출처: Vincent Barnett, John Maynard Keynes (Routledge, 2013)
목차 | 자료: 구글도서
※ 발췌 / Excerpt of which
Chapter 12. It all comes out in the wash (p. 184)
( ... ... )
The Basic Elements
Keynes ended the two volumes of A Treatise on Money with the apparently self-deprecating statement that ‘Monetary Theory, when all is said and done, is little more than a vast elaboration of the truth that “it all comes out in the wash”’. [1]
- (1) What was meant was the quantity theory-style supposition that, in the long run, many monetary (and other) factors were ‘flushed through’ the economic system leaving little long-term impact.
- (2) But, and this was a very important but, in the short- and medium-run, they could have very significant impact, i.e. the precise nature of ‘the wash’ was what monetary economics should be concerned with.
At the heart of the explanation of economic fluctuations, in Keynes's 1930 view, were two key variables: savings and investment. The purchasing power of money, or in other words, the general price level (in relation to the goods and services required for consumption in a community):
.... oscillates below or above the equilibrium level according as the cost of current investment is running ahead of, or falling behind, savings. A principal object of this Treatise is to show that we have here the clue to the way in which fluctuations of the price-level actually come to pass ... [2]
This statement was the crux of Keynes's explanation of the change in the price level (and other quantities) that were known as trade cycles. It was not simply monetary factors that were causing the oscillations of trade, but the overall relation between savings and investment. A key realisation that he had come to by 1930 was that there were no natural mechanism that automatically brought actual investment in line with actual savings, i.e. the two quantities could diverge, at least for a definite period of time. Thus, there were three possible scenarios for any given period. Savings could equal investment, savings could exceed investment, or savings could be less than investment. The consequences for the economic system of departing from and regaining this equilibrium between savings and investment was the essential driving force behind the changes that were called variously the trade cycle, business fluctuations, or the economic weather.
p. 186
As was sketched in the previous chapter, what actually determined the level of investment and the level of savings in any given period were two entirely different things. The scale and the terms on which the banking system granted loans and other monetary facilities to business set the rate of investment. The decision of the community as a whole as to how much they spent and how much they saved set the rate of savings:
... therefore, as the banking system is allowing the rate of investment to exceed or fall behind the rate of saving, the price-level ... will rise or fall ... But this disparity between investment and saving sets up a disequilibrium in the rate of profit... [3]
If savings equalled investment, then the price level would be stable, which corresponded to the average rate of remuneration on factors of production. If credit was available to businesses at terms lower than the equilibrium level, prices would increase as demand rose, and more profit would be made, until such time as the terms of credit were brought back to their equilibrium level. If credit was available to business at terms higher than the equilibrium level, prices would decline as demand fell, and less profits would be made, until such time as the terms of credit were brought back to their equilibrium level. Thus, booms and slumps were simply the result of the oscillation in the terms of credit around their equilibrium level, these terms being determined partly by the policies of the banking sector, and partly by the decisions of the community about how much to save. [4]
This approach to explaining trade cycles diverged significantly from what could (for simplicity) by called the classical theory of economic equilibrium. In the classical theory, it was the function of the interest rate to bring continuous equilibrium to the supply and demand for credit, which would also bring savings and investment into balance. Keynes accepted that such a rate existed in theory, and he called it the natural-rate of interest. However, those who set the actual interest rate considered not only whether it would bring balance to the supply and demand for credit or to savings and investment, but also many other factors such as the wider state of business, the supply and demand for money, confidence in the currency, the state of the bond market and so on. This meant that the actual rate of interest, what Keynes called the market-rate, often diverged from the natural rate, i.e. the rate that brought equilibrium to the credit market:
Enough of the analysis has now been provided to demonstrate that, above all, Keynes was in 1930 concerned to show how various types of disequilibrium were generated, and how these disequilibria would work their way through the economic system. In this sense the phrase 'it all comes out in the wash' applied not only to monetary changes, but also to changes in investment, savings, consumption and production. All the disequilibria created by the various influences affecting these economic quantities were, however, not permanent, as they created new situations out of which a tendency towards the re-establishment of equilibrium would follow. In this sense Keynes still partially adhered to the classical doctrine of automatic harmony. But where he diverged was in insisting that the economy rarely remained in a position of stable equilibrium for very long, implying that disequilibrium was a more common reality for much of the time. And if this was the case, then economists should make more of an effort to understand these periods of temporary but frequent disequilibrium, rather than assuming that a state of full equilibrium was the natural one. Keynes had reached nearly half way towards the 'new economics' that he would invent a few years later in ^The General Theory^.
