I don’t know if Nicholas Carr is right in thinking that the Internet is making us stupid, but it certainly takes greater concentration for me to read long-form – especially a long-form magnus opus written by a British economist in the language of 1936. That’s why I appreciate Elliot Turner’s effort to synthesize 12 insights from Keynes’ The General Theory of Employment, Interest and Money (h/t Byron Koay and Google Buzz for sending this article my way).
While I’m not a card-carrying Keynesian, this helped me understand what it means to be one. And after all, just because you think someone’s wrong about one thing doesn’t mean you can’t think they’re right about another.
Somewhat shamefully, however, the excerpts still required an inordinate level of concentration to read and understand. Therefore, I offer you, dear reader, the Twitter version of an article extracting 12 excerpts from a 403-page economic bible:
1. Capitalism is good, but the unemployment it’s causing sucks. Let’s fix the problem but keep the good stuff (efficiency and freedom).
2. Greed and private ownership can result in valuable human outcomes. We should manage human nature, not try to change it.
3. Changing views of the future affect employment levels.
4. Either low confidence or weak credit can cause a crash. But an improvement in both is needed for a recovery.
5. Stock market prices affect other kinds of investments as well (because money is fungible).
6. Doing good isn’t always most profitable. Long-term investors need more buffer, must use less debt, and are more criticized (short run).
7. It takes time to recover, because surplus/durable assets take time to be absorbed to the point where it makes sense to invest again.
8. Speculation – investing based on what the average opinion believes the average opinion to be – is dangerous when it becomes the norm
9. Most of our positive actions are based on spontaneous optimism, i.e. “animal spirits,” not calculated reasoning.
10. It’s easier to give money away (tax cuts in times of deficit) than invest it. With the former, you don’t have to justify the expenditure
11. Bubble = optimism overcoming more supply, rising costs and high rates. Eventual disillusionment causes a crash and all flee to liquidity
12. Low rates aid recovery but marginal efficiency of capital is less easy to manage. Return of confidence is necessary yet hard to control.
Bonus: The difficulty lies not in new ideas but the old ones that have crusted over in our minds’ corners.
It strikes me how bold (and probably arrogant) Keynes must have seemed at the time The General Theory was written. While I don’t think he was right in all things and actually believe macroeconomics is akin to chaos theory, I applaud the ambition of his endeavor. I belong to the “I don’t know” school (see post on Howard Marks) but that doesn’t mean that you throw your hands up and abdicate responsibility for wrestling with the big questions.