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"Standard new Keynesian macroeconomics essentially abstracts away from most of what is important in macroeconomics." Yes, that has been the criticism for decad

"Standard new Keynesian macroeconomics essentially abstracts away from most of what is important in macroeconomics." Yes, that has been the criticism for decades. There is nothing new here. The only time Keynesian economics has "fixed" an economy was WW2 when we (the US, specifically) had full employment because of the draft and all of our competition had been literally flattened and/or killed. For another look at it, check out the Keynes vs Hayek rap battle: https://www.youtube.com/watch?v=GTQnarzmTOc https://www.youtube.com/watch?v=GTQnarzmTOc

astazangasta 11y ago
Don't watch that rap battle, hayek's insights are surely worse than Keynes. At least we can attribute one repaired economy to Keynes, we can attribute zero to Hayek. In addition, while Keynes may not help us resume prior output, he at least gives us some way to recover from recessions. Hayek's given us nothing, unless you're one of those people who thinks "The Road to Serfdom" is a good book.
- xlm1717 11y ago
  We could have been following any economic ideology and recovered strongly post-war, for the reason caseysoftware gave. We can attribute zero to Hayek because the Keynesians have been running the economy for decades.
  - Mikeb85 11y ago
    > We can attribute zero to Hayek because the Keynesians have been running the economy for decades. No we can attribute zero to Hayek because he had no notable macroeconomic insights. Most of his work was related to the business cycle, investment and choice (ie. microeconomics).
- sbuttgereit 11y ago
  First: watch the rap battle. Avoiding (or urging the avoiding) of contrarian ideas is how you perpetuate ignorance. If Keynes is worth is weight in stimulus, he'll be able to withstand the counter argument and win the day: if not, then there's even greater reason to see other perspectives. Sorry, but not buying your argument. If anything we can attribute a greater length of the Great Depression to the Keynesian inspired policies, not a repair (assuming that is the "fixed" economy attributed to Keynes). For some reference on this consider: http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-Depression-5409 http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-D... WW II ended the Depression insofar as its impact on employment, but it also destroyed (literally) massive amounts of accumulated capital. Global quality of life was greatly reduced: a failure by any rational standard. I suspect the necessary economic restructuring for war, and the later return to a peacetime economy, has much more to do with the repair of the economy that anything Keynes ever conjured. Later we have substantial numbers of completely unimpressive Keynesianesque experiments, including our own current "recovery". For Hayek (or similar) you are correct: there are really no instances of his policies repairing an economy... but could you tell me how many times approaches like his have been tried? There's some argument for the Depression of 1920, but on the whole reduction in Government intervention during an economic downturn is just not how bureaucrats roll. So I count no attempts. To suggest there are no Hayekian successes because Hayek fails is simply deeply flawed thinking; there are no successes simply because those approaches have never been tried. I think the closest you can see are in certain emerging economies where, at first, no one cares to regulate because there is nothing of worth there from a political power point of view (e.g. early Hong Kong, much of the early U.S. even). And yes, I do consider the "Road to Serfdom" a good book :-)
  - astazangasta 11y ago
    >but on the whole reduction in Government intervention during an economic downturn is just not how bureaucrats roll. We had this exact experiment after 2008. Austerity in Europe, stimulus in the US. The results are pretty clear.
    - clock_tower 11y ago
      Both lose?
      - astazangasta 11y ago
        http://earlywarn.blogspot.com/2013/03/us-vs-european-gdp.html http://earlywarn.blogspot.com/2013/03/us-vs-european-gdp.htm...
        clock_tower 11y ago
        I didn't know until I clicked it whether this was going to be a pro-Europe or a pro-America link. Austerity hasn't ended Europe's part of the Great Recession; but the US's "recovery" has only extended to a few privileged economic areas. In the South, the Midwest, and the interior of the coastal states, the Great Recession never ended.
        astazangasta 11y ago
        The South never recovered from the Civil War, seems to me.
        clock_tower 11y ago
        What about the Midwest? The Northern and West Coast interior? Are they somehow suffering from the Civil War as opposed to the never-ended-in-real-terms 2008 recession?
    - wycx 11y ago
- caseysoftware 11y ago
  Yes, it's called "hair of the dog" and covered in the first video.
the_why_of_y 11y ago
You are missing the point entirely. Summers is criticizing "New Keynesian" models from the 1980s that are based on mathematically sophisticated DSGE models, in contrast with original "Keynesian" models from the 1930s that were rather more ad-hoc, such as Hicks' IS/LM. https://en.wikipedia.org/wiki/New_Keynesian https://en.wikipedia.org/wiki/New_Keynesian

