A vile and disgusting film

To actually know the Biblical account of The Exodus in the modern world of the once-Christian West requires someone to have actually had a religious upbringing of some sort. But we made it through Noah all right, and survived the endless battle scenes of The Hobbit with only a mild case of ennui, so why not go see Exodus as well. How bad could it really be. Turns out, really, really bad. And you get nothing of the true flavour of this film by merely knowing that the critics at Rotten Tomatoes gave it 29% and the audience 39%. Bad films are common, although this went beyond bad, about which no review I read warned me even in the slightest.

There is a Book from which the story is taken. And when the Ten Commandments was made in 1956, which I still remember vividly, along with where I was and who I was with, they began with Moses in the bullrushes, put there by his mother because Pharaoh had decreed the death of every Jewish baby. Instead, we start with Moses as a co-leader of the Egyptian army against the Hittites, leaving out this small detail. And why was that. Just so that after the tenth plague struck down the first-born children of the Egyptians, Pharaoh can deliver this line without recognition that this is the work of a just G-d, who has tried using every means possible, to persuade Pharaoh to let his people go:

Is this your god, killer of children?

Someone who was a killer of children, and a slave owner and oppressor, really isn’t in much of a moral position to say that line. There is more like it in the film. But when I see that Ridley Scott and his backers have spent tens of millions to produce such a vile political statement, not about Egypt in 1400 BCE, but about the Middle East today, I am filled for the first time with a genuine fear for the future.

McCracken, Malthus and Say’s Law

It was all the way back in October that I received an email from Thomas Colignatus, a blogger in The Netherlands. He had read my article on the origins of the General Theory and had written a post on it titled, Thomas Robert Malthus visiting Maastricht. This is how he begins his post in relation to what I had written:

Malthus set John Maynard Keynes on the path of the theory of effective demand. Keynes in his Essays in Biography:

“If only Malthus, instead of Ricardo, had been the parent stem from which nineteenth-century economics proceeded, what a much wiser and richer place the world would be to-day!” (Keynes 1961 [1933], p. 120)

Relevant is also this archive of the History of Economics Review, and in particular Steven Kates on JMK and TRM and then also on JMK and McCracken, or see the longer discussion by Kates in HER 48, 2008.

“Thus, at the very time that he has commenced writing the book that will become the General Theory, the single most influential book on the business cycle written during the past century, Keynes states in no uncertain terms that the most fruitful approach to dealing with the economic issues raised by the cycle ought to be set within an analytical framework that descends from Malthus.” (Kates HER 48, 2008)

Note that David Ricardo isn’t kicked out of the window. His method of mathematical modeling is retained, of course. His arguments are duly weighted too. The only thing is that Malthus’s argument on the lack of demand finds proper recognition. What was counter-intuitive to Ricardo is rephrased so that it becomes the proper intuition that we enjoy today. Merely putting money in the bank doesn’t help: it are the real investments that determine income.

“The Keynesian Revolution, which swept the economics world in a matter of less than a decade, had its origins in Keynes’s reading of Malthus’s letters to Ricardo in late 1932. It was from these letters that Keynes discovered the issue of demand deficiency. Reading Malthus’s letters in the midst of the Great Depression infused within him the be­lief that demand deficiency was the cause of recession and mass unem­ployment. The essay on Malthus, found in Keynes’s Essays in Biography and published in February 1933, makes plain the extent to which he had absorbed Malthus’s economic views while reading Malthus’s writings. Malthus had been the leading advocate of demand deficiency in the nineteenth century. It was this message that Keynes’s carried into the twentieth.” (Kates 2010, History of Economic Ideas, xviii/2010/3)

I can only say that it has been a long semester, and while I ought to write to people immediately, there was a lot to write about. Even with this reply which I attach below, there is much more I could have written and should have written. But this gets to the issues at hand, or at least some of them.

Dear Thomas

I apologise for this long time in writing. And the delay was not because I was in any way hostile to what you had written. I actually found myself very pleased to see how accurately pretty well all of what you wrote was. If I were to say anything at all about the text, it is that while I do not think of Keynes as a plagiarist in the normal sense, I am certain he knew the sources of what he wrote but preferred to be thought original than have to share the glory with anyone else. There is no doubt in my mind that Keynes found knocking over Say’s Law the perfect vehicle for him to get governments to spend money in the midst of recession. He came upon Malthus in later 1932 because he was updating his Essay on Malthus, he borrowed Malthus’s letters to Ricardo from his closest friend, Piero Sraffa, and discovered the entire literature on demand deficiency. He is then swept along by his discovery and by one of the stranger flukes of history, is sent a copy of McCracken’s book that does two things. It completes every thought he had had about demand deficiency and Say’s Law, even giving him the phrase “supply creates its own demand”. And it disturbs him to find that someone else had seen exactly the same thing, either simultaneously, or more likely, even before he had, given how long it takes to get a book into publication. My memory on this is a bit suss by now, but I somehow recall that this was a book that was sent out to a few people McCracken thought would be interested, which is why Keynes takes the trouble to write to McCracken personally. It doesn’t matter much, but if it is not a personally sent copy, there is no reason for Keynes to have written to McCracken at all.

