Keynes's Views Research Articles

Solow Growth Model dan Kausalitas Hubungan Saving dan Pertumbuhan Ekonomi: Perbandingan Negara Maju (High Level Income) dan Negara Berkembang (Upper-Middle Level Income)

At a theoretical level, it is believed that there is a relationship between savings rates and economic growth. In this case, accumulated savings can be used for investment purposes, which will then encourage GDP growth in the short term. On the contrary, in Keynes's view, GDP growth actually triggers growth in the savings rate. Debate then emerged as to which factors were the cause of a country's economic growth. This research uses the Solow Growth Model theoretical approach, which states that under the assumption of a closed economy, the level of savings will influence the level of investment and in turn have an impact on economic growth. Based on these arguments, this research conducted a comparative analysis of two countries, namely Indonesia and Singapore, in the period 2008-2022. The research results show that there is a tendency in the same direction of causality between savings levels and economic growth, at the two extremes of country income levels. Indonesia as a country in the upper-middle income category, and Singapore as a country in the high income category, have economic growth rates caused by the level of capital accumulation through savings. So that policies related to savings accumulation will still be relevant in the future. For future research, it is recommended to consider the influence of other macro variables, considering that the Solow Growth Model requires long-term longitudinal analysis, so that distortion of macro variables such as interest rates can have an impact on the causality of the relationship.

Ellsberg meets Keynes at an urn

Keynes (1921) and Ellsberg (1961) have articulated an aversion toward betting on an urn containing balls of two colors of unknown proportion to one with a 50–50 composition. Keynes views this as reflecting different preferences for bets arising from different sources of uncertainty. Ellsberg describes this as weighting the priors arising from the unknown urn pessimistically. In two experiments, we observe substantial links between attitude toward almost‐objective uncertainty and attitudes toward multiple‐prior uncertainties in terms of ambiguity and its corresponding compound risk. Our findings point to a shared component across domains of uncertainty and motivate the need for further theoretical development.

Causality between public expenditure and economic growth in the Kingdom of Bahrain

Various studies generally found combined empirical evidence on the relationship between public expenditure and economic growth. In literature, two contrasting analysis of the relationship between public expenditure and economic growth has been established. The current research aims to test the Keynes view that public expenditure caused economic growth in the context of the Kingdom of Bahrain. The data for the variables used in the study was yearly time series data from 1981 to 2016 and applied stationary test, causality test and regression analysis to achieve the set objectives. The study results realised that there is a unidirectional causality between public expenditure and economic growth in the Kingdom of Bahrain. Moreover, the result supports the Keynesian view of public expenditure and economic growth in the Kingdom of Bahrain.

How SIPTA overlooked Keynes’s major contributions to imprecise probability and decision making, 1999-2019

The SIPTA (Society for Imprecise Probability,Theory and Application) view of Keynes’s contributions to imprecise probability and application form a one-to-one, onto mapping from the claims of Henry E. Kyburg to what is accepted as being what Keynes’s contribution was. Thus, if one is familiar with Kyburg’s assessment of Keynes’s contributions, then one also knows what SIPTA’s views of Keynes’s contributions are. There is an extremely severe problem here, however, because Kyburg never read beyond chapter 6 in Keynes’s A Treatise on Probability. Kyburg was, therefore, ignorant about the many technical and mathematical contributions made to the theory of imprecise probability by Keynes, such as upper and lower probabilities, non additive probabilities,sub additive probabilities, interval valued estimates, decision weights, etc, in Parts II, III, IV and V of the A Treatise on Probability. Non additive probability appears in Keynes’s applications of non additive probability in his analysis of uncertainty in his theory of the liquidity preference approach to the rate of interest in the General Theory, where uncertainty was defined as an inverse function of the evidential weight of the argument in footnote 1 on page 148 of chapter 12. Keynes greatly emphasized the relative importance of his 'non-numerical' (interval) probabilities and weight of argument in his correspondence with Townshend in 1937-38. Kyburg’s view of Keynes’s contribution was to argue, based on Keynes’s verbal discussions on pp.30-34 of chapter III of Keynes’s A Treatise on Probability, that Keynes had been the first to (a) define a partial order and (b) the first to argue that all probabilities were not comparable and measurable. Kyburg also acknowledged Keynes’s contribution in chapter 6 concerning the weight of the argument as it related to the Bayesian refusal to give any importance to questions dealing with the relative strength of the evidence of different probabilities, i.e. whether the evidentiary base supporting a probability estimate was composed of strong evidence or made up of weak evidence. We will conclude that the above assessment made by Kyburg is identical to the SIPTA assessment made from 1999 (Kyburg’s 1999 assessment for SIPTA) to the last SIPTA meeting in 2019.

