By Greg Fisher
The word “univocal” refers to words that have one and only one meaning. I’m not aware that the word has any alternative meanings (although it would be wonderfully ironic if it did). “Keynesianism” for sure is not a univocal term and, like all non-univocal words, there can be a great deal of confusion when the word is used in conversation, especially when we’re discussing whether Keynes was “correct”. Indeed, one of the biggest flaws of Western social sciences is, in my opinion, the failure to define what we mean.
For the sake of clarity, I would like to distinguish between three different meanings of the word “Keynesianism”. No doubt there are others. The first meaning I will refer to is “the Keynesian principle”; a second meaning is “Hicks’ Keynesianism”, which is a particular mathematical interpretation of Keynes’ work; and a third meaning is the use of the word Keynesianism as a synonym for socialism.
For me, as I wrote in an earlier blog (“Keynes & Kayek – A Synthesis?”), the most powerful thing Keynes emphasised was that an economy did not necessarily gravitate towards some full employment equilibrium. This is the Keynesian principle. Classical and neoclassical economics both contain the notion that economies do necessarily gravitate to full employment, which is inconsistent with a great deal of empirical evidence. Indeed, the Keynesian principle sits neatly with the Complexity sciences, which indicate that complex systems can remain in perpetual states of “disequilibrium” – a recession being a good example in human systems. Indeed, given this association, it’s a bit surprising that people who align themselves with Keynes’ work have not embraced this new thinking more actively, re-interpreting “the Master” within the conceptual framework of networks and complex systems.
That aside, soon after Keynes’ General Theory was published, John Hicks sought to interpret Keynes’ work in a mathematical framework. Most economics students will have come across the IS-LM curves, which were born of Hicks and Roy Harrod. Theirs were worthy attempts at constructing a robust framework to describe Keynes’ thinking, using the conceptual technology available at that time (the mid-1930s). This technology was, however, linear in nature and sought analytical solutions. New conceptual technologies, involving multiple, heterogeneous, cognitively-limited, interacting agents, offer better foundations.
The third meaning of Keynesianism is that it the same as socialism. This appears to have emerged from the American far right wing, who seem to view any form of government intervention (other than internal and external security) as socialism. For those who bother to read what Keynes actually wrote, it is obvious that he was pro-market. He simply felt that if free market economies did not gravitate toward full employment, there was a role for the state to try to move it in that direction. That is entirely reasonable although there are legitimate questions of efficacy. Keynes’ demand management was meant to support economies that were otherwise based on free markets.
So, when we refer to Keynesianism, especially when we’re considering its “value”, let’s be clear about what we mean. The Keynesian principle looks to be fair and consistent with empirical evidence; Hicks’ Keynesianism was a good attempt at representing what Keynes wrote – but we can now do much better; and “Keynes-was-a-socialist” is nonsense.