As for the phrase itself, I am not even sure that Keynes recognised that he had taken it from McCracken. In my view, he would never have used the phrase in the way he did if it had McCracken’s DNA all over it. Either he read it and noted the phrase since it so perfectly fit into the point he was trying to make and then forgot the source, or he merely thought that McCracken had himself taken it from the classical literature. But it is the one absolutely certain dye marker that connects Keynes to McCracken. I had always been convinced that McCracken had been a major influence on Keynes. He appears as an “undocumented” influence, in my Say’s Law and the Keynesian Revolution (Elgar 1998). It was only when Richard Kent picked this up years later – my thesis was written before internet searches were possible – that I was finally able to nail the connection. It is now absolutely undeniable, except that everyone in the Keynes industry continues to deny it.

And I do have to disagree with you where you write that “McCracken’s book did not contain other elements that Keynes was concerned about”. I read every pre-Keynesian book on the cycle as part of the research, which is why I read McCracken. But the moment I picked McCracken up, I knew that I was reading a preliminary version of The General Theory. It is wall-to-wall Keynesian pre-history. And the other interesting part about the General Theory is that all of the parts on Mill and Say’s Law and supply creates its own demand are not found in the three sets of galley proofs. This was inserted at the absolute last moment, either because he didn’t want anyone else to know what he was doing, or he felt he needed to strengthen the attack on established theory, or because it only occurred to him at the last minute. But he must have put this in almost at the very last minute either during Christmas 1935 or just after the New Year in 1936. I don’t think it was a last minute decision, myself, since it is so neatly done. But it was an issue he kept from every single person he had been dealing with, other than Sraffa, who knew exactly what Keynes was up to. And if you cross over to Cambridge, you can see Sraffa’s “Notes on the General Theory” which are sitting in the archive but have never been published. I have tried to publish them myself, but they will never be allowed out, you may be sure of that, or at least not for some time yet.

Anyway, I was very grateful that HEI published my article, so it remains in the literature, studiously ignored by everyone. To me, the combination of Fred Taylor’s general publication of the phrase “Say’s Law” in 1921, and McCracken’s first use of the phrase “supply creates its own demand” in 1933, is a devastating revelation, that if it became the issue it ought to be, would absolutely require a wholesale revision of the mythological version of the trek from the Treatise to the General Theory. I hear these nonsensical stories about the major role of the Cambridge Circus and the rest of it, but it is all horsefeathers to me. But you either have to take the evidence as it is, and recognise that Keynes out and out misled everyone about how he came to write the book, or you have to shrug your shoulders and say that he wrote his book, without telling everyone what he was actually doing at the time.

However, if you actually understand that he was reading McCracken and probably Taylor, there is a very different story to tell about the genealogy, and about the actual effect of the General Theory on the nature of economics, since he was absolutely wrong about the economics of his classical forebears. This is an instance, in my view, where understanding the history makes a very large difference to understanding the present.

UPDATE: Mantaray asks:

“Supply creates its own demand”. OK, so we all know this is a strawman. Is there a correct one-line definition?

I know this is already a long post, but who else is around at the moment, so I have taken this opportunity to slip all this in. Here is the best one-line definition in the whole of the economics literature. It is from a private letter written by David Ricardo to Malthus on 9 October 1820 (source: Ricardo 1951-73: VIII. 277), just after Malthus had touched off the General Glut debate with the publication of his Principles of Political Economy earlier that year.

“Men err in their productions; there is no deficiency of demand”.

There are three parts I like about it, all devastating for Keynesians. First, although Keynes specifically states that Ricardo and those who followed did not recognise the very fact of recessions, it is absolutely clear that Ricardo and Malthus are discussing the nature of economic recession and their cause. Second, Ricardo provides in short form, a summary of the classical theory of recession. The economy becomes misdirected for some reason. Recessions are structural, due to errors on the production side. Third, we have the true meaning of Say’s Law, stated as clearly as one could wish: whatever may be the cause of the downturn, “there is no deficiency of demand”. Every economist from Ricardo’s time till the publication of The General Theory in 1936 believed exactly that. Today, it’s down to me and about a couple of dozen others. Modern macroeconomic theory is a well recognised classical economic fallacy.