The Mathematical Revolution in Economics: Factor Flows in the Production of Academics

The main theme of this essay is that the mathematical revolution in economics precipitated factor flows in the production of academics, wherein able, if not creative, mathematicians moved into economics to earn large rents. This “technical migration” set in motion a counterproductive path dependency from which the discipline may find it difficult to extricate itself. A secondary theme explores the disparate views of Keynes and Schumpeter on economics as an “exact science” and the role that mathematics should play. The seminal question is not whether mathematics is an important tool for economic analysis, because this is not a debatable proposition, but whether the deification of mathematics has come at too high a cost. This cost includes elevating elegance over substance, discounting the importance of other disciplines, and dissuading gifted undergraduates from pursuing advanced study in economics because they do not aspire to be “mathematicians.” JEL Classifications: A22, A23, B31, B41

Globalization and nationalism: Retrospect and prospect

AbstractRecent events have highlighted areas of conflict between economic integration with the outside world and the demands of domestic electorates. Historically, the tradeoffs have always become sharper in periods of crisis, such as the present. After reviewing the U‐shaped progress of globalization since the nineteenth century, this essay reconsiders John Maynard Keynes's views on “national self‐sufficiency” in the early 1930s. I argue that the postwar Bretton Woods system he helped to create evolved from those views as a balanced middle ground between market forces and governments' desires for domestic economic stability. The gradual erosion of that balance in favor of the market has helped produce discontent over globalization and more nationalism in politics. Enhanced multilateral cooperation in key areas offers the hope of supporting globalization while better meeting voters' aspirations. Despite daunting political obstacles to global cooperation these days, collective action challenges in areas such as climate, cybersecurity, and health—alongside economic policy—are becoming only more pressing over time.

How Sipta Overlooked Keynes’s Major Contributions to Imprecise Probability and Decision Making, 1999–2019

The SIPTA (Society for Imprecise Probability,Theory and Application) view of Keynes’s contributions to imprecise probability and application form a one-to-one, onto mapping from the claims of Henry E. Kyburg to what is accepted as being what Keynes’s contribution was. Thus, if one is familiar with Kyburg’s assessment of Keynes’s contributions, then one also knows what SIPTA’s views of Keynes’s contributions are. There is an extremely severe problem here, however, because Kyburg never read beyond chapter 6 in Keynes’s A Treatise on Probability. Kyburg was, therefore, ignorant about the many technical and mathematical contributions made to the theory of imprecise probability by Keynes, such as upper and lower probabilities, non additive probabilities,sub additive probabilities, interval valued estimates, decision weights, etc, in Parts II, III, IV and V of the A Treatise on Probability. Non additive probability appears in Keynes’s applications of non additive probability in his analysis of uncertainty in his theory of the liquidity preference approach to the rate of interest in the General Theory, where uncertainty was defined as an inverse function of the evidential weight of the argument in footnote 1 on page 148 of chapter 12. Keynes greatly emphasized the relative importance of his 'non-numerical' (interval) probabilities and weight of argument in his correspondence with Townshend in 1937-38. Kyburg’s view of Keynes’s contribution was to argue, based on Keynes’s verbal discussions on pp.30-34 of chapter III of Keynes’s A Treatise on Probability, that Keynes had been the first to (a) define a partial order and (b) the first to argue that all probabilities were not comparable and measurable. Kyburg also acknowledged Keynes’s contribution in chapter 6 concerning the weight of the argument as it related to the Bayesian refusal to give any importance to questions dealing with the relative strength of the evidence of different probabilities, i.e. whether the evidentiary base supporting a probability estimate was composed of strong evidence or made up of weak evidence. We will conclude that the above assessment made by Kyburg is identical to the SIPTA assessment made from 1999 (Kyburg’s 1999 assessment for SIPTA) to the last SIPTA meeting in 2019.

