Stupidest Man Alive Winner: John N. Gray

John N. Gray is supposed to be a reputable British academic, a professor at the London School of Economics, a respected political theorist.

John N. Gray writes, in Straw Dogs:

Financial markets are moved by contagion and hysteria. Mesmer and Charcot are better guides to the new economy than Hayek or Keynes...

I very much doubt that John N. Gray has ever read a word written by John Maynard Keynes.

Stupidest man alive...

Let's give the mike to John Maynard Keynesa, The General Theory of Employment, Interest and Money, chapter 12, "The State of Long-Term Expectation":

The General Theory of Employment, Interest and Money by John Maynard Keynes. Chapter 12. The State of Long-Term Expectation: WE have seen in the previous chapter that the scale of investment depends on the relation between the rate of interest and the schedule of the marginal efficiency of capital corresponding to different scales of current investment, whilst the marginal efficiency of capital depends on the relation between the supply price of a capital-asset and its prospective yield. In this chapter we shall consider in more detail some of the factors which determine the prospective yield of an asset.

The considerations upon which expectations of prospective yields are based are partly existing facts... partly future events which can only be forecasted... future changes in the type and quantity of the stock of capital-assets and in the tastes of the consumer, the strength of effective demand from time to time during the life of the investment under consideration, and the changes in the wage-unit in terms of money.... We may sum [these] up... as being the state of long-term expectation....

It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain.... For this reason the facts of the existing situation enter, in a sense disproportionately, into the formation of our long-term expectations; our usual practice being to take the existing situation and to project it into the future, modified only to the extent that we have more or less definite reasons for expecting a change....

The state of confidence, as they term it, is a matter to which practical men always pay the closest and most anxious attention. But economists have not analysed it carefully.... Our conclusions must mainly depend upon the actual observation of markets and business psychology.... The outstanding fact is the extreme precariousness of the basis of knowledge on which our estimates of prospective yield have to be made. Our knowledge of the factors which will govern the yield of an investment some years hence is usually very slight and often negligible. If we speak frankly, we have to admit that our basis of knowledge for estimating the yield ten years hence of a railway, a copper mine, a textile factory, the goodwill of a patent medicine, an Atlantic liner, a building in the City of London amounts to little and sometimes to nothing; or even five years hence. In fact, those who seriously attempt to make any such estimate are often so much in the minority that their behaviour does not govern the market....

With the separation between ownership and management which prevails to-day and with the development of organised investment markets, a new factor of great importance has entered in, which sometimes facilitates investment but sometimes adds greatly to the instability of the system. In the absence of security markets, there is no object in frequently attempting to revalue an investment to which we are committed. But the Stock Exchange revalues many investments every day and the revaluations give a frequent opportunity to the individual (though not to the community as a whole) to revise his commitments. It is as though a farmer, having tapped his barometer after breakfast, could decide to remove his capital from the farming business between 10 and 11 in the morning and reconsider whether he should return to it later in the week. But the daily revaluations of the Stock Exchange, though they are primarily made to facilitate transfers of old investments between one individual and another, inevitably exert a decisive influence on the rate of current investment. For there is no sense in building up a new enterprise at a cost greater than that at which a similar existing enterprise can be purchased; whilst there is an inducement to spend on a new project what may seem an extravagant sum, if it can be floated off on the Stock Exchange at an immediate profit. Thus certain classes of investment are governed by the average expectation of those who deal on the Stock Exchange as revealed in the price of shares, rather than by the genuine expectations of the professional entrepreneur. How then are these highly significant daily, even hourly, revaluations of existing investments carried out in practice?

In practice we have tacitly agreed, as a rule, to fall back on what is, in truth, a convention. The essence of this convention — though it does not, of course, work out quite so simply — lies in assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change. This does not mean that we really believe that the existing state of affairs will continue indefinitely. We know from extensive experience that this is most unlikely.... [T]he above conventional method of calculation will be compatible with a considerable measure of continuity and stability in our affairs, so long as we can rely on the maintenance of the convention.... But it is not surprising that a convention, in an absolute view of things so arbitrary, should have its weak points. It is its precariousness which creates no small part of our contemporary problem of securing sufficient investment. Some of the factors which accentuate this precariousness may be briefly mentioned.

