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Keynes, Krugman, and the Crisis


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06/16/2011Robert P. Murphy
Mises Academy: Robert Murphy teaches Keynes, Krugman, and the Crisis

I am pleased to announce that in late June the Mises Academy will launch my new online class, Keynes, Krugman, and the Crisis. In the interests of both intellectual honesty and rhetorical effectiveness, it is important for Austrians to "know the enemy."

The class is designed to give students of the Austrian School a fair understanding of the worldview of John Maynard Keynes and his best-known living proponent, Paul Krugman, in the specific context of economic booms and busts. After reading source material from Keynes and Krugman, we will discuss Austrian critiques of their approach.

The Scope of the Course

The course runs for eight weeks, from June 29 through August 23. All of the assigned reading and videos are available for free online.

In the first week, we will summarize the views of the pre-Keynesian economists. We will read J.B. Say's original discussion of demand and markets, to see whether the modern Keynesian caricature of "Say's law" is accurate. We will also read Lionel Robbins's chapter of policy prescriptions from his 1934 book on the Great Depression, to see whether the "orthodox" economists really just advocated sitting on their hands, waiting for the market to cure itself of the inexplicable slump. (In case my tone doesn't make it clear, I'll end the suspense: the Keynesian depiction of these opponents is not accurate.)

During the next two weeks, we will cover the views of Keynes himself, with excerpts from the General Theory. Here the student will see the famous passages in their original (and full) context — we'll talk about "animal spirits," Keynes's infamous call to socialize investment, and his casual remark that the conditions of totalitarian Germany were more suitable to the implementation of his recommendations.

However, the point of the course is not to demonize Keynes, but to accurately explore (and then critique) his worldview. In particular, the student will see why Keynes called it a general theory of employment — to contrast it with what he considered the special case of full employment, studied by the classical economists.

After our tour of the General Theory, we will spend a week summarizing Hayek's response to Keynes. We will read the famous exchange of letters that the two men (with their allies) sent to the Times (London) in 1932, outlining their respective (and vastly different) recommendations for getting out of the awful slump. We'll also discuss Hayek's remarks on Keynes offered in an interview (available on YouTube), and we'll read a chapter from Tiger by the Tail, in which Hayek sketches his main disagreements with Keynesianism.

In the fifth week, I will give a general history-of-thought lecture explaining the transition between John Maynard Keynes, the man, and the modern Keynesians led by Paul Krugman. In particular, I will outline the views of those who were originally called the neo-Keynesians (now called the Old Keynesians), and how critiques by people such as Milton Friedman and Robert Lucas forced the development of the modern New Keynesian position. I should stress that this lecture will not involve reading original source material, as it would be too technical for a general audience. Instead we will just outline the basic historical development, so that students today understand that "Keynesianism" is an evolving animal.

In the final three weeks of the course, we will read extensively from the blog and NYT column of Paul Krugman. First we will outline Krugman's views on Japan and read critiques from both the Austrian and quasi-monetarist perspectives. Then we will cover Krugman's (notorious) calls for the creation of a housing bubble, and his more recent denials that he ever did so. Finally we will outline Krugman's recommendations for our current slump, given that we are (ostensibly) in a liquidity trap.

Whatever else one may think of him, Krugman always offers a snappy argument for his views, backed up by an appeal to a formal model. My main goal in this section of the course is to equip students to "think like Krugman." For example, he has a ready response for critics who object, "So why don't we just run trillion-dollar deficits forever, if they're so good?" or who ask, "Why didn't your advice work in Zimbabwe?" Naturally, I don't agree with Krugman's worldview, but the point is that he has a fairly consistent, complex theoretical structure. Ultimately, it takes more than one-sentence zingers to give his views the thorough refutation that they deserve.

For a more detailed look at the syllabus, click the image on the right.

Structure of the Course

In a typical week of the course, I will give a live video broadcast on Wednesday from 7:00–8:30 p.m. EDT. I will spend the first 75 minutes lecturing on that week's material, and then I will field questions from students for the remaining time. In addition, on Saturday I will have "office hours" (the times varying from week to week to cater to different students), meaning that I will be available on a live video broadcast to answer questions from any students who tune in.

Note that the Saturday sessions are purely for the students' convenience, and are not mandatory. Also, all broadcasts will be recorded and available to enrolled students, so that people who have a scheduling conflict can still take the class if they wish.

If a student wishes, he or she can simply "audit" the class. This was a popular option for many adults who took my classes on the business cycle and the Federal Reserve, because they had a busy work schedule and would only watch my lectures but couldn't keep up with the reading.

However, students may also take the class for a grade. These students will take a multiple choice quiz each week, in addition to a final exam. Although the Mises Institute is not accredited, we will present certificates of completion and a formal grade at the end of the class to those students who desire it.

Mises Academy: Robert Murphy teaches Keynes, Krugman, and the Crisis

The Mises Academy

In a little over a year since its inception, the Mises Academy has had more than 1,000 enrollments in its growing collection of courses. (Some of these spots have been filled by the same students taking multiple courses.) If you haven't yet dipped your toe in the water, I strongly encourage you to give it a shot. If this particular course isn't your cup of tea, check out the current selection, covering a wide range of topics.


Whether you are a newcomer to Austrian economics or an old pro who would like to sharpen his intellectual weaponry before heading out into battle, my upcoming course on Keynes, Krugman, and the Crisis will be a great introduction to the differences between the Austrians and Keynesians. As the recent Papola and Roberts video makes clear, this clash is truly one for the ages.

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