Posts Tagged Quotes

Economists Dissing Economics

For whatever reason, I found myself compiling a list of 20 or so quotes, mostly from well known economists, criticising mainstream economics. What’s most interesting is that although the quotes come from a wide range of economists, with different political views and from different times, they seem to have a lot in common.

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.

― Joan Robinson

Economics is extremely useful as a form of employment for economists.

― John Kenneth Galbraith

The only function of economic forecasting is to make astrology look respectable.

― John Kenneth Galbraith

…the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.

― Thomas Piketty

Too large a proportion of recent “mathematical” economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols.

― John Maynard Keynes

We move from more or less plausible but really arbitrary assumptions, to elegantly demonstrated but irrelevant conclusions.

― Wassily Leontief

Existing economics is a theoretical system which floats in the air and which bears little relation to what happens in the real world.

― Ronald Coase

The economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth.

― Paul Krugman

Economics has become increasingly an arcane branch of mathematics rather than dealing with real economic problems.

― Milton Friedman

Modern economics is sick. Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences for understanding the economic world. Economists have converted the subject into a sort of social mathematics in which analytical rigour is everything and practical relevance is nothing.

― Mark Blaug

Economics has never been a science – and it is even less now than a few years ago.

― Paul Samuelson

For far too long economists have sought to define themselves in terms of their supposedly scientific methods. In fact, those methods rely on an immoderate use of mathematical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content.

― Thomas Piketty

In my youth it was said that what was too silly to be said may be sung. In modern economics it may be put into mathematics.

― Ronald Coase

If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, “what would I do if I were a horse?

― Ronald Coase

Any man who is only an economist is unlikely to be a good one.

― F. A. Hayek

The study of economics has been again and again led astray by the vain idea that economics must proceed according to the pattern of other sciences.

― Ludwig von Mises

The use of mathematics has brought rigor to economics. Unfortunately, it has also brought mortis.

― Robert Heilbroner

An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.

― Laurence J. Peter

When an economist says the evidence is “mixed,” he or she means that theory says one thing and data says the opposite.

― Richard Thaler

The First Law of Economists: For every economist, there exists an equal and opposite economist.

The Second Law of Economists: They’re both wrong.

― David Wildasin



Gems in The General Theory

I’ve recently been re-reading John Maynard Keynes’ The General Theory (TGT), along with some other tweeps, and thought I’d collect up quotes which struck me as particularly insightful. Obviously, there many such quotes in TGT, some of them quite well-known, so I’ve opted for ones you don’t see reproduced as much, and which those have not fully read TGT may not have seen before.

As an aside: I don’t know why TGT has such a reputation for being difficult to read. There are surely some difficult sections: chapter 6, the list of points on Say’s Law, the fact that Keynes insists on describing diagrams instead of just bloody drawing them. But the rest is merely a mixture of: well-known economic theories, expressed verbally; passages of (wonderful) intuitive observatory prose that even someone with no economics training could understand; basic concepts and ideas which Keynes introduces (like liquidity preference), some of which may require mulling over but none of which are particularly taxing. My hunch is that those who complain that they can’t understand it simply set out not to understand it in the first place, and are all the poorer for it.

Anyway, onto the quotes. After inquiring on Twitter, I’ve decided to retain the length of the quotes, but I’ve bolded what I see as the absolutely crucial parts.

1. In Chapter 4, in a passage about how to measure depreciation, Keynes speaks about the aggregation of capital and seems to touch on some of the points raised much later on in the Cambridge Capital Controversies:

The difficulty is even greater when, in order to calculate net output, we try to measure the net addition to capital equipment; for we have to find some basis for a quantitative comparison between the new items of equipment produced during the period and the old items which have perished by wastage. In order to arrive at the net National Dividend, Professor Pigou deducts such obsolescence, etc., “as may fairly be called ‘normal’; and the practical test of normality is that the depletion is sufficiently regular to be foreseen, if not in detail, at least in the large.” But, since this deduction is not a deduction in terms of money, he is involved in assuming that there can be a change in physical quantity, although there has been no physical change; i.e. he is covertly introducing changes in value. Moreover, he is unable to devise any satisfactory formula to evaluate new equipment against old when, owing to changes in technique, the two are not identical. I believe that the concept at which Professor Pigou is aiming is the right and appropriate concept for economic analysis. But, until a satisfactory system of units has been adopted, its precise definition is an impossible task. The problem of comparing one real output with another and of then calculating net output by setting off new items of equipment against the wastage of old items presents conundrums which permit, one can confidently say, of no solution.

