Monday, December 15, 2008
The writing is simple, elegant, sincere. It uses a few classic literary tools to great effect. The title is one simple, evocative word: Goodbye.
Sunday, December 14, 2008
- Chapter 1: The General Theory
- Chapter 2: The Postulates of the Classical Economics
- Chapter 3: The Principle of Effective Demand
I have called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the character of my arguments and conclusions with those of the classical1 theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic classes of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the special case assumed by the classical theory happen not to be those of the economic society in which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience.
Footnotes (in the original text)
1. “The classical economists” was a name invented by Marx to cover Ricardo and James Mill and their predecessors, that is to say for the founders of the theory which culminated in the Ricardian economics. I have become accustomed, perhaps perpetrating a solecism, to include in “the classical school” the followers of Ricardo, those, that is to say, who adopted and perfected the theory of the Ricardian economics, including (for example) J. S. Mill, Marshall, Edgeworth and Prof. Pigou.
We make the following two comments:
- The "general" in The General Theory serves to contrast Keynes' theory with what he calls the classical theory. According to Keynes, the classical theory is only applicable to a special case and not to the general case.
- Keynes argues that the characteristics of the special case assumed by the classical theory are not applicable to the prevailing economic situation (circa the 1935).
- Does Keynes accurately describe the alternative, or indeed alternatives, to his General Theory?
- Do the postulates of the alternative, be it the so-called classical theory or some other alternative, indeed apply only to a special case?
- Do the characteristics of the alternative differ from those of the prevailing economy (circa 1935, OR circa 2008 for that matter)?
A final comment. It's not clear to me what Keynes means when he says: "I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium." Specifically the second part of the sentence: "...the situation which it assumes being a limiting point of the possible positions of equilibrium." What is "it": The "classical theory"? The "special case"? Or the "general case"? And what is "a limiting point of the possible positions of equilibrium"? Presumably this will be clarified as we read on. We shall see. We shall certainly come back to this sentence.
Saturday, December 13, 2008
Judging by the revival of interest in Keynesian economics that has come in the wake of the recent (and ongoing) global economic crisis, Keynes' General Theory looks set to become one of the most controversial and influential books of the 21st Century as well.
In his preface, Keynes notes that although his book "is chiefly addressed to [his] fellow economists", he "hope[s] that it will be intelligible to others."
This, then, marks the beginning of a detailed commentary on Keynes' General Theory by an interested non-economist.
Why undertake such a task?
There are three reasons.
First, the growing influence of The General Theory on current global economic policy. It is vital that we, economists and non-economists alike, have a clear understanding of Keynes' ideas. And more importantly, their implications.
Second, to the best of my knowledge, there is no such commentary available online.
And third, because you're worth it.
OK, that third reason is just some debris from the world of global cosmetics advertising that floated into my mind after I typed "And third". But it sounds good and three's a good number, so it stays.
The book consists of six main sections, or books as Keynes calls them:
Book I : Introduction
- Chapter 1: The General Theory
- Chapter 2: The Postulates of the Classical Economics
- Chapter 3: The Principle of Effective Demand
- Chapter 4: The Choice of Units
- Chapter 5: Expectation as Determining Output and Employment
- Chapter 6: The Definition of Income, Saving and Investment
Appendix on User Cost
- Chapter 7: The Meaning of Saving and Investment Further Considered
- Chapter 8: The Propensity to Consume: I. The Objective Factors
- Chapter 9: The Propensity to Consume: II. The Subjective Factors
- Chapter 10: The Marginal Propensity to Consume and the Multiplier
- Chapter 11: The Marginal Efficiency of Capital
- Chapter 12: The State of Long-term Expectation
- Chapter 13: The General Theory of the Rate of Interest
- Chapter 14: The Classical Theory of the Rate of Interest
Appendix on the Rate of Interest in Marshall’s Principles of Economics, Ricardo’s Principles of Political Economy and elsewhere
- Chapter 15: The Psychological and Business Incentives to Liquidity
- Chapter 16: Sundry Observations on the Nature of Capital
- Chapter 17: The Essential Properties of Interest and Money
- Chapter 18: The General Theory of Employment Re-stated
- Chapter 19: Changes in Money-Wages
Appendix on Prof. Pigou's Theory of Unemployment
- Chapter 20: The Employment Function
- Chapter 21: The Theory of Prices
- Chapter 22: Notes on the Trade Cycle
- Chapter 23: Notes on Merchantilism, the Usury Laws, Stamped Money and Theories of Under-consumption
- Chapter 24: Concluding Notes on the Social Philosophy towards which the General Theory might lead
So much for introductory remarks.
