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This interview is almost incoherent. Note the contradiction: "no involuntary unemployment and, indeed, no money" followed by "real wages fell by 40% but employ

This interview is almost incoherent. Note the contradiction: "no involuntary unemployment and, indeed, no money" followed by "real wages fell by 40% but employment dropped". The latter statement only contradicts Keynesian economics, which don't have relative prices (Keynesian economics has only real and nominal dollars of GDP) and uses money combined with sticky prices to explain involuntary unemployment. But although in one sentence he seems to think the Greek experience contradicts Keynesian economics, he turns around and appeals to Keynesian economics a few minutes later: "the 3.5% primary target for 2018 would depress growth today".

tP5n 11y ago
Why would a self-described 'erratic marxist' even be concerned about contradicting Keynesian economics?
bildung 11y ago
> Note the contradiction: "no involuntary unemployment and, indeed, no money" followed by "real wages fell by 40% but employment dropped". That contradiction quickly dissolves once you see that he first he talks about macroeconomics as taught in the university ("no involuntary unemployment and, indeed, no money") and then about microeconomics ("real wages fell by 40% but employment dropped").
- yummyfajitas 11y ago
  It's still nonsense. Macro does discuss involuntary unemployment and money. Also, the specific microeconomic phenomenon he discusses is exactly the microfoundation for a specific macro theory (Keynesian economics).
crdoconnor 11y ago
>The latter statement only contradicts Keynesian economics Uh, no, it contradicts neoclassical economics. Keynesian economics views unemployment as a deficit of aggregate demand and most CERTAINLY does not pretend that it doesn't exist. >But although in one sentence he seems to think the Greek experience contradicts Keynesian economics A quick skim suggests he doesn't contradict Keynesian economists. Probably he contradicts new keynesian economics somewhere, but then again, New Keynesian is an abortion that would have Keynes turning in his grave.
- yummyfajitas 11y ago
  According to Keynesians, if real wages fall, employment should rise (relative to a counterfactual of fixed real wages). According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing.
  - crdoconnor 11y ago
    >According to Keynesians, if real wages fall, employment should rise AGAIN, that's what neoclassical economists believe, NOT Keynesians. >According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. No, that's what Keynesian economics predicts which is the exact opposite of what Neoclassical economics predicts. >Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing. Neoclassical seems more favored these days despite its atrocious predictive capabilities. This is what Varoufakis was criticizing.
    - yummyfajitas 11y ago
      You don't seem to know what Keynesian economics is. Please google it. Other key phrases include "sticky wages". If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck.
      - notahacker 11y ago
        The problem is that a huge swathe of mainstream and formerly mainstream macroeconomic viewpoints are classed as "Keynesian", and the mainstream "New Keynesian" macroeconomic model you speak of which focuses on manipulating inflation to overcome resistance to real wage cuts and assumes a minimal role for fiscal policy is rather different from the traditional "Keynesian" (and "Post Keynesian") emphasis on increasing net government spend to stimulate consumption in a downturn. Pretty much any undergrad who's read their introduction to national accounts and Keynesian concept of aggregate demand and multipliers can devise a set of simultaneous equations which will yield both a real wage fall and an unemployment rise in a basic stylised macro model if you also slash G and raise T (especially if the assumption is - as with Greece - that the expected debt servicing will largely be repatriated to overseas bondholders)
yk 11y ago
Actually, Keynes called his book General Theory precisely because it included unemployment, in the context of Keynesian economics usually called the output gap. So "no involuntary unemployment and, indeed, no money" is a insult from a Keynesian against neo-classic models. Second, "real wages fell by 40% but employment dropped," this is precisely what a Keynesian expects. The core insight of Keynesian economics is, that the employees are also the consumers, so that falling prices lead to falling demand.
- yummyfajitas 11y ago
  No, Keynesian economics proposes that high real wages are what cause unemployment - if an employee's real output drops but his real wage stays flat, he might become unprofitable to employ. Since nominal wages are the real sticky quantity, Keynesians propose inflation as a sneaky way to reduce the employee's real wages.
  - yk 11y ago
    Usually Keynsian economics is understood as economic thought that is based on aggregate demand, this is for example the view Wikipedia takes. [1] From there it is straightforward to argue that higher wages lead to higher employment, a view that makes Keynsian economics popular on the left. The view, that too high wages cause unemployment, is a staple of supply side economics, the view that the economic process is driven by the supply side. Krugman argues a lot about sticky wages recently, but not because this is a central tenet of Keneysian economics. Krugmann argues about sticky wages because it is a good argument against the troika's handling of the Greek crisis, since the internal adjustment in the Euro area would either mean inflation in Germany or deflation in Greece. [1] https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
    - yummyfajitas 11y ago
      Did you read the article on wikipedia? Start from the heading "Concept". https://en.wikipedia.org/wiki/Keynesian_economics#Concept https://en.wikipedia.org/wiki/Keynesian_economics#Concept Supply side economics is not based on wage levels at all, but rather based on tax-based disincentives to employment and investment. https://en.wikipedia.org/wiki/Supply-side_economics https://en.wikipedia.org/wiki/Supply-side_economics

tP5n 11y ago

Why would a self-described 'erratic marxist' even be concerned about contradicting Keynesian economics?

