Friday, November 18, 2011

My Dinner with Maynard II: Keynes on Isaac Newton, Alchemy and Linear Regression

In 1936, Sotheby's auctioned off the Portsmouth Papers of Issac Newton. Keynes missed the auction but subsequently set out to acquire the Newton manuscripts from the buyers, concentrating on the papers having to do with alchemy. At his death, Keynes bequeathed his collection to King's College, Cambridge. The Newton-related papers of John Maynard Keynes are now accessible online at The Newton Project.

From "Newton, the Man," a lecture prepared by John Maynard Keynes and delivered by his brother, Geoffrey, in July 1946:

Wednesday, November 9, 2011

My Dinner with Maynard: “On this point you are more Keynesian than I.”

Keynes to J. M. Clark, July 26, 1941:
As you will have gathered the other evening, I agree with what you say about the danger of a 'school,' even when it is one's own. There is great danger in quantitative forecasts which are based exclusively on statistics relating to conditions by no means parallel. I have tried to persuade Gilbert and Humphrey and Salant that they should be more cautious. I have also tried to persuade them that they have tended to neglect certain theoretical considerations which are important, in the interests of simplifying their statistical task.

From "Recollections of a Dinner for John Maynard Keynes," F. Taylor Ostrander, (2002) Research in the History of Economic Thought and Methodology, Volume 20-A, pages 43–50.
Leon Henderson arranged and was host of the dinner for Keynes. It was held on Tuesday June 10, 1941 in a private dining room at the National Press Club. Present were Keynes, Henderson and his two deputies Ken Galbraith and Joe Wiener and his guests: Sumner Pike, a member of the Securities and Exchange Commission; Isador Lubin, one of the six assistants to the President; Professor Jacob Viner, economic consultant to Secretary Morgenthau; and John Cassels.

Also present were two senior advisors to Henderson, Columbia Professor J. M. Clark and Duke Professor Calvin B. Hoover.

...

Everyone present knew Keynes’ famous brochure published in early 1940, How to Pay for the War, in which he advocated very strong fiscal restraint on civilian consumption including “compulsory saving.” Most were also aware of the National Income White Paper issued at the time of the Budget speech in March 1941, just three months before the dinner, in which its authors, James Meade and Richard Stone, working in collaboration with Keynes, had buttressed his view of the need for strong anti-inflationary wartime fiscal policy in Britain. Predictably, in his after-dinner talk Keynes repeated those views he had set out before and applied them to the American scene. Although the U.S. was not yet at war, Keynes urged increased fiscal restraint in the U.S. in order to be better prepared to prevent inflation resulting from our defense build-up and Allied purchases of war materials.

A general discussion followed Keynes’ long and detailed talk. Walter Salant and Don Humphrey, who sat opposite Keynes at the inside of the U-shaped table, argued strongly that increased fiscal restraint was not then needed in America as it would inhibit further progress in reducing unemployment. Challenging Keynes, they argued that Keynesian principles required that all resources be fully employed before applying fiscal restraint.

Keynes responded to their argument, gently but without giving any ground. The two young American economists continued to argue with the famous man until some of us felt it almost embarrassing to watch. Finally Keynes, obviously somewhat displeased, pushed his chair back from the table and brought the debate to an end as he said, rather sharply, “On this point you are more Keynesian than I.” It was an electrifying moment, never to be forgotten!