Status Updates From Capitalism and Its Critics:...

Note 2/2:

Cassidy uses this insight of Polanyi's to explain why Friedman and the Chicago boys' economic project in Chile created certain economic problems. Supposedly, a limit of state power will fail to create the conditions for the free market to thrive.

Note 1/2:

Perhaps ironically, the chapter on Friedman contains a nice one-liner summary of Polanyi's philosophy (outlined in *The Great Transformation*) - which is that historically, it had taken strong states to create the conditions in which free market capitalism could consolidate and thrive. A Smithian economy didn't emerge naturally.

So this is broadly similar to Keynes's economics, then.

Cassidy thinks that Friedman's solution - to raise the unemployment rate back to NAIRU, so as to curtail workers and labour unions' bargaining power to raise wages - was essentially a call to restore Marx's 'reserve army of the unemployed'.

This is such a weird and twisted perspective.

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So, the 20 golden years of Keynesianism can be seen as merely the short-run tradeoff between unemployment and inflation then, which the Keynesians mistook as a permanent tradeoff. The economy had hit the vertical part of the LRPC by the 70s stagflation years.

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Intrusive thought: Friedman argued the LR PC is vertical (in the 1967 Presidential Address to the AEA), hence, there is only a short-run tradeoff between unemployment and inflation, no long-run tradeoff.

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thought: Wasn't this Hayek's point? Hayek argued in favour of heterogeneous capital, and 1 of the points that he attacked Keynes on was that Keynes (famous for his aggregates) used homogenous capital.

So why, supposedly by the point of the Cambridge Capital Controversy, did Cambridge England attack Cambridge Massachusetts's homogenous capital?

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On the Cambridge Capital Controversy - according to Cassidy's narrative, the 1st half of this conflict was debates about the nature of physical capital. Cassidy says that Cambridge, England questioned whether it was legitimate to aggregate it into a single whole, as Solow and other neoclassical economists did.

Before I take a side in this debate, I first have a question on the history of economic ...

Notes:
1) Keynes wrote “full employment is a special case, only realised when MPC and the inducement to invest stand in a particular relationship to one another”. So what’s this particular relationship?

2) Do modern empirical economists even believe in the multiplier theory anymore? Recall that commercial banks no longer “multiply up” central bank money after the Fed started paying interest on reserves.

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This allows one to understand that Keynes wasn't some deficit maniac – he absolutely knew that the budget should be balanced, he just argued that the 'balancing horizon' should be extended.

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I unfortunately find myself feeling like a tremendous idiot now, as I have, for so many years, failed to see this simple logic – that the crux of Keynes's thought is that, instead of balancing the budget every year, the government should balance the budget over the FULL economic CYCLE (i.e. surpluses in good times balancing deficits in bad times).

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... he introduced was a cut in federal salaries. This type of argument reminds me of the new book by Selgin, False Dawn, which I have not yet read.

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I had usually believed in the conventional narrative that Keynes had a big influence on FDR himself and the New Deal, but surprisingly, Cassidy argues against that here. He says Keynes' links to and influence on the Roosevelt administration were 'somewhat tenuous'. For example, FDR was hardly a proto-Keynesian – he had campaigned for office on reducing the federal deficit, and one of the first measures ...