Typography

We are taught these days to view John Maynard Keynes and Friedrich Hayek as diametric opposites. This meme is encouraged by the Keynes vs Hayek rap videos , or Nicolas Wapshott's book Keynes and Hayek: the Clash that Defined Modern Economics . But when it came to the idea of moneyness, both Keynes and Hayek were in agreement. Wrote Hayek: although we usually assume there is a sharp line of distinction between what is money and what is not—and the law generally tries to makes such a distinction—so far as the causal effects of monetary events are concerned, there is no such clear difference. What we find is rather a continuum in which objects of various degrees of liquidity, or with values which can fluctuate independently of each other, shade into each other in the degree to which they function as money. I have always found it useful to explain to student that it has been rather a misfortune that we describe money by a noun, and that it would be more helpful for the explanation of m...

The Austrian vs Keynesian end of the blogosphere often battle over the existence of a natural rate of interest. The Keynesian side typically points to Piero Sraffa's argument that there are many natural rates of interest, or own-rates, and therefore an Austrian sort of monolithic natural rate of interest simply doesn't exist. Over the last few weeks I've participated in the comments here at Jonathan Finegold Catalan's blog and here at Daniel Kuehn's blog. Here is an older comment in this vein on "Lord Keynes" blog. Bob Murphy also has a paper ( pdf ) on this subject and has commented on the above blogs on this subject. Sraffa's point that there are different own-rates was not a new one. Irving Fisher pointed this out many years before, in Appreciation and Interest (1896): If we seek to eliminate the money element by expressing the rate of interest in terms of real " capital," we are immediately confronted with the fact that no two forms o...

I commented on the blog Social Democracy for the 21st Century: A Post Keynesian Perspective in a post called Hayek’s Natural Rate on Capital Goods, Sraffa and ABCT . Specifically, the issues in the above blog post are continued in one of my favorite David Glasner posts,   Sraffa v. Hayek . I requote Glasner: "the rate of return from holding all assets net of their storage costs and their current service flows must be equal in equilibrium. If not, you’re not in equilibrium. So all you have to do is find an asset with no storage cost and no current service flow and calculate its expected rate of appreciation and you have the real natural rate of interest."