that unemployment will be cured by a reduction in wages. Unemployment may be the result of a more general dysfunction in which all prices are away from their equilibrium levels, in which case no adjustment of the wage would solve the problem”

    This is Leijonhufvud’s take on Keynes’s interpretation of the macroeconomic dynamic disequilibrium that generates unemployment:

    “In disequilibrium, then, the “notional” excess demands of individual traders are not consistent in the aggregate. Nonetheless, general equilibrium theory tells us that potentially there does exist a vector of prices that would allow all plans to be realized. Disequilibrium, therefore, implies a ruling price vector in one or more respects different from the appropriate one” P. 334

    and he follows:

    “Though widespread unemployment is the most drastic symptom of deflationary disequilibria Keynes maintained that the cause of depressions should be sought in other markets. In a situation of actual or threatening contraction, the ruling price vector differs from the appropriate vector […] the “Classical” and the Keynesian diagnoses are juxtaposed. Observing unemployment, the “Classical” economist […] draws the conclusion that wages are too high and “ought” to be reduced. In Keynes’ theory, the maintenance of full employment depends upon the maintenance of a “right” relation between the general level of asset prices and the wage unit. […] when the appropriate price relation does not obtain, it is in general not wages but asset demand prices that are out of line. […] Once demand prices for augmentable assets have moved to “too low” a level, the pressure of excess supply in the productive sectors of the economy will rapidly be transferred back to the labor market over the whole front. Although this has been allowed to occur, the burden of adjustment should not be thrown on this market. Asset prices are “wrong” and it is to asset markets that the cure should, if possible, be applied” pp. 335-336

    If I understand correctly this passage then Keynes (or at least Leijonhufvud’s reading of Keynes is one in which macroeconomic disequilibrium stems from a problem that affects all markets prices, in that sense something must be able to brake the right relationship between asset prices and wages, the excess of supply in goods and services will ripple through towards the labor market; so which element that permeates the whole economy and every market transaction is able to generate this macroeconomic discoordination and making asset prices ‘wrong’ and generating price dysfunction, does Leijonhufvud suggests (and you maybe as well) that Keyne’s understanding of the excess supply of labor goes deeply into understanding the discoordinative effects of an excess demand for money?

    Thank you for your post,



  47. 48 Jim Rose February 22, 2014 at 7:03 pm

    Modiglani considers the Keynesian vision of macroeconomic policy to be:
    ‘a market economy is subject to fluctuations which need to be corrected, can be corrected, and therefore should be corrected’.


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About Me

David Glasner
Washington, DC

I am an economist in the Washington DC area. My research and writing has been mostly on monetary economics and policy and the history of economics. In my book Free Banking and Monetary Reform, I argued for a non-Monetarist non-Keynesian approach to monetary policy, based on a theory of a competitive supply of money. Over the years, I have become increasingly impressed by the similarities between my approach and that of R. G. Hawtrey and hope to bring Hawtrey’s unduly neglected contributions to the attention of a wider audience.

My new book Studies in the History of Monetary Theory: Controversies and Clarifications has been published by Palgrave Macmillan

Follow me on Twitter @david_glasner


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