Jim quoted DeLong
At http://www.j-bradford-delong.net/Econ_Articles/Reviews/monetaryreform.html
,
Brad deLong writes:
This may well be Keynes's best book. It is certainly the best
monetarist economics book ever written.
DeLong is also blind to the ideas to which I pointed. Once on LBO,
he attempted to defend his insistence on interpreting Keynes as a
"rational choice" theorist by pointing to Keynes's praise for "the
wisdom of Adam Smith" in the Economic Journal article, i.e to, as I
pointed out to him, Keynes's associating these ideas with Smith's idea
of the "invisible hand" of a providential god that causes irrational
"passions" to produce good consequences not consciously intended by
those motivated by them.
The change that does occur between the Tract and the General Theory
makes it less necessary to cater to the psychopathology of the rentier.
"There is, however, a second, much more fundamental inference from our
argument which has a bearing on the future of inequalities of wealth;
namely, our theory of the rate of interest. The justification for a
moderately high rate of interest has been found hitherto in the
necessity of providing a sufficient inducement to save. But we have
shown that the extent of effective saving is necessarily determined by
the scale of investment and that the scale of investment is promoted
by a low rate of interest, provided that we do not attempt to
stimulate it in this way beyond the point which corresponds to full
employment. Thus it is to our best advantage to reduce the rate of
interest to that point relatively to the schedule of the marginal
efficiency of capital at which there is full employment.
"There can be no doubt that this criterion will lead to a much lower
rate of interest than has ruled hitherto; and, so far as one can guess
at the schedules of the marginal efficiency of capital corresponding
to increasing amounts of capital, the rate of interest is likely to
fall steadily, if it should be practicable to maintain conditions of
more or less continuous full employment unless, indeed, there is an
excessive change in the aggregate propensity to consume (including the
State).
"I feel sure that the demand for capital is strictly limited in the
sense that it would not be difficult to increase the stock of capital
up to a point where its marginal efficiency had fallen to a very low
figure. This would not mean that the use of capital instruments would
cost almost nothing, but only that the return from them would have to
cover little more than their exhaustion by wastage and obsolescence
together with some margin to cover risk and the exercise of skill and
judgment. In short, the aggregate return from durable goods in the
course of their life would, as in the case of short-lived goods, just
cover their labour costs of production plus an allowance for risk and
the costs of skill and supervision.
"Now, though this state of affairs would be quite compatible with
some measure of individualism, yet it would mean the euthanasia of the
rentier, and, consequently, the euthanasia of the cumulative
oppressive power of the capitalist to exploit the scarcity-value of
capital. Interest today rewards no genuine sacrifice, any more than
does the rent of land. The owner of capital can obtain interest
because capital is scarce, just as the owner of land can obtain rent
because land is scarce. But whilst there may be intrinsic reasons for
the scarcity of land, there are no intrinsic reasons for the scarcity
of capital. An intrinsic reason for such scarcity, in the sense of a
genuine sacrifice which could only be called forth by the offer of a
reward in the shape of interest, would not exist, in the long run,
except in the event of the individual propensity to consume proving to
be of such a character that net saving in conditions of full
employment comes to an end before capital has become sufficiently
abundant. But even so, it will still be possible for communal saving
through the agency of the State to be maintained at a level which will
allow the growth of capital up to the point where it ceases to be
scarce.
"I see, therefore, the rentier aspect of capitalism as a transitional
phase which will disappear when it has done its work. And with the
disappearance of its rentier aspect much else in it besides will
suffer a sea-change. It will be, moreover, a great advantage of the
order of events which I am advocating, that the euthanasia of the
rentier, of the functionless investor, will be nothing sudden, merely
a gradual but prolonged continuance of what we have seen recently in
Great Britain, and will need no revolution."
http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch24.htm
In the GT and the Treatise on Money, the emphasis on and argument
supporting central bank obsession with price stability (particularly
in the form of Hayek's "monetarism") is itself treated as an
expression of serious psychopathology, as "sadistic puritanism."
Ted
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