(1) As a result of the gradual increase in the proportion of the equity in the community’s aggregate capital investment which is owned by persons who do not manage and have no special knowledge of the circumstances, either actual or prospective, of the business in question, the element of real knowledge in the valuation of investments by those who own them or contemplate purchasing them has seriously declined.

(2) Day-to-day fluctuations in the profits of existing investments, which are obviously of an ephemeral and non-significant character, tend to have an altogether excessive, and even an absurd, influence on the market....

(3) A conventional valuation which is established as the outcome of the mass psychology of a large number of ignorant individuals is liable to change violently as the result of a sudden fluctuation of opinion due to factors which do not really make much difference to the prospective yield; since there will be no strong roots of conviction to hold it steady. In abnormal times in particular, when the hypothesis of an indefinite continuance of the existing state of affairs is less plausible than usual even though there are no express grounds to anticipate a definite change, the market will be subject to waves of optimistic and pessimistic sentiment, which are unreasoning and yet in a sense legitimate where no solid basis exists for a reasonable calculation.

(4) But there is one feature in particular which deserves our attention. It might have been supposed that competition between expert professionals, possessing judgment and knowledge beyond that of the average private investor, would correct the vagaries of the ignorant individual left to himself. It happens, however, that the energies and skill of the professional investor and speculator are mainly occupied otherwise. For most of these persons are, in fact, largely concerned, not with making superior long-term forecasts of the probable yield of an investment over its whole life, but with foreseeing changes in the conventional basis of valuation a short time ahead of the general public. They are concerned, not with what an investment is really worth to a man who buys it “for keeps”, but with what the market will value it at, under the influence of mass psychology, three months or a year hence. Moreover, this behaviour is not the outcome of a wrong-headed propensity. It is an inevitable result of an investment market organised along the lines described. For it is not sensible to pay 25 for an investment of which you believe the prospective yield to justify a value of 30, if you also believe that the market will value it at 20 three months hence.

Thus the professional investor is forced to concern himself with the anticipation of impending changes, in the news or in the atmosphere, of the kind by which experience shows that the mass psychology of the market is most influenced. This is the inevitable result of investment markets organised with a view to so-called “liquidity”. Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of “liquid” securities. It forgets that there is no such thing as liquidity of investment for the community as a whole. The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment to-day is “to beat the gun”, as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.

This battle of wits to anticipate the basis of conventional valuation a few months hence, rather than the prospective yield of an investment over a long term of years, does not even require gulls amongst the public to feed the maws of the professional; — it can be played by professionals amongst themselves. Nor is it necessary that anyone should keep his simple faith in the conventional basis of valuation having any genuine long-term validity. For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs — a pastime in which he is victor who says Snap neither too soon nor too late, who passes the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops. These games can be played with zest and enjoyment, though all the players know that it is the Old Maid which is circulating, or that when the music stops some of the players will find themselves unseated.

Or, to change the metaphor slightly, professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one’s judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.

If the reader interjects that there must surely be large profits to be gained from the other players in the long run by a skilled individual who, unperturbed by the prevailing pastime, continues to purchase investments on the best genuine long-term expectations he can frame, he must be answered, first of all, that there are, indeed, such serious-minded individuals and that it makes a vast difference to an investment market whether or not they predominate in their influence over the game-players. But we must also add that there are several factors which jeopardise the predominance of such individuals in modern investment markets. Investment based on genuine long-term expectation is so difficult to-day as to be scarcely practicable. He who attempts it must surely lead much more laborious days and run greater risks than he who tries to guess better than the crowd how the crowd will behave; and, given equal intelligence, he may make more disastrous mistakes. There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable. It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun. Moreover, life is not long enough; — human nature desires quick results, there is a peculiar zest in making money quickly, and remoter gains are discounted by the average man at a very high rate. The game of professional investment is intolerably boring and over-exacting to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll. Furthermore, an investor who proposes to ignore near-term market fluctuations needs greater resources for safety and must not operate on so large a scale, if at all, with borrowed money — a further reason for the higher return from the pastime to a given stock of intelligence and resources. Finally it is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks. For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy. Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally....