Clearly, these arguments about capital had been floating around for some time before they came to a head in the 1950s/60s – in Chapter 11, Keynes notes that even Alfred Marshall was aware of them. Then, in Chapter 14, Keynes explicitly states the point that you cannot measure the ‘productivity’ of capital independent of its price:

Nor are those theories more successful which attempt to make the rate of interest depend on “the marginal efficiency of capital”. It is true that in equilibrium the rate of interest will be equal to the marginal efficiency of capital, since it will be profitable to increase (or decrease) the current scale of investment until the point of equality has been reached. But to make this into a theory of the rate of interest or to derive the rate of interest from it involves a circular argument, as Marshall discovered after he had got half-way into giving an account of the rate of interest along these lines. For the “marginal efficiency of capital” partly depends on the scale of current investment, and we must already know the rate of interest before we can calculate what this scale will be. The significant conclusion is that the output of new investment will be pushed to the point at which the marginal efficiency of capital becomes equal to the rate of interest; and what the schedule of the marginal efficiency of capital tells us, is, not what the rate of interest is, but the point to which the output of new investment will be pushed, given the rate of interest.

Clearly, this was part of Keynes’ reason for formulating a theory of the rate of interest independent of considerations about productivity, time-preference and so forth.

2. In Chapter 6, Keynes articulates the Kalecki profit equation – the idea that investment effectively ‘creates its own savings’ – years before Kalecki did (formally, at least):

The equivalence between the quantity of saving and the quantity of investment emerges from the bilateral character of the transactions between the producer on the one hand and, on the other hand, the consumer or the purchaser of capital equipment.Income is created by the value in excess of user cost which the producer obtains for the output he has sold; but the whole of this output must obviously have been sold either to a consumer or to another entrepreneur; and each entrepreneur’s current investment is equal to the excess of the equipment which he has purchased from other entrepreneurs over his own user cost. Hence, in the aggregate the excess of income over consumption, which we call saving, cannot differ from the addition to capital equipment which we call investment. And similarly with net saving and net investment. Saving, in fact, is a mere residual. The decisions to consume and the decisions to invest between them determine incomes. Assuming that the decisions to invest become effective, they must in doing so either curtail consumption or expand income. Thus the act of investment in itself cannot help causing the residual or margin, which we call saving, to increase by a corresponding amount.

3. In Chapter 7, Keynes offers an argument against the Hayekian Natural Rate of Interest. This is not a comprehensive critique, but it sums up my thoughts on ABCT quite adequately: the naturalistic fallacy, along with implicit appeals to neoclassical equilibrium concepts, lurk in the background and leave some crucial points vague or undefined:

Thus “forced saving” has no meaning until we have specified some standard rate of saving. If we select (as might be reasonable) the rate of saying which corresponds to an established state of full employment, the above definition would become: “Forced saving is the excess of actual saving over what would be saved if there were full employment in a position of long-period equilibrium”. This definition would make good sense, but a sense in which a forced excess of saving would be a very rare and a very unstable phenomenon, and a forced deficiency of saving the usual state of affairs.Professor Hayek’s interesting “Note on the Development of the Doctrine of Forced Saving” shows that this was in fact the original meaning of the term. “Forced saving” or “forced frugality” was, in the first instance, a conception of Bentham’s; and Bentham expressly stated that he had in mind the consequences of an increase in the quantity of money (relatively to the quantity of things vendible for money) in circumstances of “all hands being employed and employed in the most advantageous manner”. In such circumstances, Bentham points out, real income cannot be increased, and, consequently, additional investment, taking place as a result of the transition, involves forced frugality “at the expense of national comfort and national justice”. All the nineteenth-century writers who dealt with this matter had virtually the same idea in mind. But an attempt to extend this perfectly clear notion to conditions of less than full employment involves difficulties.

