Economics textbooks are chewed economic theory.
We can learn from them, but we shouldn’t learn from them.
Because they give us a stupid sense of superiority. They usually belittle the great minds of the past.
Ricardo believed the value of things resided in labor. How stupid he was…
Say said supply created its own demand. How naive he was…
Keynes said that in the long run we are dead. How inconsiderate he was..
Friedman wanted to target the money aggregates. Really??
If we read through the original ones, usually we will get a much sharper description of their reality that the one that is portrayed in textbooks.
But my point is not to belittle textbook and textbook writers, my point is concerns Keynes’ long run.
How much ink has been spilled denigrating the man, for saying that in the long run we are all dead.
You can read DeLong post and be shocked!
We all know why “they” offended Keynes, because he was a Keynesian, duh!
But Keynes wasn’t a Keynesian, at least in his Tract (the book where we can find the cursed sentence). Keynes “became a Keynesian” in 1936 with the publication of his General Theory, up until then he was a Monetarist. And a pretty damn good one.
So…what about the sentence?
The sentence is about the Quantity Theory of Money (although Keynes formulates it in another way). Here is what Lord Keynes says:
What Lord Keynes is saying is: If we put a whole lotta money in the economy, prices won’t respond accordingly. The parameters may shift (Brad deLong considers it a foreshadowing of Lucas Critique).
(This time what changed was r – the reserve ratio)
History sometimes has this twists.
Except that this isn’t a twist.. just a bunch of uneducated people..