These considerations should not lie beyond the purview of the economist.... As the organisation of investment markets improves, the risk of the predominance of speculation does, however, increase.... Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.... These tendencies are a scarcely avoidable outcome of our having successfully organised “liquid” investment markets. It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges.... The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise....

The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, except by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only. But a little consideration of this expedient brings us up against a dilemma, and shows us how the liquidity of investment markets often facilitates, though it sometimes impedes, the course of new investment. For the fact that each individual investor flatters himself that his commitment is “liquid” (though this cannot be true for all investors collectively) calms his nerves and makes him much more willing to run a risk....

Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits — of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole, is it based on an exact calculation of benefits to come. Thus if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die; — though fears of loss may have a basis no more reasonable than hopes of profit had before....

This means, unfortunately, not only that slumps and depressions are exaggerated in degree, but that economic prosperity is excessively dependent on a political and social atmosphere which is congenial to the average business man. If the fear of a Labour Government or a New Deal depresses enterprise, this need not be the result either of a reasonable calculation or of a plot with political intent; — it is the mere consequence of upsetting the delicate balance of spontaneous optimism. In estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity it largely depends....

[A]ter giving full weight to the importance of the influence of short-period changes in the state of long-term expectation as distinct from changes in the rate of interest, we are still entitled to return to the latter as exercising, at any rate, in normal circumstances, a great, though not a decisive, influence on the rate of investment. Only experience, however, can show how far management of the rate of interest is capable of continuously stimulating the appropriate volume of investment.

For my own part I am now somewhat sceptical of the success of a merely monetary policy directed towards influencing the rate of interest. I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organising investment; since it seems likely that the fluctuations in the market estimation of the marginal efficiency of different types of capital, calculated on the principles I have described above, will be too great to be offset by any practicable changes in the rate of interest.

Comments

[tom s.]

I wondered why I couldn't get past page 10 of Straw Dogs. Now I know. Thanks.

[Cal]

Gray may be the most ignorant man alive. The stupidest remain those at the NYT who hired Bill Kristol, only to be tied by those who voted for Bush, not once but twice! (Except the super wealthy, since they seemed to know what they were getting.)

[Maynard Handley]

What exactly is your complaint here, Brad?

[That Gray doesn't know what Keynes said about the issue.]

[Ponzi Q. Globalization]

Damn, professor, I post one quote from the guy and a couple of hours later you're all over him. Where do you get the time & energy?

Our host: "John N. Gray writes, in Straw Dogs:

Financial markets are moved by contagion and hysteria. Mesmer and Charcot are better guides to the new economy than Hayek or Keynes...

I very much doubt that John N. Gray has ever read a word written by John Maynard Keynes."

I would imagine that Gray has but I dunno. You're a fellow professor. Send him an email and ask. BTW, have *you* read Mesmer and Charcot? Sh*t with the weird energy level for absorbing intellectual things you seem to possess, you probably have read them.

Keynes: "Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.... "

Even for a non-economist like myself, I realize that this part is often quoted. What is the current state of speculation in the global neoliberal financial wonderland our wise men and women have created for us? Bubbles on a steady stream of enterprise or a whirlpool enveloping the bubbles of enterprise? To me it seems like the latter with all these strange securitizations of securitization of ... of bundles of loans. Devices for hiding poop? Just don't be the one holding the bag full when the music stops. The derivative side betting. Betting on what? The VIX? The weather? The craps table? Bets on currencies. Bets where some of those that bet can load the dice a bit. Hundreds and hundreds of billions of dollars decoupled from reality. When some 31 year old French guy sneezes, the market plummets, and maybe tens of thousands will lose their jobs. It's just a mad casino, at least a huge chunk, no? For what end?

tom s.: "I wondered why I couldn't get past page 10 of Straw Dogs."

