Wednesday, 18 June 2014

Keynes1

The difficulty of Keynes's Style

While greatly admiring the clarity and confidence of Keynes's thinking I am very critical of the obscurity of his style and the impediment that raises to a close reading of his important book: John Maynard Keynes* (1936), "The General Theory of Employment, Interest and Money" (readable online). Take (for example) the following from chapter 8.
"Since we are here concerned in determining what sum will be spent on consumption when employment is at a given level, we should, strictly speaking, consider the function which relates the former quantity (C) to the latter (N)."
The 'here' is mere pedantry. And the definitions of C and N are unnecessarily delayed. Given that, in English grammar, 'which' describes while 'that' defines, I conclude that JMK has a tendency to confuse the two. So try:
Since we are concerned in determining what sum will be spent on consumption (C) when employment (N) is at a given level, we should, strictly speaking, consider the function that relates the two.
Another example of the that/which problem (from chapter 2):
"....; whereas they do not resist reductions of real wages, which (that) are associated with increases in aggregate employment and leave relative money-wages unchanged, unless the reduction proceeds so far as to threaten a reduction of the real wage below the marginal disutility of the existing volume of employment."
I submit that not all reductions of real wages are of the sort described, so the 2nd clause is a 'definition', a necessary limitation, and not a 'description'.

Take that obscure but important of definitions in Chapter 2 — that of "involuntary unemployment". Unless you understand this you do not understand Keynes:
"Men are involuntarily unemployed if, in the event of a small rise in the price of wage-goods relatively to the money-wage, both the aggregate supply of labour willing to work for the current money-wage and the aggregate demand for it at that wage would be greater than the existing volume of employment. "
Keynes's "would be" throws me, as it flouts the Humpty-Dumpty rule on conditionals ('If the number were greater the men would be unemployed'). Which men? No-one has been sacked, so are we talking about men currently idle by choice, who wish to become employed because of a rise in real prices, but who cannot find a job (except at a wage below the current)? (I do not see the force of this. Will not the classical school say that there is nothing to stop these men taking a lower wage (unless it be collective bargaining)?) What is the 'aggregate demand for labour'? Does Keynes mean that the entrepreneurs are seeking workers? So, why does not the 'existing volume of employment' increase if there is both rising demand and supply? Are we merely talking about a time lag; the supply and demand for labour go up, but the jobs do not appear immediately? However, we all know that there are people seeking work during a 'depression', and we suspect it is because the entrepreneurs do not see a market for further product.

I find (to my amusement) that people write books* about this important concept of the 'involuntarily unemployed', and the obscurity of Keynes's writing.

References:
1.  John Maynard Keynes (1936), "The General Theory of Employment, Interest and Money"
2.  G. L. S. Shackle (1983) The Years of High Theory: Invention and Tradition in Economic Thought 1926-1939.


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