The new political economy network: Keynes is dead, hurrah!

So, the new political economy network. It\’s got Duncan Weldon in it. A retired accountant from Wandsworth. The Guardian\’s economics leader writer. Such luminaries: and such luminaries, their words should be taken very seriously indeed.

In their introduction to their report about all this difficult sums stuff, what we should do with the economy, they say:

Labour made the mistake of buying the snake oil of neo-classical
economics. It must now discard it,…

Hmm, well, if you say so boys. Dropping neo-classical economics means dropping:

Alfred Mashall (without whom there is no marginalism), Arthur Pigou (without whom we cannot have green taxation), John Hicks (who created the ISLM model), George Stigler, Carl Menger, Jvons and even John Bates Clarke. Even Walras….oh, and Robinson, Samuelson and possibly even Sraffa.

And, of course, it also means that JM Keynes is right out. Verboeten. For some flavour of Keynesian macroeconomics is the neo-classical othodoxy.

What they mean of course is that Labour went overboard for neo-liberalism (at which point all liberals, neo or not, howl with laughter) the Hayek/Friedman stuff.

But let\’s be serious about this shall we? If these people are just too fucking thick to even know the name of what they\’re against, why on earth should we pay any attention to what they\’re for?

If someone said they\’re against classical music and gave as an example Deep Purple, a mainstay of classic rock, you\’d think they were too stupid to live let alone think their typed drivel worth reading. So it is with those who would confuse neo-classical economics with neo-liberal.


And no, it\’s not just an isolated typo. Larry Elliott in the foreword:

Strategically, those who had fought a
long guerrilla war against neo-classical economics and conservative
politics went into the crisis in a weak position.

I normally think better of him than that.

Unlike the neo-classical
movement, which in the 1970s had a coherent alternative to
Keynesianism to offer – after writing, thinking and arguing their
case during the three decades since 1945 – the left’s intellectual
wellspring was in danger of drying up.

Sad really….

And yes, they do keep making this same gross error.

There are other problems with this pamphlet but we\’ll only point to one gross stupidity at a time shall we?

14 comments on “The new political economy network: Keynes is dead, hurrah!

  1. what do they actually mean, I wonder, when they refer to neoclassical economics?

    are they referring to the vague idea that markets are best left alone, or something specific about mainstream economics.

  2. The pity really was that when Keynesianism didn’t work, the alternative offered was the nearly as bad Chicago School (3% inflation every year, and you can trade off inflation with unemployment; disastrous) which formed the basis of the not particularly liberal “neo-liberalism”. If Thatcher and Reagan had gone to Austria instead, things might be oh so different.

  3. ” The Guardian’s economics leader writer”: aw, come off it, Tim. “The tax-dodging Guardian’s economics leader writer”: there you are.

  4. Tim, slightly off topic but do you know why the Adam Smith Institute blog has been out of bounds, (403 error), for the last 24 hours?

  5. I went to the document.

    Everything these people do is ‘very much a work in progress’.

    Is this a let out for when they put their foot in it?

  6. Luis:

    Neoclassical economics embraces nearly all
    modern economists. Neoclassicists are those subscribing to any of various schools and strains which hold that “value” lies not in goods or services, in resources or labor but is a subjective magnitude, determined continuously in the mind of the value-er or valuing agent.

    The classical economists simply were never able to locate the source or “cause” of value; thus, although making some important contributions to the science (and to the understanding of various aspects of human life) such as Ricardo’s “Law of Diminishing Returns,” his “Law of Comparative Advantage,” Say’s Law, etc., they unable to shed light on more perplexing problems. The very last classical economist of any importance (not economically but politically) was Marx. The modern, “neoclassical” age was ushered in by the discovery by three different
    economists, independently of one another, within the space of about a month (Menger, Jevons, Walras) that value is subjective. Once the “cat was out of the bag,” so to speak, Marx must have realized the “jig was up”–he simply quit without finishing “Das Kapital” (originally announced as running to 3 volumes).

  7. Duncan,

    but how does that fit with how those words are being used in this NPE document?

    I just don’t understand why anybody would regard rejecting neoclassical economics and being a “post-Keynesian” as some sort of meaningful policy divide. It’s barely even a meaningful methodological divide.

    plenty of people think about non-ergodicity in the mainstream:

    and it’s not obvious how important it is. And you can think about the importance of money (see for example numerous Nick Rowe posts, and the difference between public and private debt etc. whilst still being perfectly mainstream and without having to come out with claptrap about the “snake oil of neoclassical economics”

    I think they’d do better to substitute something like “fundamentalist free-market ideology” or similar in its place.

  8. yes, but De Long is saying “I thought all this stuff was the consensus within neoclassical economics, but turns out policy makers and some other economists saw thing differently”. Fama, Posner and others hardly constitute a roll call of mainstream macroeconomics. He isn’t saying that all the things we believed were incompatible with the snake oil of neoclassical economics. Within mainstream economics, people disagree about the role of fiscal policy but I don’t think it’s accurate to characterize the majority as do-nothing monetarists.

    I know Steve Keen has long drawn attention to debt, and has long argued mainstream economics had very wrongly largely ignored debt, which has surely deserves credit for. But he regularly spouts utter garbage about economics, that book he wrote is cringe worthy, and to use Nick Rowe again as argument by authority, I’m with him here.

  9. Don’t know what the fuss is about: the authors are using neoclassical to describe politicians
    who like to think they belong to some coherent
    economic tradition but just want to cut spending by the State.Their belonging to a school of thought (any school of thought) which includes Jevons (sun spot theory) and Marshall is to flatter some very silly people who are also dull and stingy.

    But on the bright side the pamphlet recommends LVT on page 54 so it can’t be all bad.(Strange this, since Murphy has never been a fan of LVT and Elliott’s support comes and goes a bit.)

  10. Perhaps they really do want to get rid of neo-classical economics? Wanting to return Marx and the Labour Theory of Value would certainly fit with a steriotypical Guardian writer’s world view, and lack of grasp of reality.

  11. I’m never quite sure what Theory Of Value is actually in favour/being used by the “left” to be honest. Aren’t they effectively using an LTV even if not really coming out and saying it?

    I know I’ve come across enough ordinary left-liberals on the internets who denounce Marginal Utility as a neo-liberal lie.

  12. Marginal utility and marginal cost are a good way of determining value in microeconomics.

    But a political privilege is not a cost saving. And that is all what neoclassism is about. A theory about “a price” of political privileges. A “theory” about fake costs and fake utilities.

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