The beginning is the weakest part I thought. Try the rest with an open mind. It gives a very interesting perspective on things. Very radical. Many of us pretend to be secular and believe in evolution and what not, but we're really all still hung up with believing there's a bit of the divine in us. Seems we all can't get away from the delusion that we are different than other animals in that we think reason rules us. Reason doesn't rule us. Reason is simply used as a tool by us humans. And we humans are not so reasonable. After all, the self is, to a large degree, but a bundle of fighting unconscious impulses.

Gray doesn't present any system in this book. Gray claims it's systematic but he just blasts away with lots of ideas, facts, aphorisms, stories, and pointers. Maybe it is systematic on some level -- there are consistent themes -- but I don't see it. Anyway, for me (today at least) it seems to present some profound truths. Plus it turned me on to the wackiness of Taoism. I liked it. Two thumbs up! Woof woof!

[donna]

The super wealthy will very soon find out that they were wrong as well.

[donna]

And Ponzi, Tao is not "wacky" in any sense whatsoever. It simply IS.

[Tomas]

Ponzi, I am not sure I get your argument or understand what you are arguing for. Is it a defense of Gray´s "reading" of Keynes?

Is it true that Gray says that "Financial markets are moved by contagion and hysteria. Mesmer and Charcot are better guides to the new economy than Hayek or Keynes"

Unless the two sentences are not connected at all, then that suggest that he thinks that because Financial markets are moved by contagion and hysteria, Mesmer and Charcot are better than Hayek and Keynes in relation to the new economy.

This is stupid because Keynes is, in the quote Prof. Delong posted, arguing that financial markets are moved by......contagion and hysteria. Hence it doesnt matter whether Prof. Delong has read Mesmer or Charcot or C.S. Lewis.

So what is your point?

[bob h]

"I very much doubt that John N. Gray has ever read a word written by John Maynard Keynes."

He should be good choice as economic adviser to John McCain. Republicans don't believe in Darwin, and they seem equally ignorant of Keynes.

[Ponzi Q. Globalization]

Tomas: "Ponzi, I am not sure I get your argument or understand what you are arguing for. Is it a defense of Gray´s "reading" of Keynes?"

No.

Tomas: "Is it true that Gray says that "Financial markets are moved by contagion and hysteria. Mesmer and Charcot are better guides to the new economy than Hayek or Keynes""

Yes.

Tomas: "Unless the two sentences are not connected at all, then that suggest that he thinks that because Financial markets are moved by contagion and hysteria, Mesmer and Charcot are better than Hayek and Keynes in relation to the new economy."

Agreed.

Tomas: "This is stupid because Keynes is, in the quote Prof. Delong posted, arguing that financial markets are moved by......contagion and hysteria. Hence it doesnt matter whether Prof. Delong has read Mesmer or Charcot or C.S. Lewis."

DeLong: "I very much doubt that John N. Gray has ever read a word written by John Maynard Keynes."

Tomas, do you really believe this to be true? Does DeLong?

DeLong is asserting that Gray hasn't read Keynes. He's also commenting on a single quote that references Mesmer and Charcot.

[Yep. That one sentence is proof positive that Gray has not read Keynes. If he had read Keynes, he would understand what a gargantuan howler he had just written--and would have erased it. Similarly, if you had read Keynes, you would understand what a gargantuan howler Gray is committing--and you wouldn't be defending him.]

[Tomas]

I think it is nice of Brad to assume that Gray has not read Keynes. That means he is just ignorant about what Keynes thought about economics and just used him as a "literary device" for "stuffy old economist doing stuffy old economics".

If he has read him then he suffers from severe reading comprehension problems or he is extremely dishonest. It is not like this view of the financial markets is some perifial thing about Keynes economics, it really part of the core (Prof. Delong and I might disagree here since as Random Gradstudent Internet Inquisitor for the Church of Keynes I did excommunicated him once).

"DeLong is asserting that Gray hasn't read Keynes. He's also commenting on a single quote that references Mesmer and Charcot. I was pointing out that DeLongs accusations of complete ignorance on the part of Gray wrt Keynes may be used against him wrt to Mesmer and Charcot. I believe the accusation that Gray never read Keynes to be false but, again, I dunno. Same with DeLongs reading of Mesmer and Charcot.