Government Expenditure and Economic Growth Nexus in Mena Countries: Frequency Domain Spectral Causality Analysis

Abstract The paper aims at examining the causal relationship between economic growth and government expenditure in selected MENA countries over the period of 1987–2017. Unlike previous studies, we examine the causality in both panel data and time series data to get a clear idea about the causal relationships individually and as a full sample. We also revisited the causal relationship between the two variables within the framework of frequency domain causality. Our findings support the neutrality hypotheses in the short-run term for most of the countries. Thus, economic growth and government expenditure at most frequency levels evolve independently. On the other hand, we found the support of Wagner’s law, Keynes view, neutrality and bidirectional hypotheses in the long term.

DISCURSIVE STRATEGIES IN THE KEYNES-HAYEK DEBATE: BUILDING A LIBERAL CRITIQUE

© 2019 The Author(s). Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved. This article addresses an analysis of discourse based on Michel Foucault's 'order of discourse' to comprehend which discursive forces influenced Keynes's mode of thought and his liberal critique. The article returns to the Keynes-Hayek debate to explore the possibilities of considering Hayek as a reverse influence in Keynes's late beliefs on the limits of state action and socially desired ends. An understanding of Keynes's view on the state and economic action requires identifying the underlying strategies of his discourse when criticizing Hayek's spontaneous liberalism. More specifically, Hayek's liberal views promoted a reverse and discontinuous force that contributed to reinforce Keynes's mode of thought.

MALTHUSIAN MOMENTS IN THE WORK OF JOHN MAYNARD KEYNES

ABSTRACTThis article tracks the shifting contours of John Maynard Keynes's invocation of certain ideas associated with Thomas Robert Malthus, between 1914 and 1937 especially. These ‘Malthusian moments’ in Keynes's work form a triptych. In pre-war thinking about global population dynamics as a Malthusian ‘devil’ threatening national political and economic stability, Keynes found optimism in the thought that modern political economy could be repurposed to avoid the horns of such a dilemma. In the 1920s, he moved to consider the international, and particularly European, responses to both population and to the developing Malthusian ‘devil’ of unemployment. Finally, in the 1930s, Keynes's view became increasingly domestic, focusing on ways that these devilish twin problems could be managed by nation-states organized for prosperity and self-sufficiency. Across these moments, Keynes sought to assert the power of past political and economic ideas to aid in the formulation of present policy, by continuously (if rather loosely) invoking the Malthusian trope of ‘effective demand’.

Financiamiento, financiarización y problemas del desarrollo

En este artículo se analizan las corrientes teóricas heterodoxas que explican el financiamiento en el marco de los procesos de producción e inversión, las estructuras financieras de los países desarrollados y en vías de desarrollo. Todo ello en un contexto de dominación del capital financiero. El artículo revisa los planteamientos de Keynes, los circuitistas y Kalecki que dan cuenta de los procesos de creación y destrucción de las deudas, así como de la circulación de las ganancias. Asimismo, explican la forma que adopta esta movilización de recursos en los países en desarrollo, incluyendo la era de la financiarización que se distingue por la profundización del sistema financiero mundial.

