Keynes vs. Piketty

This post contains no probing analysis or profound insight. Just an offhand, hipshot reaction. I think there’s a big difference between John Maynard Keynes’s views and those of Thomas Piketty. Keynes’s observations are theoretically rock solid but have proven difficult to implement under real world conditions. Piketty’s views are, apparently, theoretically and empirically suspect but politically appealing, at least to some.

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    Keynes’s observations are theoretically rock solid but have proven difficult to implement under real world conditions.

    If they can’t be implemented in the real world, they can’t be theoretically solid. It makes him no different than Marx, results-wise.

  • Ben Wolf

    Post-Keynesian criticism of Picketty can be largely summarized as:

    1) Taylor makes the point that Picketty’s determinations of the rate of profit and the capitalists’ share of those profits assume a fully employed global labor force due to his use of the neoclassical production function (the one trashed back in the 1950s during the Cambridge capital controversies). This is THE critical error in Picketty’s work, that capital can be aggregated and differences simply assumed away while the reality of effective demand is ignored.

    2)The rate of profit and share of net profits will vary over time depending on the business cycles, employment level, monetary policies, technical changes, etc. The neoclassical production function referenced above does not take this into account.

    3) The accumulation of wealth at the top is not an autonomous product of “capital”, some natural law of economics which states that it will always produce growing inequality, but rather a product of specific policies which can be reversed. Altering the ratio of output/capital and the share of profits taken by the capitalist class is the better and more easily implemented choice for reducing inequality rather than taxation. In other words rising real wages are more effective in sustaining aggregate demand and attenuating capitalist power, while relying on taxation will fail to address stagnating wages and continue the current trends.

  • Ben Wolf


    The problem is not with Keynes work but with the American economists who bastardized it in the 1940s. Rather than adopt Keynes’ broad recommendations for maintaining aggregate demand and full employment they focused almost entirely on the “spend more” part. After a meeting with American economists he is reported to have said he was the only non-Keynesian in the room.

  • Ben Wolf

    I just noticed my spell-check keeps changing “Piketty” to “Picketty”. Is the spelling with a c more common?

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    Ben, if Keynes work can be that easily bent towards justifying what pols want to do to get rich and stay in power, it doesn’t work. If one group of economists hadn’t perverted it another group would have. And is there any reason to believe that economists elsewhere haven’t done the same thing? Haven’t debt totals gone up all over the Western world since the end of WWII?

    If the ideas aren’t robust enough to deal with human cussedness and cupidity, they’re not robust enough to be considered a good model of reality.

  • Ben Wolf

    Ice, there’s nothing in this world humans can’t and won’t corrupt. I think the best we’ll ever do is to make things work for a little while before the slide into dysfunction begins. American economists latched onto spending because it was the part of Keynes work the business community found least objectionable. The job creation programs he suggested? Forget it. Industrial leaders made very clear they would not tolerate an independent and empowered working class. They preferred to forgo the greater profits that would have accompanied it to instead maintain control over society.

    Things will always suck until we find some way to filter the sociopaths out of the mix.

  • Ben Wolf

    This is an interesting criticism of Piketty’s methodology from a U.S. historian:

  • I think the most significant clause in that analysis is its closing clause:

    upon finding that it hit desirable political notes, that product was put into print by a major academic press despite serious issues with the rigor of its analysis

    It might be another example of “too good to question”.

  • The job creation programs he suggested?

    That’s an important observation, Ben, and something that’s frequently ignored in the discussions, particularly those of the last couple of decades. Keynes didn’t so much see the government as the consumer of last resort but as the employer of last resort.

  • ...

    Ben, the sociopaths may be necessary. Anyone that wants to command/lead a large number of people may need sociopathic tendencies. The question then becomes how to keep them reigned in.

  • Ben Wolf

    Plato argued the best people to lead will be those who are capable but don’t want to do it. Sociopaths don’t care about the common good, only self-aggrandizement and sadistic treatment of others; the key is to persuade the wise and virtuous to accept power (which any wise person is loath to do) and eradicate the disproportionate number of sociopaths in positions of power. Because they’ll do anything to gain while a wise person has principles, the virtuous person is at a distinct disadvantage in anything resembling a contest.

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