Does Prof. Delong have a reading of Mesmer and Charcot in this post? To the point he is making he doesnt need one since he is not saying anything about them, but about Gray misreading (or more likely, not reading) Keynes in a very very silly way. If I said "The new world of spacetravel is based on knowledge of the earth not being the center of the solarsystem. Thus X and Y is better guides to spacetravel than Z and Copernicus"

Now that would be stupid and its stupid no matter who X,Y and Z would be and if you had no idea who X, Y and Z where or what they said it would be fair for you to call me stupid.

[kharris]

Come, come, Perfesser, surely "Stupidest Man Alive" relies on a body of work, rather than one glaringly stupid episode. This guy is obviously trying to play baseball with a cricket bat. He could have made far better choices (Fama for his assiciation with rationality, perhaps, or Tobin for his "Q"), and didn't know enough to make them. Is all his thinking equally ill-informed? (I have no idea.)

It is surely true that Gray has read some word of Keynes writing, in the same way that we all have read Homer. "In the long run,..." has over the years joined the same class as "rosy-fingered" and "wine-dark". But if Gray has intentionally read Keynes, it doesn't show.

[Tomas]

I agree, "stupidest man alive" is way way too harsh. kharris to the rescue!

[Cosma]

If we can play _Road to Xanadu_ here, I'd guess that Charcot came first to Gray's mind, on account of "hysteria" and "contagion", leading to Mesmer, thence to the latter's "animal magnetism", and so to "animal spirits", which at some subconscious level he knew enough to associate with Keynes; but not enough to remember what Keynes had, famously, written on the topic. (Hayek comes in because Gray is an ex-apostle.)

This is dumb, but considering the competition covered by our host for "stupidest man alive", not even remotely in the running for the title.

[General Specific]

Me thinks this technique used by DeLong would make hash and mince-meat of Shakespeare. And Nietzsche.

And in all three cases--John Gray, Shakespeare, and Nietzsche--the technique would be misused.

Straw Dogs is as much a literary and personal-perspective philosophical work, and the quote referenced little more than another form of Gray's ongoing observation that humans are hubristic and over-deterministic. Irrespective of Keynes views on the mania of markets...

[When you are talking about Keynes and about the mania of markets, Keynes's views on the mania of markets are something you have to respect--if you have read Keynes, that is.]

[Colin Danby]

"Irrespective of Keynes views on the mania of markets, he is generally known--particularly in the conservative community--as a member of the economic community who considered it at least possible to manage the economy (to a degree)."

General, your "to a degree" qualifier suggests that even you realize you don't know what you're talking about. Keynes was, as Robert Skidelsky shows, in important ways conservative. The fact that people who haven't read Keynes us "Keynesian" ignorantly is not evidence about Keynes, who for all his mistakes was a much brighter fellow than John Gray.

[Ponzi Q. Globalization]

[Metacomments belong at: http://delong.typepad.com/sdj/comment-policy-a-seminar-.html]

[airth10]

Isn't it Gray who made the dumb remark that 9/11 signaled the end of globalization?

[nemo]

Even a reputable British academic has to get up pretty early in the morning to beat Donald Luskin for the prize of stupidest man alive.

[lgm]

Judging from the over the top windbaggery of the Keynes quote, Grey
should get points for avoiding him.

[General Specific]

1. I agree that John Gray's intended point is mangled by Keyne's recognition of mania.

2. Colin Darby: I'll respond more accurately when I understand your point. I didn't say Keynes was or was not a conservative. And I didn't say one or another fellow was bright or not. I said--or meant--that Keynes is a bugaboo for conservatives and libertarians (a) because his arguments for demand management and (b) as the Oxford Dictionary of Economics describes it, he was "largely responsible for the creation of modern macroeconomics."

3. Regarding respect of Keynes views: I think someone who quotes John Gray to make an economic argument (not DeLong, but whoever originally did) does so erroneously, just as erroneously as drawing on Shakespeare or Nietzsche to prove an economic point.