China’s Christian future

The world does move in mysterious ways. Think of this: Christians Now Outnumber
Communists In China

Though the Chinese Communist Party is the largest explicitly atheist organization in the world, with 85 million official members, it is now overshadowed by an estimated 100 million Christians in China. It is no wonder Beijing is nervous and authorities are cracking down on Christian groups.

Christianity is growing so fast in China that some predict that it will be the most Christian nation in the world in only another 15 years. By far, the greatest growth is coming outside the official state-sanctioned churches, which are rightly considered subservient to the Communist Party. Numbers are increasing, rather, in unofficial Protestant “house churches” and in the underground Catholic church.

Tell me about the world in a hundred years, with this factored into the story:

Unrecognized Christian groups have been subject to crackdowns for years, but observers say the atmosphere is getting worse as their numbers increase and the governing Communist Party takes a more nationalist tone under President Xi Jinping.

Particularly hard hit has been a Beijing Christian group called Shouwang. “Things have got worse this year because the police started to detain us. I was detained for a week,” said Zhao Sheng, 54, musical organizer for the group’s Christmas service.

“But Christmas is still a happy time. No matter what happens, God is with us,” he added with a smile.

Not everything has to be for the worse.

UPDATE ON JANUARY 15: Another report: Christianity Is Exploding In China And The Communist Party Isn’t Happy.

While Christianity is waning in many parts of the world, in China it is growing rapidly – despite state strictures. The rise in evangelical Protestantism in particular, driven both by people’s spiritual yearnings and individual human needs in a collective society, is taking place in nearly every part of the nation.

Western visitors used to seeing empty sanctuaries in the United States or Europe can be dumbfounded by the Sunday gatherings held in convention center-size buildings where people line up for blocks to get in – one service after another. In Wenzhou, not far from Hangzhou, an estimated 1.2 million Protestants now exist in a city of 9 million people alone. (It is called “China’s Jerusalem.”) By one estimate, China will become the world’s largest Christian nation, at its current rate of growth, by 2030.

Indeed, an acute problem facing urban churches in China is a lack of space. Chongyi Church is building a million-dollar underground parking lot to replace one that worshipers under age 30 have taken over as a meeting place.

“I come because I found a love here that isn’t dependent on a person,” says Du Wang, a young businesswoman in Hangzhou. “It is like a river that doesn’t go away.”

There is hope yet for the world.

Winston Churchill on our Judaic inheritance

A fascinating article by Steve Hayward of Powerline on Winston Churchill and Islam, in the midst of which he brings up this quote:

We owe to the Jews in the Christian revelation a system of ethics which, even if it were entirely separated from the supernatural, would be incomparably the most precious possession of mankind, worth in fact the fruits of all other wisdom and learning put together. On that system and by that faith there has been built out of the wreck of the Roman Empire the whole of our existing civilization.

With his views today, he could not survive in public life. Read the article.

And who created the God particle?

There is an article that originated at at the WSJ, but has been reproduced in The Australian: Is science showing there really is a God?, according to which “the rumours of God’s death were premature. More amazing is that the relatively recent case for his existence comes from a surprising place—science itself.” Said the same thing the other day myself. The article adds:

Today there are more than 200 known parameters necessary for a planet to support life—every single one of which must be perfectly met, or the whole thing falls apart. Without a massive planet like Jupiter nearby, whose gravity will draw away asteroids, a thousand times as many would hit Earth’s surface. The odds against life in the universe are simply astonishing.

Yet here we are, not only existing, but talking about existing. What can account for it? Can every one of those many parameters have been perfect by accident? At what point is it fair to admit that science suggests that we cannot be the result of random forces? Doesn’t assuming that an intelligence created these perfect conditions require far less faith than believing that a life-sustaining Earth just happened to beat the inconceivable odds to come into being?

There’s more. The fine-tuning necessary for life to exist on a planet is nothing compared with the fine-tuning required for the universe to exist at all. For example, astrophysicists now know that the values of the four fundamental forces—gravity, the electromagnetic force, and the “strong” and “weak” nuclear forces—were determined less than one millionth of a second after the big bang. Alter any one value and the universe could not exist. For instance, if the ratio between the nuclear strong force and the electromagnetic force had been off by the tiniest fraction of the tiniest fraction—by even one part in 100,000,000,000,000,000—then no stars could have ever formed at all. Feel free to gulp.

The God particle, so called, may actually exist, that allowed energy to be immediately turned into mass at the moment the universe was created. But that still doesn’t answer the question, who created the God particle?

