Today’s economic problems involves the largest global downturn since the Great Depression. Ultimately, however, the reviewer declares that the policies I developed for the 21 century global economy from Keynes’s ideas and philosophy for ending the Great Depression and creating a full employment global economy after the second world war are “to most others[ mainstream economists? politicians? powerful interest groups?] …. solutions that are outmoded and unworkable”.

Aren’t these “most others” the same people who for the past three decades have advocated government de-regulation of financial markets, no constraints on international capital flows (which led to the contagion of a U.S. sub-prime market collapse to threaten the global banking community), free trade with flexible exchange rates, and perfectly flexible prices and wages so that any unemployment problem can always be eliminated by removing any social safety net that protects the unemployed and thereby force unemployed workers to choose to accept lower wages or see their family starve to death? These classical policies are ultimately based on the ideas espoused by 18th century Adam Smith and 19th century classical economists such as David Ricardo and Leon Walras.

The reviewer argues that “the world economy may have changed beyond recognition since 1944 but to a true disciple of Keynes…[his] policies make sense” while most mainstream economists think them “outmoded”. Since the world economy has changed much more since the 18th and 19th century of classical economists, does the reviewer really believe these ideas of 18th and 19th century economists are not “outmoded” and unfounded or worse merely because “most ” mainstream economists and policymakers”, still cling to such failed ideas and policies rather than face the reality of Keynes’s analysis of how modern market oriented, money using economies actual operate?

Finally I am reminded of the advice an elder devil gives to a younger devil in one of C. S. Lewis’s books–namely do not argue over whether something is true or not but whether it is outmoded since this is practical propaganda that is more

Many years ago, I asked Ken Galbraith why politicians and government officials in the Roosevelt administration seem to be so much more ethical and relatively honest– Remember Ken was head of the OPA [Office of Price Administration] during world war II.

Ken thought it had something to do with the ethics of the people Roosevelt appointed as far as the government administrators were concerned — and the depth of the problem so that voters were not as easily fooled.

We certainly cannot say that about George W’s appointments or his voters (Supreme Court and otherwise). Can we say that about Obama’s?

regarding the status of the economics profession — I see very little change in their views about what is “good” and “scientific” economics derserving yenure at our most prestigous universities and space in mainstream economic journals. The mainstream still believes in the efficient market theory as the thoeretical organizing system and the non-validity of “heterodox” approaches to economic analysis. Even what some mainstream economists think is a radical departure from orthodoxy– namely “behavioral economics” is nothing more tha orthodox theory where empirical results provide (on the micro-level but not the macroeconomic level) some deviations from what would be rational behavior in an efficient market theoretical world.

Nevertheless, the organizing principle aganst which these empirical behavioral irrationalities are placed in the rational mainstream economic theory world where decision makers “know” the future.

for example, if people know the future during their working days they will save enough to live in the style they are acustomed to in their retirement years. [ An example of this is Franco Modigliai’s life cycle hypothesis –where people save more out of income during their earnng years and less when they retire and age closer to the grave. Despite my publishing in the Journal of Post Keynesian Economics in the early 1980s a study by the Institute of Poverty showing people over 65 saved more out income than those under 65, and people over 75 saved more out of income than those between 66 and 74, no one in the mainstream — including Franco took this empirical result seriously! Maybe they thought it just showed how senile our senior citizens are!

Now if behavioral economists show that many working people are not putting enough savings away for their retirement years,their response is to force “opting out” of 401k schemes when employed, instead of opting in as is the case today..

The behavioral economists still can’t explain why the propensity to save increases after 65 during retirement -so they just ignore that empirical behavior!

But Keynes’s analysis can.

A few thoughts. The neoliberal meme that the “free market solves all problems” is fallacious because free market is an oxymoron other than in a barter economy or perhaps a bazaar. In a complex economy based on capitalism, such as ours, prosperity is equated with growth regardless of the the GINI coefficient and capital accumulation is considered paramount. Under such a system markets tend toward monopoly unless they are restrained. Of course, capital seeks to avoid such restraints. As the influence of wealth concentration increases, the political system gets subverted by influence buying, and this becomes a self-augmenting parasitic system that eventually captures the apparatus of the state and bends the policy to the interests of capital over labor (that’s everybody who works for a living).

Then, “free market,” “free trade,” and “free capital flow” become propaganda memes employed to obscure what is happening behind the curtain, and the dominant principle becomes privatize gains and socialize losses. This propaganda is used to get working people to vote against their own interests, in addition to obscuring the three card monte. This is where the US finds itself now.

While I applaud the action of the government and Fed in adopting a stim to stem the decline in aggregate demand, let’s not kid ourselves about the rest of the story. Instead of addressing the problems at their source, the authorities are using taxpayer funds and guarantees to prop up an insolvent financial system while driving a debt deflation that is sinking the middle class, exacerbating unemployment, preventing the restructuring of toxic debt, and shying from the necessary reforms, including accountability.

It is clear that the output gap is not the top priority of this administration, even though unemployment is the most pressing social problem. Rather, it is rescuing influential parties who were imprudent in risk-taking and financiers who violated their fiduciary trust, not only at the cost of putting taxpayers on the hook and allocating funds to the top instead of the bottom where they are most needed from a humanitarian point of view, but also undermining confidence in both the government and the financial system.

This is as much a forensic problem as an economic one. It is also a political problem in that in shows that an oligarchy has captured the levers of government and is operating policy chiefly for its benefit in the name of “free market capitalism.” This unfortunate situation will continue until the people force legislators to get the money out of politics by instituting public funding of campaigns and outlawing legalized bribery in the form of lobbying.

While some economists (like MIT’s Simon Johnson publicly) are addressing this, I would like to see more economists, especially heterodox economists, showing how neoliberal ideology is being sold as the best policy solution based on bogus claims that rest on models that bear little relation to reality and are not substantiated empirically, if they are not actually falsified, as many have been. (See Steve Keen’s Debunking Economics, for example.) Unfortunately, their work is not getting the attention it deserves.

As I explain in my book THE KEYHES SOLUTION, Samuelson has admitted (in his own words I quote him) that he never understood Keynes’s theory– and in fact got it all wrong! Keynes would never have used the “phillips curve” explanation of inlfation but since Samuelson claimed he was a “Keynesian” he gave Keynes’s analysis a bad name– and permitted Milton Friedman to push Samuelson’s “keynesianism” into the dustbin of history and open the path to politicans and policy makers to acccept the only available alternative that mainstrea economists knew — free market solves all problems.

Unfortunately people like Professor Sidney Weintraub of the University of Pennsylvania had the correct Keynes solution for the inflationj of the 1970s — but no one, except Henry Wallich a member of the Federal Re4serve Board of Governors — took Weintraub seriously. The Weintraub-Wallich solution was never taken seriously

demand drives policy

demand doesn’t drive policy, this statment takes a falsehood and states it as if it’s a fact

sking a question based on the false claim is “circular” adn then “begs it’s question

power drives policy…sometimes demand out powers the powerful

keynesian policies weren’t “abandoned” they were exiled by the powerful because it’s that much easier to steal without them

but demand can be artificially created

if Keynesian principals abd policies are so great why were they abandoned?

sounds like something’s missing from the equation.

what are the most outstanding weaknesses of the Keynesian economic model?

the way the WalMart outlets prefer to sell in bulk seems like the ideal of Keynesian economic theory–leading to massive waste and over-consumption.