astazangasta 11y ago

Don't watch that rap battle, hayek's insights are surely worse than Keynes. At least we can attribute one repaired economy to Keynes, we can attribute zero to Hayek. In addition, while Keynes may not help us resume prior output, he at least gives us some way to recover from recessions. Hayek's given us nothing, unless you're one of those people who thinks "The Road to Serfdom" is a good book.

xlm1717 11y ago
We could have been following any economic ideology and recovered strongly post-war, for the reason caseysoftware gave. We can attribute zero to Hayek because the Keynesians have been running the economy for decades.
- Mikeb85 11y ago
  > We can attribute zero to Hayek because the Keynesians have been running the economy for decades. No we can attribute zero to Hayek because he had no notable macroeconomic insights. Most of his work was related to the business cycle, investment and choice (ie. microeconomics).
sbuttgereit 11y ago
First: watch the rap battle. Avoiding (or urging the avoiding) of contrarian ideas is how you perpetuate ignorance. If Keynes is worth is weight in stimulus, he'll be able to withstand the counter argument and win the day: if not, then there's even greater reason to see other perspectives. Sorry, but not buying your argument. If anything we can attribute a greater length of the Great Depression to the Keynesian inspired policies, not a repair (assuming that is the "fixed" economy attributed to Keynes). For some reference on this consider: http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-Depression-5409 http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-D... WW II ended the Depression insofar as its impact on employment, but it also destroyed (literally) massive amounts of accumulated capital. Global quality of life was greatly reduced: a failure by any rational standard. I suspect the necessary economic restructuring for war, and the later return to a peacetime economy, has much more to do with the repair of the economy that anything Keynes ever conjured. Later we have substantial numbers of completely unimpressive Keynesianesque experiments, including our own current "recovery". For Hayek (or similar) you are correct: there are really no instances of his policies repairing an economy... but could you tell me how many times approaches like his have been tried? There's some argument for the Depression of 1920, but on the whole reduction in Government intervention during an economic downturn is just not how bureaucrats roll. So I count no attempts. To suggest there are no Hayekian successes because Hayek fails is simply deeply flawed thinking; there are no successes simply because those approaches have never been tried. I think the closest you can see are in certain emerging economies where, at first, no one cares to regulate because there is nothing of worth there from a political power point of view (e.g. early Hong Kong, much of the early U.S. even). And yes, I do consider the "Road to Serfdom" a good book :-)
- astazangasta 11y ago
  >but on the whole reduction in Government intervention during an economic downturn is just not how bureaucrats roll. We had this exact experiment after 2008. Austerity in Europe, stimulus in the US. The results are pretty clear.
  - clock_tower 11y ago
    Both lose?
    - astazangasta 11y ago
      http://earlywarn.blogspot.com/2013/03/us-vs-european-gdp.html http://earlywarn.blogspot.com/2013/03/us-vs-european-gdp.htm...
      - clock_tower 11y ago
        I didn't know until I clicked it whether this was going to be a pro-Europe or a pro-America link. Austerity hasn't ended Europe's part of the Great Recession; but the US's "recovery" has only extended to a few privileged economic areas. In the South, the Midwest, and the interior of the coastal states, the Great Recession never ended.
        astazangasta 11y ago
        The South never recovered from the Civil War, seems to me.
        clock_tower 11y ago
        What about the Midwest? The Northern and West Coast interior? Are they somehow suffering from the Civil War as opposed to the never-ended-in-real-terms 2008 recession?
  - wycx 11y ago
caseysoftware 11y ago
Yes, it's called "hair of the dog" and covered in the first video.

the_why_of_y 11y ago

You are missing the point entirely. Summers is criticizing "New Keynesian" models from the 1980s that are based on mathematically sophisticated DSGE models, in contrast with original "Keynesian" models from the 1930s that were rather more ad-hoc, such as Hicks' IS/LM. https://en.wikipedia.org/wiki/New_Keynesian https://en.wikipedia.org/wiki/New_Keynesian