Excessive savings[!] and Keynesian economics

There was a comment on my previous post, Krugman’s Keynesian cluelessness reaches new heights, that got me to thinking. Here is the comment, for which I am very grateful:

I was looking up the “broken window fallacy” in comments at the link that Steve Kates provided about Skousen’s Gross Output… the words that were a howler to me was the concept of “excessive savings.”

Excessive savings!

Insane, right? Who could believe such idiocy that our central economic problem is too much saving? Completely ridiculous and beyond bizarre. Utter nonsense! How stupid would you have to be to believe such stuff!

And yet, I’m afraid, that this is indeed the very central point of Keynesian economics. There is demand deficiency because there is too much saving. There is no one who has studied economic theory that has not heard this, and absorbed it from their first days of study. You may think this is an obvious blunder, but it is a blunder shared by 95% of the economists in the world. Don’t believe it? Let me take you back to the General Theory itself, from whence it all began. In the following passage I have substituted the words “return on investment”, in place of Keynes’s own terminology, “marginal efficiency of capital”, since Keynesian terminology is part of the problem that people have in seeing through what a threadbare patchwork of stupidity the General Theory actually is.

I do hate to be technical. But with Rich raising the point, I can do no other than try to show that what he finds absurd beyond reason is in fact the single most central idea of Keynesian theory and policy, taught in every text to every student of economics. The following is from page 217-19. Keynes is pointing out that the central problem for economies is that there can be too much capital relative to its willingness to spend. If there is too much capital, an economy will produce more than it is willing to buy. If interest rates cannot be brought low enough, there won’t be enough investment to soak up all of these excess savings. Capital has to be kept scarce; it is not naturally so since the problem he is discussing is an excess of saving. So Keynes writes:

We have seen that capital has to be kept scarce enough in the long-period to have a return on investment which is at least equal to the rate of interest for a period equal to the life of the capital.

What then happens, if the community nevertheless keeps producing more capital, is that it will eventually find that spending is insufficient to absorb all of the savings. A poor community can maintain growth and full employment longer than a rich community, but eventually, as Keynes writes, the propensity to save will overwhelm the propensity to spend, and even the richest of communities will fall into recessions that have been caused by too much saving.

It follows that of two equal communities, having the same technique but different stocks of capital, the community with the smaller stocks of capital may be able for the time being to enjoy a higher standard of life than the community with the larger stock; though when the poorer community has caught up the rich ⎯ as, presumably, it eventually will ⎯ then both alike will suffer the fate of Midas. [GT: 219]

“The fate of Midas”: the more productive your economy becomes, the more it will be driven into recession and high unemployment. And if you should think that this is some far off prospect, given that we are dealing with the 1930s, that is not the case at all. Here is Keynes again, in the passage that actually precedes the passage above, saying that the high unemployment of the Great Depression has been literally because there has been such a large prior increase in capital accumulation, that the two richest economies in the world have fallen into depression.

The post-war experiences of Great Britain and the United States are, indeed, actual examples of how an accumulation of wealth . . . can interfere, in conditions mainly of laissez-faire, with a reasonable level of employment and with the standard of life which the technical conditions of production are capable of furnishing. [GT: 219 – my bolding]

Keynesian economics is stupid. Its assumptions have never been validated by any actual experience of the world, but its logic is even worse. It is the dumbest economic theory every peddled to the world. But as noted in the comment that began this post, you put excessive saving in the company of ‘the list of weasel words, including: “inequality”, “fairness” and “social justice” to justify wealth redistribution and big government taking a cut’ and you can see its allure to governments and public servants, who in spite of having no idea how to get a positive return on the money spent, nevertheless get to spend more money than the largest corporations in the land.

Krugman’s Keynesian cluelessness reaches new heights

This is economic cluelessness reaching some kind of peak:

The point is that relatively good private sector performance has been masked by public-sector cutbacks; this is the opposite of what you usually hear, but that’s no surprise.

This is, of course, the point of cutting back on the public sector during bad times, as Obama was forced to do. Krugman is describing the current upturn that has followed the sequester. Making virtue of necessity is the way of the world. But the incapacity of seeing what a dismal detour all of the stimulus spending actually was is the province of Keynesians. Of course, the fall in public sector spending shows up as a fall in GDP. But that’s a fault of the statistic, not of the policy.

Importantly, the reality described is of a rising private sector that is finally being allowed to recover by cutting back on public spending. For a true equation of economic growth, you should try Y=C+I-G, just for a change. It’s still pretty subdued by this is why “austerity” has become the universal policy, irrespective of what our economic textbooks say.