A.V.C.College of Mayiladuthurai creates history by having a discourse on Keynes and Friedman

Keynes’s General Theory- really a monumental master piece of 20^th century completed its 75 years of existence last year . This year(2012)  happens to be the centenary celebration of Milton Friedman. Thanks to the financial benevolence of Malcolm & Elizabeth Adisheshaiah Trust , under the guidance of Prof.N.Rama gopal of Annamalai University ,  Dr.Ramasamy of A.V.C.College, Mayavaram conducted  both the functions in his campus and I was one of the invited speakers .On both the occasions, I had the opportunity to read prof.Paul Krugman’s scholarly writeup viz Introduction to Keynes’s General Theory of Employment , Interest andMoney and ‘ Who was Milton Friedman?’

Ever since I returned from Gokhale Institute of Politics and Economics, Pune in 1982 after the completion of my Ph.D I have fallen in love with Paul Krugman’s writings. While writing a new introduction to Keynes’s General Theory in 2005 , the 70^th year of publication, he made the following remark that he read that classic as a student but hardly touched there after. Again in view of its continued relevance to interpret contemporary developments in the world economy, he again read the book to write a lengthy commentary, passing on the central message of Keynes –How did he do it? What he missed it and so on. This write up , combined with his classic piece on Miton Friedman do have an educative influence on lesser privileged people like us who have a passionate interest in economics but clearly lacking scholarhsip to understand the tricky  aspect of the subject .

Last year, Prof.Neelakantan, former Director of MIDS, who must have crossed 75 was there at A.V.C to scintillate all of us by giving the juice of Keynes’s General Theory. There were also many others to do justice to task assigned to them. That occasion also helped me to re read Keynes and get fresh insight as to how monetary policy was impotent and ineffective, and that fiscal policy should play a dominant role. It was an altogether different matter that the Keynesian medicine of deficit budget and public spending was half heartedly applied and hence the Depression prolonged for more than a decade and ironically the economic salvation came through Second World War.

This time the audience was large, the hall was very big, stage setting was very nice and yet in terms of  interpreting the substantial contribution of Miton Friedman , there was some slack and  nobody can be blamed for this .From my side, given the constraint of time , following Paul Krugman fully and feverishly and getting convinced that he was right , I made an attempt to expose the intellectual fallacy and dishonesty  on the part of Friedman in interpreting the Great Depression of 1930s through the monetary lens.By citing the statistics  that monetary base increased from  $6.05bn to $7.02bn and that the money supply declined from $26.6bn to $19.9bn , I  brought home the  truth that  Federal Reserve Bank of U.S did not adapt any deflationary policy and that, contraction of money suppply was the fall out of series of bank failures ins 1930-31 , leading to excessive liquidity prefernce by the general public and the bank as well .

Before I conclude this piece let me quote the attribute of Economists as quoted by Theodre White in ‘Breach of Faith’ “Economists are very much like reporters and necessary. The best of them can tell you exactly where you are. The exceptional ones can tell you how you got there.But none can predict how you go from where you are to where you want to get.”

Personally I feel that both Keynes and Krugman are exceptional professional economists who could write more analytically on issues and tell where we are and how we got here. We need the tribes of these economists to interpret the complex events taking place around us.

If God wills and my physical stamina permits , I will subject myself to the self imposed discipline of writing more on Keynes and Smith, Ricardo and Friedman, Sameulson and Joan Robinson and so on and by  reading and re reading Krugm,an’s scholarly writings .