David Glasner has previously covered this in far more depth. See also Sraffa (1932).

4. In the excellent Chapter 19, in which Keynes refutes the idea that sticky wages are responsible for recessions, he concludes a section by sarcastically noting that if sticky wages were the cause of recessions, we should want “monetary management by the trade unions”:

If, indeed, labour were always in a position to take action (and were to do so), whenever there was less than full employment, to reduce its money demands by concerted action to whatever point was required to make money so abundant relatively to the wage-unit that the rate of interest would fall to a level compatible with full employment, we should, in effect, have monetary management by the Trade Unions, aimed at full employment, instead of by the banking system.

What say you, libertarians?

5. At the very beginning of Chapter 21, Keynes notes the tension between monetarist reasoning based on the Quantity Theory of Money and conventional microeconomic theory. The former assumes a smooth, mechanistic relationship between the stock of money and the price level, but the latter teaches us that prices depend on microeconomic ‘fundamentals’ such as preferences and technology:

So long as economists are concerned with what is called the Theory of Value, they have been accustomed to teach that prices are governed by the conditions of supply and demand; and, in particular, changes in marginal cost and the elasticity of short-period supply have played a prominent part. But when they pass in volume II, or more often in a separate treatise, to the Theory of Money and Prices, we hear no more of these homely but intelligible concepts and move into a world where prices are governed by the quantity of money, by its income-velocity, by the velocity of circulation relatively to the volume of transactions, by hoarding, by forced saving, by inflation and deflation et hoc genus omne; and little or no attempt is made to relate these vaguer phrases to our former notions of the elasticities of supply and demand.

Keynes then goes on to anticipate Joan Robinson‘s simple but (IMO) rather damning critique of the QToM and the velocity of money as a concept:

But the “income-velocity of money” is, in itself, merely a name which explains nothing. There is no reason to expect that it will be constant. For it depends, as the foregoing discussion has shown, on many complex and variable factors. The use of this term obscures, I think, the real character of the causation, and has led to nothing but confusion.

So, there we have it: in a relatively small set of quotes, Keynes has forcefully critiqued neoclassical theories of capital and the rate of interest, the Quantity Theory of Money, the Natural Rate of Interest, the idea that sticky wages are responsible for recessions, and the idea that savings create investment. Then there’s the rest of the book, where he sort of invents macroeconomics (I know, I know – but he does bring it together far more effectively than anyone else before, and adds a lot along the way). There’s a reason books like this catch on.


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My Favourite Quotes

I’m feeling a bit lazy today, so instead of contributing some original content I’m going to offer up some of my favourite quotes. They get progressively leftier, which wasn’t intended but is of course welcome. Enjoy!


It doesn’t make any difference how beautiful the hypothesis (conclusion) is, how smart the author is, or what the author’s name is, if it disagrees with data or observations, it is wrong.

Richard Feynman

…when two opposite points of view are expressed with equal intensity, the truth does not necessarily lie exactly halfway between them. It is possible for one side to be simply wrong.

– Richard Dawkins


I have found out what economics is; it is the science of confusing stocks with flows

– Michael Kalecki, quoted by Joan Robinson in Shedding Darkness

By applying V, velocity of circulation, that is turnover say per week or per year, to M, the stock of money used in transactions in a given market, we arrive at the flow of transactions in the market concerned.

So what? Neither M nor V is an independent causal factor determining or limiting the level of prices or of output but merely an element in the mechanism that relates one to another.

– Joan Robinson on the Quantity Theory of Money, ibid

Economists have a singular method of procedure. There are only two kinds of institutions for them, artificial and natural. The institutions of feudalism are artificial institutions, those of the bourgeoisie are natural institutions. In this, they resemble the theologians, who likewise establish two kinds of religion. Every religion which is not theirs is an invention of men, while their own is an emanation from God. When the economists say that present-day relations — the relations of bourgeois production — are natural, they imply that these are the relations in which wealth is created and productive forces developed in conformity with the laws of nature. These relations therefore are themselves natural laws independent of the influence of time. They are eternal laws which must always govern society. Thus, there has been history, but there is no longer any. There has been history, since there were the institutions of feudalism, and in these institutions of feudalism we find quite different relations of production from those of bourgeois society, which the economists try to pass off as natural and as such, eternal.