bildung 11y ago

> Note the contradiction: "no involuntary unemployment and, indeed, no money" followed by "real wages fell by 40% but employment dropped". That contradiction quickly dissolves once you see that he first he talks about macroeconomics as taught in the university ("no involuntary unemployment and, indeed, no money") and then about microeconomics ("real wages fell by 40% but employment dropped").

yummyfajitas 11y ago
It's still nonsense. Macro does discuss involuntary unemployment and money. Also, the specific microeconomic phenomenon he discusses is exactly the microfoundation for a specific macro theory (Keynesian economics).

crdoconnor 11y ago

>The latter statement only contradicts Keynesian economics Uh, no, it contradicts neoclassical economics. Keynesian economics views unemployment as a deficit of aggregate demand and most CERTAINLY does not pretend that it doesn't exist. >But although in one sentence he seems to think the Greek experience contradicts Keynesian economics A quick skim suggests he doesn't contradict Keynesian economists. Probably he contradicts new keynesian economics somewhere, but then again, New Keynesian is an abortion that would have Keynes turning in his grave.

yummyfajitas 11y ago
According to Keynesians, if real wages fall, employment should rise (relative to a counterfactual of fixed real wages). According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing.
- crdoconnor 11y ago
  >According to Keynesians, if real wages fall, employment should rise AGAIN, that's what neoclassical economists believe, NOT Keynesians. >According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. No, that's what Keynesian economics predicts which is the exact opposite of what Neoclassical economics predicts. >Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing. Neoclassical seems more favored these days despite its atrocious predictive capabilities. This is what Varoufakis was criticizing.
  - yummyfajitas 11y ago
    You don't seem to know what Keynesian economics is. Please google it. Other key phrases include "sticky wages". If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck.
    - notahacker 11y ago
      The problem is that a huge swathe of mainstream and formerly mainstream macroeconomic viewpoints are classed as "Keynesian", and the mainstream "New Keynesian" macroeconomic model you speak of which focuses on manipulating inflation to overcome resistance to real wage cuts and assumes a minimal role for fiscal policy is rather different from the traditional "Keynesian" (and "Post Keynesian") emphasis on increasing net government spend to stimulate consumption in a downturn. Pretty much any undergrad who's read their introduction to national accounts and Keynesian concept of aggregate demand and multipliers can devise a set of simultaneous equations which will yield both a real wage fall and an unemployment rise in a basic stylised macro model if you also slash G and raise T (especially if the assumption is - as with Greece - that the expected debt servicing will largely be repatriated to overseas bondholders)

yk 11y ago

Actually, Keynes called his book General Theory precisely because it included unemployment, in the context of Keynesian economics usually called the output gap. So "no involuntary unemployment and, indeed, no money" is a insult from a Keynesian against neo-classic models. Second, "real wages fell by 40% but employment dropped," this is precisely what a Keynesian expects. The core insight of Keynesian economics is, that the employees are also the consumers, so that falling prices lead to falling demand.

yummyfajitas 11y ago
No, Keynesian economics proposes that high real wages are what cause unemployment - if an employee's real output drops but his real wage stays flat, he might become unprofitable to employ. Since nominal wages are the real sticky quantity, Keynesians propose inflation as a sneaky way to reduce the employee's real wages.
- yk 11y ago
  Usually Keynsian economics is understood as economic thought that is based on aggregate demand, this is for example the view Wikipedia takes. [1] From there it is straightforward to argue that higher wages lead to higher employment, a view that makes Keynsian economics popular on the left. The view, that too high wages cause unemployment, is a staple of supply side economics, the view that the economic process is driven by the supply side. Krugman argues a lot about sticky wages recently, but not because this is a central tenet of Keneysian economics. Krugmann argues about sticky wages because it is a good argument against the troika's handling of the Greek crisis, since the internal adjustment in the Euro area would either mean inflation in Germany or deflation in Greece. [1] https://en.wikipedia.org/wiki/Keynesian_economics https://en.wikipedia.org/wiki/Keynesian_economics
  - yummyfajitas 11y ago
    Did you read the article on wikipedia? Start from the heading "Concept". https://en.wikipedia.org/wiki/Keynesian_economics#Concept https://en.wikipedia.org/wiki/Keynesian_economics#Concept Supply side economics is not based on wage levels at all, but rather based on tax-based disincentives to employment and investment. https://en.wikipedia.org/wiki/Supply-side_economics https://en.wikipedia.org/wiki/Supply-side_economics