This is not really a blog post; it's an experiment. I have no idea if it will work, but the downside costs seem trivial.
If you subscribe to Review of Keynesian Economics, or if your university has a subscription, you can read my article "Keynesian Parables of Thrift and Hoarding". (Anyone can read the abstract and get the gist.) If you want to comment on that article, here is your chance to do so.
[OK, that was the blog post. But it seems to me that one of the problems with academic articles is that the reader doesn't get a chance to comment on the article, and the author doesn't get the chance to read readers' comments and respond to them. So if you want that opportunity, here is your chance to comment, and my chance to reply to your comment. It's an experiment to see if there might be some complementarity between articles and blogs.
And thanks to Matias Vernengo and Louis-Philippe Rochon for the invitation to a non- (or sorta-) Keynesian to submit an article to ROKE. They wanted contributions from "the other side" too (see Simon Wren-Lewis's article too). So I tried to write a sort of "internal" critique of Keynesianism.]
Worthwhile Canadian Initiative 
Jason Smith,
I just looked up your thesis – very nice! I was a phenomenologist once too, but in the high energy world – mostly SUSY GUTs, but some cosmology (dark matter), and extra dimensions. Like you, I moved into industry – quant work. I spend my time mostly with rather exotic stochastic processes now, which I find much more fun.
I find economics fascinating, but the minds of the macro revolution are very, very bright. There are some very deep waters there and that is why I had to work out the details in Ljungqvist and Sargent and the like for myself. These ideas go way beyond the MC Escher drawings that Keynes paints.
BTW, when you were at Washington, did you ever take a course from David Kaplan? His notes on effective field theory are super sweet!
Avon, clearly you and Jason can carry on a conversation over [some of?… well, at least one of] our heads. If you digested his thesis, then this (his econ paper) should be a breeze (shoot, even I can understand it! Plus he’s as gracious as Nick at answering questions).
Nick –
Then you’re observing that if households and corporates decrease their ‘current’ spending (or consumption), this needn’t be deflationary provided that, instead, they are prepared to maintain their spending but divert it to EITHER newly-produced capital goods OR buy pre-existing real investment goods such as land.
My concern on newly-produced capital goods is that in practice I can’t imagine any CFO telling its board “I’m worried about the future – so let’s ramp up our capex”. I don’t see why the same doesn’t apply to real investibles. If the board is concerned about the future, won’t it fear land values falling?
We also need to consider who is selling the investible: presumably someone with lots of assets – a rich household or a fund, perhaps. If there is increased net selling of real investibles by this group to the group which has cut back on its current spending (corporates and / or ordinary households), we have to ask what the investible-sellers do with the proceeds. If they use it to boost their own current spending, then you’re absolutely right that spending will have been smoothed. But it seems much less likely that the investible-sellers should be increasing their spending by decreasing their endowments, than that they are selling because they fear investment values may fall and would prefer to hold cash.
It seems to me that for your insight here to hold true, you need bearishness amongst part of the economy to be accompanied by (a) an inclination for the bears to express this fear in a curious way (by buying assets, not accumulating cash), and / or (b) there to be an equal and opposite level of bullishness elsewhere in the economy (with asset-owners opting to dis-save). I can’t envisage such a scenario ever arising. It also seems decidedly different from the generalised bearishness which Keynes envisaged.
@Anders:
@Majromax –
Your graduate degree example is absolutely fair, inasmuch as you identify a cohort of people who would ramp up their dissaving in the face of generalised bearishness. This increased dissaving will indeed offset increased saving elsewhere. I can think of other examples: as the recession starts, restructuring advisors and distressed debt funds will invest in hiring new employees initially at a loss, in order to build up a platform and franchise for when the restructuring opportunity emerges.
If there were many analogues to this in sufficient other groups of people (including workers for whom further training wouldn’t be appropriate or available) and in other corporate sectors, then I think Nick’s point would hold. But these examples seem rather niche relative to the overall economy, no?
@Avon –
If you boil Keynes down to one contribution, it was surely to draw attention to the fallacy of composition. Doesn’t your conception of orientating macro firmly in the “consistent economic laws that we find in microeconomics” miss this point? Or do you repudiate the FoC?
Anders:
Then you’re observing that if households and corporates decrease their ‘current’ spending (or consumption), this needn’t be deflationary provided that, instead, they are prepared to maintain their spending but divert it to EITHER newly-produced capital goods OR buy pre-existing real investment goods such as land.
My concern on newly-produced capital goods…
My concern would be entirely with spending on pre-existing assets insofar it is GDP neutral (land may be a bit special in this sense, I haven’t quite decided yet). No macroeconomic value is added by shuffling savings.
Avon,
Our year, we self-organized our quantum field theory class and ended up with several professors giving lectures, including David Kaplan. He was also in the INT and our group’s brown bag seminars. If you are referring to this:
http://arxiv.org/abs/nucl-th/0510023
… I probably had seen some early versions in that class. But I graduated in 2005, so the nice typeset version came out a bit late for me.
My friends were on the short range gravity experiment that generated quite a bit of excitement when they were testing the possibility of large extra dimensions.
Anyway — I think models like ISLM may be “effective theories” in certain regimes (e.g. it does fail when inflation is high). I’m trying to make sense of econ (for myself, at least) from an effective theory viewpoint.
Feel free to head over to my blog and email me.
@Avon Barksdale
“Current theories are not perfect – but unlike the Keynesian theory of perpetual motion machines they explain a great deal and have a great deal of truth to them.””
Only in the context of the abstract models in which these “truths” are derived.
It’s a shame these “truths” flounder and drown ingloriously in the seas of reality.
“…..for the invitation to a non- (or sorta-) Keynesian….”
Nick,
It’s time to fess up – you’re a Keynesian.
Don’t worry, we won’t tell anyone.
Nick,
“The point of my article was to argue that an increase in thrift could not cause a recessionary fall in output….”
Putting hoarding aside, could you briefly explain your reasoning?