I received approximately the coolest piece of mail ever today: the collection guide for the archive of Simon Kuznets’ papers at Harvard. It’s like a preview of coming/very old attractions. For example, Box 1 contains “Corresp. w/J.M. Keynes 1936; Corresp. w/Prof. Don Patinkin re-Keynes [Reprints]”. I do not know what this means or what the correspondence concerns (though I can make some educated guesses). At some point – summer of 2010? – I am going to go find out.
On an almost unrelated note, this article in the NYTimes about FDR’s economic policy rings a little false to me. Here’s a section:
Roosevelt’s New Deal is often portrayed as an embrace of Keynesian economics, which advocates increased government spending to combat economic downturns and generate jobs.
Yet despite New Deal programs and some aid to the states, total government spending — federal, state and local — as a share of the economy throughout the 1930s remained at just under 20 percent. (Today, total government spending is more than 35 percent, a larger buffer against weakness in the private sector.)
Here’s the thing: Keynes didn’t even publish the General Theory until 1936. What Keynes believed in 1930 was different from what he settled on by 1936 (for example, if I understand correctly, his emphasis on fiscal policy over monetary grows in that time period). So, the New Deal may be portrayed as an embrace of Keynesianism, but it wasn’t, at least not until around 1937. Alan Brinkley documents this story excellently in The End of Reform. In the 1933-1936 period, Roosevelt and his economic team were focused on managing separate crises with separate interventions. Jobs programs were conceptualized as just that – ways to help unemployed people make a living while doing something moderately socially useful. The Keynesian notion of aggregate demand, and its importance in the economy, enters into New Deal thinking relatively late, with the sudden downturn in 1937 following Roosevelt’s attempt to balance the budget. So, Roosevelt’s early actions (1933-1936) were not anything close to Keynesian, in intention anyway.
Add to that the fact that there wasn’t really a firm conception of “the economy”, specifically “the macroeconomy”, until the end of this period and the whole story makes even more so. Early New Deal policy was concerned with individual crises – declining agricultural prices, rising unemployment, the collapse of banks, and rising budget deficits (one of the acts FDR passed in 1933 was the “Economy Act” to reduce government spending. Economy didn’t yet mean what we now mean by it). These problems were tackled, albeit only partially, by a series of somewhat unrelated measures. The point of the WPA, TVA, etc. was not to stimulate aggregate demand but simply give people jobs who would otherwise be at loose ends and unable to make ends meet. Only as the concept of the macroeconomy becomes firmer, measured by official government statistics like the National Income figures produced by Simon Kuznets at the Department of Commerce in 1934, along with better national unemployment data, do Keynesian ways of acting on the economy become possible. A macro-level, above the individual market, becomes available as a site of intervention. Once unemployment is seen not just as a problem of people not being able to make a living, but rather as the source for a decline in aggregate demand which in turn affects private investment, etc. can “Keynesian” or even “macroeconomic” policies be implemented, rather than a host of microeconomic initiatives (interacting with single markets or problems at a time). So, yeah, the early New Deal wasn’t very good at being Keynesian.. but it wasn’t trying to be, nor could it have been.
Every time a historian writes about how pre-1930s economists were trying to understand “the economy”, or about whether or not some policy was “Keynesian” substantially before the General Theory, I get confused and annoyed*. So, to paraphrase Foucault, stop writing the history of the past in terms of the present, and start writing the history of the present!
* And yes, I know the article mentions Keynes visiting FDR to try and give him advice on what to do in 1934. But certainly the first 100 days stuff in 1933 can’t be judged against Keynesianism. No? Am I even coherent this late at night?