Keynote Address to the 2003 HOPE Conference: My Keynesian Education

I have mixed feelings about Bob Byrd¹ saying he's looking forward to receiving my papers. He's probably only going to get them when I'm gone: I don't seem to be able to give up anything out of my file drawers. But when that does happen, my papers will be in the best library for the history of economic thought they can find anywhere, so they will have a happy home.

Well, I'm not here to tell people in this group about the history of monetary thought. I guess I'm here as a kind of witness from a vanished culture, the heyday of Keynesian economics. It's like historians rushing to interview the last former slaves before they died, or the last of the people who remembered growing up in a Polish shtetl. I am going to tell you what it was like growing up in a day when Keynesian economics was taught as a solid basis on which macroeconomics could proceed.

My credentials? Was I a Keynesian myself? Absolutely. And does my Chicago training disqualify me for that? No, not at all. David Laidler [who was present at the conference] will agree with me on this, and I will explain in some detail when I talk about my education. Our Keynesian credentials, if we wanted to claim them, were as good as could be obtained in any graduate school in the country in 1963.

I thought when I was trying to prepare some notes for this talk that people attending the conference might be arguing about Axel Leijonhufvud's thesis that IS-LM was a distortion of Keynes, but I didn't really hear any of this in the discussions this afternoon. So I'm going to think about IS-LM and Keynesian economics as being synonyms. I remember when Leijonhufvud's book² came out and I asked my colleague Gary Becker if he thought Hicks had got the General Theory right with his IS-LM diagram. Gary said, "Well, I don't know, but I hope he did, because if it wasn't for Hicks I never would have made any sense out of that damn book." That's kind of the way I feel, too, so I'm hoping Hicks got it right.

Today I'm going to reminisce about my macro courses at Chicago and a little bit about what I learned teaching macroeconomics at Carnegie Mellon, which is where the Keynesian phase of my career ended. And then I would like to talk about what I now think, not as a graduate student but as an adult, about Keynesian economics, both as a political force in the years during and after the Depression and as a scientific influence. But I do think those are two different questions. And then, since I love the reference to the "strange persistence" of IS-LM in the conference title, in the end I'm going to take a crack at that, too. Because it has persisted.

I started graduate school in the history department at Berkeley in the fall of 1959. As a Chicago undergraduate in history, I had been excited by writings like Marx and Engels's Communist Manifesto and the work of the Belgian historian Henri Pirenne. I was interested in ancient history in those days, and Pirenne had an economic interpretation of the end of the Roman Empire in Western Europe and the advent of the Dark Ages that was exciting for me. So I wanted to learn some economics, but hadn't got around to actually doing so.

In those days, Keynes's standing was kind of like Einstein's—everyone knew he was important—this was among undergraduates, but I suppose it was true everywhere; but no one understood what he meant. In high school, they told us that only six people in the world understood the theory of relativity. So I don't know—the General Theory maybe would have had sixteen or something. I remember Alvin Hansen had actually written a watered-down version—you had to...