Control óptimo de las expectativas de inversión

En la teoría tradicional de la política económica los gestores tenían un conocimiento perfecto de la realidad y podían alcanzar una “sintonía fina” en su gestión. Pero, suponiendo expectativas racionales, el control óptimo resulta imposible para unos gestores que toman decisiones discrecionales. Así, la teoría del control óptimo perdió lugar ante la teoría de los juegos que formaliza agentes de comportamientos estratégicos.
 En este trabajo se ensaya una síntesis entre la técnica de control óptimo y las expectativas de los agentes privados; para ello, el control óptimo no se ejerce sobre variables monetarias o fiscales sino sobre las propias expectativas, cuya credibilidad se basa en transformaciones institucionales.
 El modelo del ciclo de las existencias evidencia una oscilación de la propensión marginal a invertir. Se formaliza entonces una inversión endógena cuya propensión a invertir es función de las expectativas, y se aplica la técnica del control óptimo sobre las expectativas de inversión. El resultado es la estabilización del ciclo de las existencias. Esta formalización es coherente con las apreciaciones de KEYNES (1936) sobre la conveniencia de estabilizar el ciclo no mediante el freno de la inversión en el auge sino mediante el estímulo al consumo para que el auge sea sostenible.

The Relationship Between Public Expenditure and Economic Growth In Kosovo: Findings from a Johansen Co-Integrated Test and a Granger Causality Test

In the scientific literature, there are two opposing views on the relationship between public expenditure and economic growth. The Keynesian view states that public expenditure is an exogenous factor that influences economic growth and can be used as a policy instrument. This point of view is in contrast to the Wagner view that the public expenditure is seen as an endogenous factor or an outcome, not a cause, of economic growth. The primary objective of this study is to test the views of Keynes’s versus Wagner’s in the case of Kosovo by using Public Expenditure (G), Gross Domestic Product and three other components of GDP: Foreign Direct Investment (FDI), Export (EXP) and Total Budget Revenue (TRtax); the variables used in this analysis are quarterly time series data spanning from 2004–2016. To accomplish the set objectives, the Johansen co-integrated technique is used to investigate the long-run relationship between public expenditure and economic growth, while the Granger causality test is used to know the direction of flow between variables. This study discovers that there is a unidirectional causality between government expenditures and economic growth in Kosovo. It is also found that there is a bidirectional causality between total budget revenue and public expenditure. On the other hand, results also provide evidence that there is a bidirectional causality between export and economic growth. Moreover, the results for Kosovo indicate that data for the period considered support the Keynesian view.

Thomas Aquinas (A.K.A. the Medieval Church, Canonists, Scholastics, and Schoolmen) and J M Keynes on the Necessity of Excluding Smithhs Projectors, Imprudent Risk Takers, and Prodigals From Receiving Any Bank Loans

J. M. Keynes had already recognized in his 1930 A Treatise on Money that the major cause of deflation and inflation problems at the macro level was the ability of Smith’s Projectors, Imprudent risk takers, and Prodigals, whom Keynes categorized as Wall Street connected speculators and rentiers (modern day hedge funds, private equity firms, and investment banks) in his General Theory in 1936, were the fundamental problem in a capitalist society because they diverted bank loans from investment in durable capital formation into the financial manipulation of paper claims in various stock and money markets. The General Theory makes it even clearer because it reiterates what he had said in both the A Treatise on Money and in the 1932 Symposium on Usury in the Economic Journal in response to Keynes’s decision to publish a 1931 article by Henry Somerville. Keynes heavily supported Somerville’s major point about the dangers of using bank loans to finance speculative debt leverage practices versus loans to finance the purchase of durable capital equipment. This is the same point made by Smith with respect to loans made to his three categories of upper-income class citizens that Smith labeled as Projectors, Imprudent risk takers, and Prodigals. Both Smith and Keynes were influenced by Aristotle. Keynes admitted that he felt that the arguments of the “ancients”, “Medieval Church”, and “Schoolmen” were also influential in his general conclusions, although he differed from them in some specifics. Smith also used the term “Scholastics” and “Schoolmen” several times in his The Theory of Moral Sentiments. By far the most prominent member of the Medieval Church, Canonists, Scholastics, and Schoolmen was Thomas Aquinas. Somerville, in his June 1936 article in The Commonweal, titled, Usury as a New Issue, argued for a connection between the views of Keynes and Aquinas specifically. He had originally pointed out in the December 1931 issue of the Economic Journal Keynes’s connection with the “canonists” in his A Treatise on Money. In March 1932, the Savings and Usury Symposium was held in the Economic Journal. Keynes essentially states what he latter restated in the General Theory in chapter 23 in 1936. Keynes’s view on the dangers to the macroeconomy of making loans to speculators and rentiers did not change from 1930 until the end of his life. Aquinas’s work on decision making under conditions of ignorance, risk, uncertainty, imperfect information, asymmetric information and imprecise/indeterminate, interval-valued probabilities puts him heads and shoulders above any contemporary thinker until Adam Smith’s Wealth of Nations was published in 1776. Aquinas’s contribution has not been correctly appreciated because of his realization that precise, mathematical, point estimates of both prices and probabilities are generally impossible. This thus greatly constrains the use of the mathematical laws of the probability calculus upon which both neoclassical and modern economics is built on.