4. I don't think stupidest man in the world should be diluted by John Gray and his comment.

[Ponzi Q. Globalization]

Delong: "[Metacomments belong at: http://delong.typepad.com/sdj/comment-policy-a-seminar-.html]"

I took out anything that may be considered a metacomment (except this sentence and the your quote above)...

Jesus, I didn't realize that this one quote would start an attack on a man whose work I respect (at least the portion I have read) even if I don't always agree with it. I feel bad about triggering it.

"[Yep. That one sentence is proof positive that Gray has not read Keynes. If he had read Keynes, he would understand what a gargantuan howler he had just written--and would have erased it. Similarly, if you had read Keynes, you would understand what a gargantuan howler Gray is committing--and you wouldn't be defending him.]"

Professor, you are wrong. I am not defending Gray because I think that Keynes didn't talk about contagion and hysteria also. I read the quote of Keynes you posted, accept your expertise in the matter, and I am still defending Gray because I don't think he deserves to be called stupid on the basis of this one quote.

[So you make a habit of defending people who don't do their work?]

Now General Specific has defended Gray much better than I can. But I will add that what you and others are doing is taking a single quote out of a large body of work and calling a man stupid for what may be simple sloppiness on a fairly open choice of 'famous economists'. Like I said before, and as General Specific alludes to, it is a literary device. A way to show how modern financial markets are ruled by psychological extremes. Gray sadly chose Keynes. No big deal.

Other than the single quote I posted, have you or Tomas read any of Gray's work? Since you are calling the man stupid, it is an appropriate question.

[kevin quinn]

Gray certainly hasn't read Keynes. But he may have read almost any conventional account of "Keynesian" economics with not a single mention of the ideas from GT, Ch 12 that Brad quotes from. And these are wtitten by ECONOMISTS, for heaven's sake. For all an outsider consulting a standard text could tell, Keynes was simply concerned with the effect of STICKY PRICES. It is sad beyond belief.

[Tomas]

I have not even heard of Gray before this post, so I confess utter ignorance about anything he might have written besides the presented quote.

This is, however, besides the point. What he said was stupid or at least ignorant. I to say prefer ignorant because I assume he didn´t know what Keynes position on financial markets were.

The "literary device" arguement might be true, but the function of the device on anyone who knows any economics is to provoke the respons "God, that guy is stupid". Thus one should, ideally, choose a literary device that doesn´t makes one look like one who doesnt know anything about economics when talking about economics.

[Ponzi Q. Globalization]

"[So you make a habit of defending people who don't do their work?]"

No, I defend people who do their work and who I think have valuable insights even if they make mistakes or make a point in a sloppy manner on occasion. Maybe as General Specific said, I shouldn't have used Gray to make an *economic point*. However, Gray did make the point about contagion and hysteria in a pithy way. Even if he did 'mangle' it with the unfortunate choice of Keynes. It sticks in ones mind. And I still don't think Gray is stupid!

[Barkley Rosser]

I do not even know who Mesmer and Charcot are, much less have read them. Shame on me. But it is not only Keynes, although he has tremendous priority and eloquence and insight, who has argued that financial markets are driven by hysteria and contagion. There has been a long and steady stream of widely read and recognized individuals over time who have made the argument including at a minimum: Hyman Minsky, Charles Kindleberger, and Robert Shiller. For that matter, prior to Keynes one can find such discussions in the works of Richard Cantilon, Adam Smith, John Stuart Mill, and Walter Bagehot, just to name a few. The list is much longer than that.

[Colin Danby]

Mesmer would be the inventor of Mesmerism i.e. hypnosis. Charcot, a moment of googling reveals, is the inventor of hysteria. So Gray is having a little flourish there which is fine, though he perhaps falls too readily into the isn't-finance-wacky trope of many pop writers on globalization. (His seems to be a right-dystopian variant, no?)

That Keynes is a bugaboo in numerous quarters is hardly news but Brad is right: part of doing your work is sizing up your bugaboos. And this is someone billed as a Very Serious Political Philosopher.

As for the notion that Keynes is culpable simply as a founder macroeconomics, shall we assume that even Gray is not too silly to think that?

