Warren Meyer posts of a parallel between Climate Science and Keynesian Economics. I posted about a subject close to his heart, and central to Keynesianism – Feedbacks. I have also attempted to update on the current debate on feedbacks.

Warren

There is a parallel between Keynes and the CAGW that is close to your heart – feedbacks. Pure Keynesianism is that an increase in government expenditure at less than full employment would have a positive feedback response. Keynes called the feedback measure the multiplier. (The multiplier is the reciprocal of the proportion of Government expenditure to GDP. So if government expenditure was 20% of GDP, then a $1bn fiscal boost would increase output by $5bn.)

By the 1950’s the leading sceptic was Milton Friedman who, in his 1962 book “Capitalism and Freedom”, estimated empirically that the multiplier was about 1 – that is it did not have any impact. Friedman was denounced as a denier and a dinosaur. (At the same time, mainstream economics adapted his verificationist methodology.) Indeed by the end of the 1960s it was generally agreed that the long-term feedback impact of government demand management was negative, as increased government expenditure crowded out the private sector, caused escalating inflation (as economic actors ceased to be fooled by the false signals 0f increased expenditure), slowed economic growth and generally undermined the very structures of the capitalist system. (see Friedman’s Nobel Prize lecture “Inflation and Unemployment“)

Keynesian thinking is that the capitalist economic system is inherently unstable. Stability is only achieved through the guiding hand of government. Keynes contrasted this with a caricature of neoclassical economics, with the macroeconomic system would rapidly come back into equilibrium. Similarly, the climate models assumption of chronic instability is contrasted by an extreme caricature of those who disagree with them. That is the “deniers” are saying that the climate is incredibly stable, with human beings having no influence. In both cases the consequence of this caricaturing is to automatically claim any extreme occurrence as vindification of their perspective.