Lou Dobbs Actually Gets It

[TPS]

(notable that the Nobel was given to an economist who spent his career debunking Keynes' inflation theories)

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You obviously don't know anything about Keynes' theory of inflation.

 

Phelps (and Friedman) attacked the notion underlying the Phillips' Curve that there's a trade-off between UP and inflation. Phillips looked at historical data for the UK to come to this conclusion. In the US, Paul Samuelson and Robert Solow (so-called American Keynesians) did a similar study, and they came up with the same results. Phelps and Friedman argued that this relationship would not be permanent once you considered expectations. In particular, they held to the view that expectations were formed by the recent past--"adaptive expectations." Keynes' theory of output, employment, and prices also assumes that current expectations are formed by the recent past. His "theory of prices" is based on how prices are determined at the level of the firm--prices are a function of the costs of production (wages, materials, etc.) and a profit margin.

 

The Phillips Curve relationship that Phelps "debunks" was based on an historical relationship and promoted by the American Keynesian school in 1960, not Keynes.

For the record, and I stated this years ago here, I am not a proponent of this simplified interpretation of Keynes. I adhere to a group known as post keynesians, and I am probably most influenced by Hyman Minsky.

[Kelly the Dog]

You obviously don't know anything about Keynes' theory of inflation.

 

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Uh oh.

[kegtapr]

I interpret it that Fox News does really do more than four minutes of news an hour and almost all of their programs are opinion shows and not news shows. MSNBC is the same, although they sometimes borrow the NBC reporters. The networks only put on approximately an hour of actual news a day. So CNN wins by default.

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Gold medal in the special olympics..woohoo!

[GG]

You obviously don't know anything about Keynes' theory of inflation.

 

 

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Let me see if I get this right, Phelps & Friedman debunked the Phillips curve (so far, they are more right than wrong). Phillips was a British disciple of Keynes. The American disciples reached the same conclusions as Phillips.

 

Yet it's the American school and not Keynes' theories that were under attack by Phelps & Friedman.

 

Ok

[TPS]

Let me see if I get this right, Phelps & Friedman debunked the Phillips curve (so far, they are more right than wrong).  Phillips was a British disciple of Keynes.  The American disciples reached the same conclusions as Phillips. 

 

Yet it's the American school and not Keynes' theories that were under attack by Phelps & Friedman.

 

Ok 

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First, Phillips was from New Zealand and attended the London School of Economics (starting the year Keynes, who was at Cambridge, died). Second, American Keynesian economics is based upon "interpretations" of Keynes by John Hicks and Alfred Hansen. Samuelson followed this line of thought. Actual disciples of Keynes at Cambridge--like Nicholas Kaldor, Joan Robinson (she called American Keynesians "Bastard Keynesians"), and Michel Kalecki--disagreed with those interpretations (one main reason was because those mechanical models ignored his discussion on uncertainty, which was fundamental in explaining why an economy could be stuck with high unemployment for an extended period). These economists represent the core of the post Keynesian school. An interesting side note on Hicks: toward the end of his life, he wrote a paper criticizing his interpretation of Keynes, mainly because of his admitted omition of the role uncertainty plays in a modern monetary economy.

 

I'll try to simplify things for you:

 

Phillips, a disciple of the Hicksian interpretation of Keynes, published an empirical paper on the trade-off between money wages and unemployment. S&S took it a step further, connecting wages to prices, and then estimating the trade off between inflation and unemployment. This simplified Phillips Curve relationship was then incorporated into the "Bastard" Keynesian models. However, without the concept of uncertainty, there's no role for expectations. This left the door open for Phelps and Friedman.

 

So, yes, it was the American Keynesian School that was under attack, not Keynes's actual theory, which incorporates expectations based upon the concept of fundamental uncertainty.

 

I believe you work in the financial industry, yes? You should read chapter 12 of the General Theory, "The State of Long Term Expectations." It's one of the best discussions on the relationship between real investment and financial investment you'll ever read.

[N.Y. Orangeman]

Dobbs is on Bill Maher's show tonight.

[Chilly]

Dobbs is on Bill Maher's show tonight.

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Bill Maher the science guy

[finknottle]

First, Phillips was from New Zealand and attended the London School of Economics (starting the year Keynes, who was at Cambridge, died).  Second, American Keynesian economics is based upon "interpretations" of Keynes by John Hicks and Alfred Hansen.  Samuelson followed this line of thought.  Actual disciples of Keynes at Cambridge--like Nicholas Kaldor, Joan Robinson (she called American Keynesians "Bastard Keynesians"), and Michel Kalecki--disagreed with those interpretations (one main reason was because those mechanical models ignored his discussion on uncertainty, which was fundamental in explaining why an economy could be stuck with high unemployment for an extended period).  These economists represent the core of the post Keynesian school.  An interesting side note on Hicks: toward the end of his life, he wrote a paper criticizing his interpretation of Keynes, mainly because of his admitted omition of the role uncertainty plays in a modern monetary economy.

 

I'll try to simplify things for you:

 

Phillips, a disciple of the Hicksian interpretation of Keynes,  published an empirical paper on the trade-off between money wages and unemployment.  S&S took it a step further, connecting wages to prices, and then estimating the trade off between inflation and unemployment.  This simplified Phillips Curve relationship was then incorporated into the "Bastard" Keynesian models.  However, without the concept of uncertainty, there's no role for expectations.  This left the door open for Phelps and Friedman. 

 

So, yes, it was the American Keynesian School that was under attack, not Keynes's actual theory, which incorporates expectations based upon the concept of fundamental uncertainty. 

 

I believe you work in the financial industry, yes? You should read chapter 12 of the General Theory, "The State of Long Term Expectations."  It's one of the best discussions on the relationship between real investment and financial investment you'll ever read.

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Based on what I've read of the nuances of Keynesian models this is correct (but a much more detailed history than I can attest to).

[SactoBillFan]

Basically the fact is that the middle class is shrinking, I think that is what Dobbs is pointing out. How does that influence our future? With all the geniuses posting here I think the problem will be solved tommorrow. That is of course if it is a problem. We don't need no stinkin middle class! Right?