[Lilly Evans]

OK guys - time to pipe down! John Gray is a philosopher. So, one need not expect him to be an in depth expert on specifics of economics.

[But one would expect him to read those he cites, would one not? Or does "philosopher" to you simply mean "person who makes things up"?]

[General Specific]

For those not familiar with John Gray, who is a bit of a nut at times: he's a student of the liberal political tradition in the west and has--perhaps in the last twenty years--become a spokesperson for the uncertainty and black swans that exist in any human endeavor--and expressed concern about the hubris exhibited by humans when think they can easily control the future. He is not unlike, in his thinking, Aldous Huxley, another oddball at times, but still an individual who made important points in his political writings.

John Gray places into the camp of hubris Bush's war in Iraq, American thinking that the world would embrace our ideology and way of life, he's longed argued that that tribes and tribal forces will continue to create significant problems for the west, that the liberal tradition is in danger because of the breakdowns that can potentially occur as tribalism and multi-polarization increase following the breakdown of the previously bipolar world, and, what makes him anathema to Julian Simon utopians--humans are just another organism on the planet that can easily extinguish itself or run into a malthusian or ecological catastrophe. He also argues that globalization may run into a brick wall. And one should not discount what will happen when energy supplies peak-which will likely happen in the near future. Trade barriers have risen before. Why think they won't again?

He's also in love with the idea of comparing religious fundamentalists with those secularists who--in his opinion--have replaced the concept of heaven with a market utopia on earth.

These ideas aren't new. But he brings them to contemporary events in a useful way (for me, at least). He is thought provoking. And that quote--while not necessary in an economics forum--isn't a testament to stupidity. Perhaps he showed a bit of hubris in using it, but I still knew what he was saying.

So is this the path to truth? Micro-analyzing one line from one book? I think not.

BTW: He's got more zingers than that. But so does Nietzsche. Tons of 'em. And so do many thinkers. I work around them.

Enough time has probably been spent on this.

[bob mcmanus]

"who has argued that financial markets are driven by hysteria and contagion."

Are we clear on the question here, on Gray's and Keynes points?

Is Gray's point that financial markets are sometimes driven by hysteria and contagion or that financial markets are always driven by hysteria and contagion?

If Gray were to say that viewed either from inside or outside, by traders or economists, there is no, zero, rationality or predictability or causal factors in financial markets...would Keynes agree? That the weakest conceivable EFH is untrue or that interest rates are irrelevant?

[bob mcmanus]

Ok, on re-reading and contemplation, I guess it's true. Gray mentioned Charcot & Mesmer, not dice throws. Human beings are not absolutely unpredictable, and economic theory & policy does have some basiss for prediction in some kind of consistency in human behavior.

It is still hard for me to get my mind around the idea that all of the Samuelson & Solow equations are entirely about managing expectations and manipulating psychologies, that the Bernanke 75 basis point cut contained no objective information for investors.

And if true, I have to think about what economics as a science really means.

[kharris]

Barkley,

You aren't expected to have read them. Mesmer is the father of "mesmerism" and, according to Wikipedia, "...Charcot's most enduring work is that on hypnosis and hysteria." That's a shame, because Charcot was a fountain of medical discovery in his day.

[Geoff Robinson]

Gray came close to being endorsed by Hayek as his successor in political philosophy. He has kept the Hayekian style of grand generalizations as he navigated across the political spectrum.

[floating fx]

So China will not float her currency because she is afraid this guy and his momo followers will muck up her markets?

http://www.livewithoscar.com/

Our gubbment is struggling desperately to get China to float so that her currency can be subject to the same wild west casino that everyone elses has. Why is China the only one smart enough to listen to keynes and not turn her markets over to wild eyed gamblers?

[floating fx]

The USA has repeatedly urged china to float her currency. Why is china the only smart enough to listen to keynes and not turn her currency over to a bunch of short sighted gamblers, and more importantly why do we keep begging her to do so?

[Hansrudolf Suter]

So it seems that "Modus Vivendi" was written by the most etc. An amazing achievement.