Liquidity Preference is the Second (Missing) Factor in Keynes's Chapter 13 'The General Theory of the Rate of Interest'. The First Factor Was the MEC Schedule for Investment Combined with Consumption Out of Income, Which Determined Savings

Nowhere in chapter 13 of the General Theory does Keynes state that his initial, introductory, Liquidity Preference equation determine the rate of interest. He states that there are two factors that determine the rate of interest. Unfortunately, the neoclassical theory of the rate of interest is based only on one of the two factors. It is therefore necessary to discuss the second factor in detail. This is done in chapter 15. Chapter 13 is thus an introductory chapter that introduces the concept of Liquidity preference. Unfortunately, economists, such as Millikan, Viner, and Hansen, ignored Keynes’s ten pages of analysis and took the L=M(r) equation on page 168 completely out of context, even though Keynes explicitly introduced Y, national (aggregate) income, where Y=C I, so that I=S, as a reason why decision makers would hold money balances on pp.170-171 of the GT. Keynes’s introductory analysis of the rate of interest was thus reduced to a one liner –L=M(r) - by the vast majority of economists. Current views of Keynes’s contributions in the GT amount to a jumble of conflicting stories, tall tales, myths, fables, fairy tales, claims and concoctions that have been passed down from the 1930’s. For instance, one fable is that there could never be any IS-LP(LM) model in the GT because Keynes was a partial equilibrium, Marshallian, anti formalist, methodologist who would never, ever, use a formal set of simultaneous, mathematical, equations in any analysis because this would be a Walrasian, general equilibrium approach which Keynes had condemned. The vast majority of these fables are related to phony claims that were spread by Joan Robinson, who, supposedly, knew what Keynes was doing because she was a close collaborator who worked with Keynes in the writing of the GT. Actually, Joan Robinson never knew what Keynes was doing because she was mathematical illiterate. She never collaborated with or worked with him on the writing of the GT. A careful reading of her 1953 contribution, “A Lecture Delivered at Oxford by A Cambridge Economist”, provides all the evidence one needs to support the conclusion that she had no idea about the nature of Keynes’s GT contribution. She was a draft reader who completely overlooked the clearly specified four equation, formal, simultaneous, mathematical, IS-LP(LM) model in the 1934 draft copy of the GT. If she had been able to follow this analysis, then she would have realized that Keynes’s GT is based directly on the IS-LP(LM) model with uncertainty integrated as a shift parameter in chapter 21 in Sections IV, V and VI of the GT. The IS-LP(LM) model, supported by the microeconomic, optimizing, expectations D-Z model of chapter 20, is the central contribution of Keynes’s GT.

Keynes's Views on Formalism and Mathematics: On the Role Played by Mathematical Formalism in His IS-LP(LM) Model As Presented in the General Theory in Chapter 21