Let's proceed to the Preface which begins as follows:
This book is chiefly addressed to my fellow economists. I hope that it will be intelligible to others. But its main purpose is to deal with difficult questions of theory, and only in the second place with the applications of this theory to practice. For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premisses. Thus I cannot achieve my object of persuading economists to re-examine critically certain of their basic assumptions except by a highly abstract argument and also by much controversy.
We must note the following points:
- Whilst The General Theory is addressed primarily to economists, Keynes hopes that it will be intelligible to non-economists.
- The primary purpose of The General Theory is to deal with difficult theoretical issues and only secondarily with applications of this theory to practice.
- Keynes argues that the fault of orthodox economics (circa 1935) arises from its erroneous premisses and two characteristics of these premisses or basic assumptions in particular: their lack of clarity and generality.
The composition of this book has been for the author a long struggle of escape, and so must the reading of it be for most readers if the author’s assault upon them is to be successful,— a struggle of escape from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.We note that, according to Keynes: "The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones". This suggests that, if anything, the non-economist may be better placed than the economist to judge The Classical Theory and its alternatives on their own merits, unencumbered by any professional prejudices.
Saturday, November 29, 2008
Question: What is the greatest weakness of an experienced person?
Question: What is the greatest weakness of an inexperienced person?
Question: What is the greatest strength of an inexperienced person?
Friday, October 17, 2008
No doubt many of the stories of this kind circulated about him are apocryphal, but the examples below come from reliable sources or from conversations at which the writer was present. The oldest of the famous remarks dates back to the Munich days, when Pauli was a brilliant but unknown research student, and at a crowded colloquium meeting Einstein,who was visiting, made a comment in the discussion. Young Pauli rose at the back of the hall and said: 'You know, what Mr Einstein said is not so stupid', a remark characteristic for his lack of respect for authority but not yet of the bite which came later with his greater assurance.
N. Kemmer reports a more characteristic remark. 'I do not mind, Mr X, if you think slowly, but I do object when you publish more quickly than you think.'
When L. Landau, after a long argument in Zurich, pleaded for an admission that not everything he had said was complete nonsense, Pauli replied,'Oh, no. Far from it. What you said was so confused that one could not tell whether it was nonsense or not.'
When a charming colleague whose papers had not impressed Pauli had given him directions how to find a certain place in a strange town and enquired the next day whether Pauli had found the place, he said, 'Oh, yes. You express yourself quite intelligibly when you don't talk about physics.'
Quite recently, a friend showed him the paper of a young physicist which he suspected was not of great value but on which he wanted Pauli's views. Pauli remarked sadly, 'It is not even wrong.'
People have tried to attribute these sharp remarks to Pauli's impatience with slipshod reasoning and wishful thinking. There is no doubt that he was using them as a tool to drive home valid and often constructive criticism, but equally often they were so remote from any specific point in the argument that it is doubtful whether this is the full story. He himself once said to the writer, 'Many people have sensitive corns and the only possible way of living with them is to step on these corns often enough until they get used to it', but that remark, too, probably oversimplifies the problem.
The remarkable thing is that, although the victims often felt hurt at the time, none of then ever bore a grudge for long. It is a tribute to his greatness as a physicist and as a man, and to his understanding of other people, that all who knew him, who all must at one time or another have been exposed to remarks of this sort, had as much affection for him as they had respect for his knowledge, his judgement and his integrity.
Wolfgang Ernst Pauli. 1900-1958
Author(s): R. E. Peierls
Source: Biographical Memoirs of Fellows of the Royal Society, Vol. 5, (Feb., 1960), pp. 175-192
Published by: The Royal Society
Stable URL: http://www.jstor.org/stable/769285
Let me explain by way of example.
