G.Visakh Varma • 6 days ago
Only mainstream economists mostly American economists who exhibits mathematical gymnastics are chosen by the Nobel committee. It is customary that out of 3 Nobel economists, one must be a Chicagoan. Great economists like Professor Joan Robinson and Professor Nicky Kaldor were not awarded the prize. Even versatile economists like Professor William Baumol or Professor Martin Weitzman were not selected. If Lord Keynes was alive the Nobel committee would not have awarded him Nobel prize

My reply:
I could not agree more with this comment. I was a student of economics at Cambridge in the late 1950s when Joan Robinson and Nicholas Kaldor were prominent around the department and Keynes very much foundational to everything I was expected to learn. Some 60 years later, I still find their economic thinking made more sense than much of the mindless econometrics that has become more and more fashionable and perhaps explains the power of 'financialization' that has been doing untold damage to society as well as the environment. Keynes would be appalled !!!!!!!!!!!!!!

• Bernanke, Ben S. 1983. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” American Economic Review 73 No 3 (June): 257-276.
• Kindleberger, Charles P. 1973. The World in Depression, 1929-1939. Berkeley CA: University of California Press.
• Kindleberger, Charles P. 1978. Manias, Panics and Crashes: A History of Financial Crises. New York: Basic Books.
• Kindleberger, Charles P. 1985. Keynesianism vs. Monetarism and Other Essays in Financial History. London: George Allen and Unwin.
• Kindleberger. Charles P. and Jean-Pierre Laffargue, eds. 1982. Financial crises: Theory, History, and Policy. Cambridge: Cambridge University Press.
• Mehrling, Perry. 2022. Money and Empire: Charles P. Kindleberger and the Dollar System. Cambridge: Cambridge University Press.

1. [1] Bernanke (1983, 258): “reconciliation of the obvious inefficiency of the depression with the postulate of rational private behavior”.
2. [2] Reder, Melvin W. “Chicago Economics: Permanence and Change.” Journal of Economic Literature 20 No. 1 (March 1982): 1-38. Bernanke (1983, 257) states explicitly, “the present paper builds on the Friedman-Schwartz work…”
3. [3] Bernanke (1983, 257): “The basic premise is that, because markets for financial claims are incomplete, intermediation between some classes of borrowers and lenders requires nontrivial market-making and information-gathering services.” And again at p. 263: “We shall clearly not be interested in economies of the sort described by Eugene Fama (1980), in which financial markets are complete and information/transactions costs can be neglected.”
4. [4] Bernanke (1983, 258): “Hyman Minsky (1977) and Charles Kindleberger (1978) have in several places argued for the inherent instability of the financial system, but in doing so have had to depart from the assumption of rational economic behavior.” It is perhaps relevant to observe that elsewhere Kindleberger takes pains to point out the limitations of the Minsky model for explaining the great depression: “it is limited to the United States; there are no capital movements, no exchange rates, no international commodity prices, nor even any impact of price changes on bank liquidity for domestic commodities; all assets are financial.” (Kindleberger 1985, 302) This passage appears in Kindleberger’s contribution to a 1981 conference sponsored by the Banca di Roma and MIT’s Sloan School of Management, which followed on a 1979 Bad Homburg conference that also included both men, which proceedings were published as Financial Crises: Theory, History and Policy (Cambridge 1982).
5. [5] Bernanke (1983, 262): “DIF = difference (in percentage points) between yields on Baa corporate bonds and long-term U.S. government bonds”.
6. [6] It is exactly the sharp drop in commodity prices that Kindleberger puts at the center of his explanation of why the depression was worldwide since commodity prices are world prices. Kindleberger (1973, 104): “The view taken here is that symmetry may obtain in the scholar’s study, but that it is hard to find in the real world. The reason is partly money illusion, which hides the fact of the gain in purchasing power from the consumer countries facing lower prices; and partly the dynamics of deflation, which produce an immediate response in the country of falling prices, and a slow one, often overtaken by spreading deflation, in the country with improved terms of trade, i.e. lower import prices.”
7. [7] Bernanke’s Table 1 cites August-December DIF figures as follows: 4.29, 4.82, 5.41, 5.30, 6.49.
8. [8] September 21 is of course the date when the Bank of England took sterling off gold, see Kindleberger (1973, 167-170).
9. [9] The published version, Bernanke (1983), still does not list Kindleberger (1973), citing only Kindleberger (1978), Manias, Panics, and Crashes. Notably, the full title of that book includes also the words “A History of Financial Crises.” Kindleberger himself quite explicitly frames Manias as an extension of the Depression book, now including all of the international financial crises he can find. Later commentary however follows Bernanke in viewing Kindleberger (1978) as instead an extension of Minsky’s essentially domestic Financial Instability Hypothesis, which is not correct. On this point see footnote 4, and more generally, Chapter 8 of my book Money and Empire (Cambridge 2022).

Shifting, multiple equilibria lead to six-stage business cycle in which the economy oscillates around optimal income growth and generates phases of boom and bust.