Fighting talk

A new working paper from M E Brady will not go down well with everyone.

"G. L. S. Shackle Was J. M. Keynes's Rival and Opponent: He Was an Austrian and Never a Keynesian of Any Type"

Michael Emmett Brady, California State University - Department of Operations Management

Shackle was a tireless opponent of both Keynes and the Keynesian revolution. He was a 100% Austrian subjectivist. He never was a disciple of Keynes at any time in his life. Shackle was successful in a tricky sleight of hand and legerdemain due to the support of Joan Robinson and Paul Davidson, neither of whom had any idea of the concept of the weight of the evidence from the A Treatise on Probability that was the foundation for Keynes’s uncertainty analysis in both the A Treatise on Probability and General Theory.

Shackle successfully substituted his rival and directly conflicting definition (See for example, pages 162-164 of Epistemics and Economics) of uncertainty, which meant total and complete ignorance. Shackle’s concept of total and complete ignorance goes under the synonyms irreducible uncertainty, fundamental uncertainty, unquantifiable uncertainty, utter uncertainty and radical uncertainty. None of Shackle’s analysis holds except in the special, but important, case of investment in long lived, physical durable capital or producer goods that are subject to innovation, technological change and advance, and obsolescence over time. Keynes’s treatment in the A Treatise on Probability and General Theory is superior to Shackle’s, so there is no need for any consideration of Shackle’s convoluted approach based on possibilities (not probabilities), imagination and the entrepreneur’s private dreams.

Keynes was the first to put forth an original IS-LP (LM) model in October, 1933. This model appeared in the 1934 draft copy of the GT. This original model is very inferior to the final model constructed in chapters 10, 11, 12, 13, 14, and 15 of the GT. It was presented in its entirety in chapter 21 in sections IV, V and VI and briefly in Section IV of chapter 15. The investment multiplier and marginal propensity to consume are both missing. Keynes had not yet integrated Y, Aggregate realized or actual Income, into the LP equation because he had not yet formulated his D-Z model, which allowed him to present an elasticity analysis in Section VI of chapter 21.

There is no Shackleian interpretation of the GT. There is a deliberate, Shackleian misinterpretation of the 1937 QJE article, in which Shackle tries to sabotage the Keynesian revolution by attempting to claim that Keynes was really an Austrian Subjectivist like Shackle.

Fitzgibbons was not able to come to the correct conclusion regarding Shackle simply because his belief in a Shackleian interpretation of Keynes makes no sense because Keynes had always rejected Austrian Subjectivism.

King’s 2002 “history” is a version of Shackle’s claim that Keynes was an Austrian Subjectivist. King’s “History” is completely contradicted by the 1937-38 Keynes-Townshend correspondence, where Keynes agrees with Townshend’s tentative conclusion that the Theory of Liquidity Preference, as presented in the General Theory, is based on Keynes’s TP concepts of weight of the evidence and non numerical probabilities, which are interval valued probabilities that can be indeterminate or imprecise. The Keynes-Townshend correspondence represents a complete rejection of Shackle’s and Joan Robinson’s claims about radical uncertainty being the foundation of the GT.

The Uncertainty fraud is the foundation upon which Post Keynesianism and Institutional economics is founded. This foundation is composed of the myths made up by Joan Robinson and GLS Shackle about Keynes and the GT. These myths were then passed on to hundreds of thousands of readers by way of Paul Davidson during the 37 years, from 1978-2014, that he was the editor of the Journal of Post Keynesian Economics.

Keynes on "The Road to Serfdom"

It is well known that John Maynard Keynes said of Hayek's "The Road to Serfdom":

In my opinion it is a grand book [...] Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.

What was not known, to me at least, is what Keynes said later in the letter from which the above quote comes. At the end of his letter to Hayek, Keynes wrote,

I come finally to what is really my only serious criticism of the book. You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere [between free-enterprise and planning], and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. In a sense this is shirking the practical issue. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly underestimate the practicability of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.

I should therefore conclude your theme rather differently. I should say that what we want is not no planning, or even less planning, indeed 1 should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue. This is in fact already true of some of them. But the curse is that there is also an important section who could almost be said to want planning not in order to enjoy its fruits but because morally they hold ideas exactly the opposite of yours, and wish to serve not God but the devil. [...] What we need is the restoration of right moral thinking - a return to proper moral values in our social philosophy. If only you could turn your crusade in that direction you would not feel quite so much like Don Quixote.

It seems Keynes believed in philosopher-kings, disinterested, public-spirited people working wholly for the public good. I wish him luck with that. But his point about the "slippery path" is one often made with regard to Hayek's argument.