Who said first said "The best way to predict the future is to create it"?
Well, depending on whose word you accept, it was Peter F. Drucker; or Alan Kay; or even Jason Kaufmann (whoever that is).
This mis-attribution of quotations is quite widespread on the Web. Perhaps the most famous instance of mis-attribution involves the following passage:
“Our deepest fear is not that we are inadequate. Our deepest fear is that we are
powerful beyond measure. It is our light, not our darkness that most frightens
us. We ask ourselves, Who am I to be brilliant, gorgeous, talented, fabulous?
Actually, who are you not to be? You are a child of God. Your playing small does
not serve the world. There is nothing enlightened about shrinking so that other
people won't feel insecure around you. We are all meant to shine, as children
do. We were born to make manifest the glory of God that is within us. It's not
just in some of us; it's in everyone. And as we let our own light shine, we
unconsciously give other people permission to do the same. As we are liberated
from our own fear, our presence automatically liberates others.”
Sound familiar? Yes, of course it does. That's an excerpt from Nelson Mandela's 1994 inaugural speech, isn't it? Actually, it isn't, according to no lesser an authority than the Nelson Mandela Foundation. It's from Marianne Williamson's book A Return to Love.
So, the basic idea of Great Excerptations is to provide Great Quotations with fully traceable details of their original sources.
Monday, April 07, 2008
And he'll answer and then ask a question of his own:
"And what about you dad? What did you learn at work today?"
That's a fascinating question, is it not? What did you learn at work today?
Thursday, April 03, 2008
Although Asimov was my favourite, I think there's a very good chance that it will be Clarke whose influence will last the longest.
Here are five strong reasons why:
- Writing. This includes both his fiction and his non-fiction. In my view, Clarke was at his best in the short form. Many of his short stories, novellas and essays are classics. In response to a challenge from Wired to write a story in just six words (a la Hemingway's "For sale: baby shoes, never worn."), Clarke submitted a ten word story which he refused to trim. Nonetheless, it was a classic: "God said, 'Cancel Program GENESIS.' The universe ceased to exist."
- Geostationary satellites. Clarke wrote the original paper outlining the principles of geostationary satellite communications in 1945. Without this seminal contribution from Clarke, global communications in all its forms (television, Internet, telephony, etc.) would not be what it is today. A geostationary orbit is also known as a Clarke orbit, in his honour.
- Clarke's Three Laws of Prediction.
I. When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
II. The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
III. Any sufficiently advanced technology is indistinguishable from magic.
- 2001: A Space Odyssey. Critics and fans frequently choose this 1968 film as among "the best" of all time, although this appraisal is by no means unanimous. What is beyond dispute is that 2001: A Space Odyssey is one of the most influential films in cinematic history. Clarke co-wrote the screenplay with Stanley Kubrick. It was based on Clarke's short story The Sentinel (1948). Clarke cited this collaboration in his CV under under "Occupation" as follows: Writing “2001: A SPACE ODYSSEY” with Stanley Kubrick, 1964-68. 1964-68! Not surprising perhaps, given the perfectionism for which Kubrick was famed.
- A profound sense of wonder and possibility. The term "sense of wonder" is often used to describe the purpose and effect of science fiction. And like the term "science fiction" itself, it has no universally agreed definition. Arthur C. Clarke had a very acute sense of wonder, and with it of possibility. It's both: wonder and possibility. How else could you describe a man whose many conceptual innovations include a space elevator?
Oh, yes. I've often quoted it: "He never grew up; but he never stopped growing."Fitting.
Friday, February 29, 2008
I was talking to a friend yesterday and deployed that storied and clichéd clincher, The First Law of Holing: When you're in a hole, stop digging. His response was as fresh as it was unanswerable: "And have you ever heard of the The First Law of Mining? When you're in a mine, keep digging." Touché; a mine is essentially a hole, after all. That one's right up there with the Unstoppable Force and the Immovable Object.
OK. Same guy. Later (or earlier, I forget) on in the conversation. My turn to be creative. I serendipitously (how's that for an unwieldy word?) rediscover the pun: a punch of salt. Rediscover because evidently lots of people got there before I did, including the scriptwriter of Donnie Brasco. Oh well.