– Karl Marx, The Poverty of Philosophy

Milton Friedman’s misfortune is that his economic policies have been tried.

– John Kenneth Galbraith


People who dismiss the unemployed and dependent as ‘parasites’ fail to understand economics and parasitism. A successful parasite is one that is not recognized by its host, one that can make its host work for it without appearing as a burden. Such is the ruling class in a capitalist society.

– Jason Read

People are taking the piss out of you everyday. They butt into your life, take a cheap shot at you and then disappear. They leer at you from tall buildings and make you feel small. They make flippant comments from buses that imply you’re not sexy enough and that all the fun is happening somewhere else. They are on TV making your girlfriend feel inadequate. They have access to the most sophisticated technology the world has ever seen and they bully you with it. They are The Advertisers and they are laughing at you. You, however, are forbidden to touch them. Trademarks, intellectual property rights and copyright law mean advertisers can say what they like wherever they like with total impunity. FUCK THAT. Any advert in a public space that gives you no choice whether you see it or not is yours. It’s yours to take, re-arrange and re-use. You can do whatever you like with it. Asking for permission is like asking to keep a rock someone just threw at your head. You owe the companies nothing. Less than nothing, you especially don’t owe then any courtesy. They owe you. They have re-arranged the world to put themselves in front of you. They never asked for your permission, don’t even start asking for theirs.

– Graffiti artist Banksy on advertising

We should do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian Darwinian theory he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.

– Richard Buckminster Fuller

The mine owners did not find the gold, they did not mine the gold, they did not mill the gold, but by some weird alchemy all the gold belonged to them!

“Big Bill” Haywood, Union Leader


….you can’t prevent me from believing that these notions of human nature, of justice, of the realisation of the essence of human beings, are all notions and concepts which have been formed within our civilisation, within our type of knowledge and our form of philosophy, and that as a result form part of our class system; and one can’t, however regrettable it may be, put forward these notions to describe or justify a fight which should – and shall in principle – overthrow the very fundaments of our society.

– Michel Foucault in the Chomsky-Foucault debate

History does not tell us what a Soviet Union, allowed to develop in a “normal” way of its own choosing, would look like today. We do know, however, the nature of a Soviet Union attacked in its cradle, raised alone in an extremely hostile world, and, when it managed to survive to adulthood, overrun by the Nazi war machine with the blessings of the Western powers. The resulting insecurities and fears have inevitably led to deformities of character not unlike that found in an individual raised in a similar life-threatening manner.

– William Blum, author of Killing Hope

There were two ‘Reigns of Terror’, if we could but remember and consider it; the one wrought murder in hot passions, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon a thousand persons, the other upon a hundred million; but our shudders are all for the “horrors” of the minor Terror, the momentary Terror, so to speak; whereas, what is the horror of swift death by the axe compared with lifelong death from hunger, cold, insult, cruelty and heartbreak? A city cemetery could contain the coffins filled by that brief terror that we have all been so diligently taught to shiver at and mourn over; but all France could hardly contain the coffins filled by that older and real Terror – that unspeakable bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.

– Mark Twain on the French Revolution


In the way that scepticism is sometimes applied to issues of public concern, there is a tendency to belittle, to condescend, to ignore the fact that, deluded or not, supporters of superstition and pseudoscience are human beings with real feelings, who, like the sceptics, are trying to figure out how the world works and what our role in it might be. Their motives are in many cases consonant with science. If their culture has not given them all the tools they need to pursue this great quest, let us temper our criticism with kindness. None of us comes fully equipped.

– Carl Sagan, The Burden of Skepticism

PS I also started to look through Robert Solow and John Maynard Keynes quotes, but decided that one should really just read all of them.

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