Keynes All The Rage

I noticed some articles and posts on Keynes recently. The ones I noticed are somewhat different than those highlighted by the Sandwichman. I think Robert Skidelsky's new book, Keynes: The Return of the Master, is getting more buzz than Paul Davidson's new book, The Keynes Solution: The Path to Global Economic Prosperity. Paul Krugman's review of Skidelsky's book in the Observer contrasts the rejection of Say's law with an emphasis on fundamental uncertainty. Davied Warsh also alludes to the debates over what Keynes really meant. Here is a year old oped by Skidelsky, while here is a more recent article quoting him. Aaron Swartz has been reading The General Theory of Employment, Interest, and Money. He has both a chapter-by-chapter summary and a brief explanation.

I think Keynes book was primary about economic theory and only secondary about advocating policy based on that theory. One can perhaps explain why an economy might deviate from a full employment equilibrium. Workers are constrained to budget based on the income they receive, not on the income they would receive if they were fully employed. This idea could be basis of a dynamic story. But Keynes argued, building on Richard Kahn's multiplier, that it could also explain an equilibrium with involuntary unemployment.

I think that Keynes argued that such an unemployment equilibrium could hold in both the Marshallian short run and the long run. To make sense of Keynes' claim, one must construct a model in which money enters in some essential way. And I would expect money to be non-neutral in all runs. To me, this introduction of money into an economic model is connected with modeling fundamental uncertainty. In short, I see Keynes' rejection of Say's law and his emphasis (e.g., in Chapter 12) on uncertainty as complementary.

(Apropos of none of the above - some might be amused by this cartoon. H/T to Brian Leiter.)