J. M. Keynes’s general comments made on pp. 275-276, pp. 297-298, and p.305 of the General Theory concerning the relationship between mathematics and economics has been very severely misinterpreted by economists in general for the last eight decades. Hundreds of commentators have cited these pages while being completely oblivious to the fact that Keynes presented his complete IS-LP (LM) model on the very next line of the same page, page 298. Keynes’s entire analysis, including potential problems with the model, was presented on pp. 298-303 of the General Theory. Keynes spent five pages listing what these potential problems were. Very specific qualifications, constraints and criticisms, that needed to be considered when applying the model, were presented by Keynes. Nevertheless, Keynes made it crystal clear on p. 299 of the General Theory that his entire model, presented on p. 298, was a system of simultaneous equations that would yield a specific, determinate, equilibrium result if it was solved using the available, aggregate facts about consumption, investment, the multiplier, and the amount of liquidity preference. Keynes’s masterful performance in 1936 has been portrayed as partially incomprehensible by the vast majority of both Post Keynesian and Neoclassical synthesis Keynesian economists. What is incomprehensible is that Keynes’s clearly presented IS-LP (LM) model, with an additional supporting mathematical analysis that was provided on pp. 304-306 of the General Theory, could have been overlooked by all economists for the last 83 years.

Three Essays on the Theory of Money and Financial Institutions Essay 3: The Economy with Innovation, Externalities and Context

This essay is the third of three. The first is nontechnical and in part autobiograhpical describing the evolution of my approach to developing a microeconomic theory of money and.financial institutions. The second essay was devoted to a more formal sketch of a closed economic exchange system with no other externalities beyond money and markets. This essay builds on the existence of monetary exchange but also context, and active government with nonsymmetric information and many externaties indicate that the views of Keynes, Hayek and Schumpeter are all consistent with the next stages of complexity as the logic requires many different arrays of institutions to provide the necessary economic functions and adjust to the variety of socio-economic contexts.

The gold standard and the euro: A reflection from a reading of A Tract on Monetary Reform

This paper makes a comparison between the gold standard and the euro through a study of Keynes's views on the need to manage the macroeconomic situation of an industrial economy. The essay centers on Keynes's first relevant economic work of the post World War I years, A Tract on Monetary Reform, analyzing its theoretical and practical content. The situation of monetary instability and the choice of exchange regime (to return or not to the gold standard, with the parity prior to the war) were the factors that attracted Keynes's attention in those years. Similarities between the gold standard and the present euro system bestow a certain interest on Keynes's ideas and on the economic discussions that took place in Great Britain during the postwar years (1919–1925).

J. M. KEYNES AND HIS ECONOMIC THEORY: AN ETHICAL PERSPECTIVE

The article examines the philosophical and moral foundations of the biggest economist and political philosopher of the 20th century John Maynard Keynes (1883-1946), who played an important role in rethinking a number of important provisions of the classical political economy and in creating the ideological and methodological basis of the "Keynesian revolution" and of the new field of economic analysis-macroeconomics. The author traces the main stages in the formation of ethical views of Keynes, shows that his interest in ethics as the system of values in society was dictated by the need for the new conceptual vision of economic realities and by the search of an answer to the main ethical question: "What should we do?". Attention is drawn to the fact that an understanding of the ethical orientation of economic theory by Keynes allowed him to take a critical stance towards traditional individualism and Victorian morality of thrift and moneymaking and to conclude that rational and "right" forms of individual behaviour are not a guarantee of the prosperity of society as a whole. To achieve the latter Keynes justified the necessity of "central control" by the State of the overall level of aggregate expenditure. It isstressed that the ethical views of Keynes correspond with the concept of the "ethic of responsibility"- a relatively new scientific discipline, which originated as a response to the risks of technogenic era: pollution, resource constraints, overpopulation, lack of stability of the world economy. The final part of the article analyzes one of the most important, from the point of view of Keynes, vices of capitalism - reckless proclivity of people to the multiplication of "abstract monetary wealth". It is shown that it doesn't only disfigure the psyche and consciousness of people, but also changes the direction of development of the market economy towards "speculative capitalism", which creates a threat to civilization, creativity, well-being and full development of the individual.

Speculation in the Foreign Exchange: Noise or Information?

An event study is used to assess the views of Keynes and Friedman on speculation. Speculative extremes are ranked by intensity of sentiment and weight of speculative activity. A unique dataset of risk-reversal skew on option prices is used to measure the intensity of speculative sentiment; the weight of positions is based on US regulatory data. The extremes say little about the future in either case, suggesting that speculation is more than just random noise and supporting the view there is some informational content that is being passed through to the price with speculative activity.