2021年6月1日 星期二

The economic consequences of canceling Keynes

How the right tried to ban useful economics — twice.
Tim Gidal/Picture Post and Hulton Archive, via Getty Images
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By Paul Krugman

Opinion Columnist

These days it often seems that you can't turn on your TV without encountering a well-paid, influential figure being given copious airtime to explain how he's being "canceled" by our oppressive woke culture. Yes, some people really have been victims of unjustified smears, but the widespread exploitation of the "cancel culture" meme by people who are doing fine does some genuine harm.

For one thing, all this whining on the part of privileged people has the (intentional) effect of distracting public attention from the enormous real injustices facing many Americans.

It also makes it hard to talk about serious cancellation, which happens all the time.

What should we be talking about when we talk about cancellation? It certainly doesn't mean saying mean things — I'm not "canceling" Bitcoin advocates when I suggest that much of what they say is "libertarian derp." It also doesn't mean ignoring points of view that have little claim to be taken seriously; The Times is under no obligation to publish guest essays by people claiming that satanic pedophiles control the Democratic Party.

But there is a real phenomenon in which powerful interests try to block the dissemination of ideas they find threatening, for whatever reason. In fact, it happens a lot. So let me talk about one example I know a fair bit about: attempts to cancel Keynesian economics. I say "attempts," plural, because it has happened twice: an overtly political attempt to block the teaching of Keynesian economics in the 1940s and '50s, and a subtler freezing out of Keynesian ideas in the decades leading up to the 2008 financial crisis.

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John Maynard Keynes's theory that depressions were caused by inadequate demand, and that governments could cure them with deficit spending, was accepted by many American economists in the late '30s and early '40s. And in 1947, when the economist Laurie Tarshis published one of the first economic principles textbooks embodying the new doctrine, many schools decided to adopt it.

But then came an organized smear campaign, with many university trustees and donors demanding that orders for the book be canceled. This campaign was successful, at first: Sales of Tarshis's book dwindled. It wasn't until a year later, when Paul Samuelson's "Economics" somehow slipped through, that Keynesianism became a staple of undergraduate courses.

Right-wingers continued to complain — William Buckley's "God and Man at Yale" was, to an important degree, a screed against the horrible fact that Yale professors were teaching Keynes. But the blockade was broken for the time being.

Round two was, as I said, subtler. In the 1970s some economists began arguing that Keynesianism must be wrong, because the phenomena Keynes described couldn't happen in an economy of perfectly rational individuals and perfectly functioning markets.

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You might consider this a weak critique — but in the culture of economics, with its demand for rigorous modeling, it carried weight. Defenders of Keynes, uneasy about a theory that relied on plausible descriptions of behavior rather than ineluctable mathematics, lacked all conviction; enemies of Keynes were filled with a passionate intensity. Just a few years into the anti-Keynesian backlash, influential economists were ridiculing the whole doctrine, declaring that whenever anyone engaged in Keynesian theorizing, "the audience starts to giggle and whisper to one another."

Many economists privately continued to find Keynesian ideas persuasive. But it soon became common knowledge that major journals would not publish anything overtly Keynesian. During my own early career, I and others simply took it as a fact of life that if you wanted to get tenure, you would have to build your publication record in subfields that steered clear of the core issue of depressions and how they happen; you could sometimes smuggle some Keynesian material into your papers, but only if it came wrapped in a model that seemed to be mainly about something else.

So Keynes had in effect been canceled.

Then came the 2008 crisis and its aftermath, which demonstrated that Keynes had been right all along. The slump reflected a collapse in demand; governments that responded with deficit spending were able to mitigate the downturn, while those that practiced fiscal austerity made it worse. And the anti-Keynesian theories that had dominated the journals for several decades proved perfectly useless.

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It may also be worth noting that current policy debates continue to be conducted largely in a Keynesian framework. Critics of President Biden's policies, most famously Larry Summers, aren't disputing the stimulative effect of deficits — on the contrary, they're contending that the stimulative effect will be too big for the economy to handle.

But the years of Keynesian cancellation had a heavy cost. Many economists entered the crisis ignorant of basic concepts that had been worked out many decades earlier, because you couldn't publish those concepts in the journals or teach them in many (not all) graduate programs. This intellectual impoverishment, I'd argue, weakened and distorted the policy response: We had a much worse, much more prolonged slump than we might have had if the ideas needed to fight the slump hadn't been suppressed.

So yes, cancellation can be a serious issue and should be fought. Unfortunately, making that case is harder than it should be when so many privileged people conflate the real thing with not being invited to fancy dinner parties.

Quick Hits

My colleague Branko Milanovic thinks discussion of inequality was canceled.

Some economists certainly tried.

But I plead innocent.

International macro stayed relatively sane.

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