One final innovative element of the 'pure' part of ^A Treatise on Money^ requires consideration. The actual rate of interest, what Keynes called the market-rate, was in reality divided into long-term market rates (for example those on government bonds), short-term market rates (for example those on three-months bills of exchange) and then the official Bank rate set by the monetary authorities. Long-term rates were 'sticky' in relation to mimicking changes in the natural-rate, while the Bank rate affected short-term rates more than long-term. Part of Keynes's originality was to direct greater attention to 'the complex of interest rates effective in the market at any time', suggesting that actual rates which prevailed in private markets were not necessarily a simple reflection of the official rate set by the Central Bank. [6] Understanding what was later called 'the term structure of interest rates' was thus important to explaining how equilibrium and disequilibrium were generated.
[소제목] The international dimension (p. 188)
The above analysis applied to economies of individual nation-states, but ^A Treatise on Money^ also contained a substantial consideration of international factors. As was explained previously, one source of increased funds for UK investment that Keynes had identified in his policy writings across the second half of the 1920s was the withdrawal of funds from overseas sources. It might consequently be expected that in ^A Treatise on Money^, Keynes would explain this element in more detail. And in a sub-section of a chapter presenting the fundamental equations of money entitled ‘Foreign Lending and the Foreign Balance’ this was indeed the case.
He defined two basic quantities as follows. The foreign balance (B) was the excess of home-owned output placed at the disposal of foreigners (exports), over foreign-owned output in UK hands (imports). Foreign lending (L) was the excess of the amount of UK money put at the disposal of foreigners (investment abroad), compared to the amount expended by foreigners on investments in the UK. An equation related to these two elements as follows:
( ... ... ) important, as he had dealt with it both in his policy writings and theoretically, in ^A Treatise on Money^. Here he also raised additional issues on the best form of an international monetary system that deserve some consideration.
[소제목] The problem of national economy
In the second volume of ^A Treatise on Money^, devoted to the applied theory, Keynes provided a more concrete analysis of what so worried him about excess international investments by the UK. In the 19th century, the UK was the 'conductor of the international orchestra' of foreign investment, as London was the only major global trading market, and this enabled a successful ^laissez-faire^ attitude to prosper. However, British economists had erroneously 'attributed the actual success of her ^laissez-faire^ policy, not to the transitory peculiarities of her position, but the the sovereign virtues of ^laissez-faire^ as such'. [13] After 1914, New York had become a rival to London as a funnel of international investments, in part because the financial strength of the UK had been seriously affected by the war. As a result, the relative importance of the London market had been substantially reduced, and the consequences of large levels of foreign investment flowing out of the UK would be greater.
This led Keynes to consider a wider question: the problem of national autonomy with respect to the international standard of value and fixed exchange rates, which was another reason to question the wisdom of the UK using the gold standard. In an ideal international gold standard system, differences in national interest rates inevitably produced gold flows towards those countries with higher rates, until uniformity of rates was re-established. However, for Keynes this would mean that the degree of an individual country's power of independent action over interest rates 'would have no relation to its local needs'. [14] Thus, the dilemma of an international monetary system was to maintain the advantages of local currency stability, and 'to preserve at the same time an adequate local autonomy for each member over its domestic rate of interest and its volume of foreign lending'. [15] For Keynes, the diminution of national autonomy that the use of the international gold standard system entailed was another reason why the UK should not have been using it after 1925. ( ... p. 192 unavailable ... )
( ... ... ) propagating 'slump' psychology. The stock market collapse in 1929 was only a secondary cause of the economic decline, but once it had occurred, it aggravated the situation by further discouraging investment and lowering the natural-rate of interest.
A lasting economic recovery would not occur until the market-rate of interest fell internationally to near its pre-war level, but this would not happen naturally. The remedy was a deliberate policy of controlling the rate of investment so as to assist in the reduction of the market-rate of interest towards its long-term natural rate. Keynes consequently recommended that banks should offer private depositors the very low figure of 0.5% as interest, that the government should lend to local authorities and public boards at the low rate of 3% when the proposed investment schemes were new and immediate, and that the government should place a large amount at the disposal of a newly-formed Bankers' Industrial Development Company at 3% in order to re-equip the private industries of the UK. [17] This latter policy would be a subsidy to private investment in the home market so as to divert funds away from foreign investment. Thus by 1930, Keynes had fully accepted the need for conscious intervention in the economy both in specific policy terms and also in more general theoretical terms, but still conceived of this intervention as a means of getting the 'natural' movement towards equilibrium back on track.
As ^A Treatise on Money^ was designed mainly for professional economists, it gave only short intimations of Keynes's wider socio-political analysis of the slump. In October 1930 , he published an article entitled 'Economic Possibilities for our Grandchildren' that gave such a wider analysis in non-technical terms. He believed that to see the slump and associated pessimism as an indication that a long epoch of continuous economic progress was over was mistaken; rather it represented only the 'growing-pains of over-rapid changes', a painful readjustment caused by one period of development transmuting into another. [18] He expressed a firm belief that wealth creation would in the long run continue unabated, and that when in the future wealth had accumulated beyond a certain point 'there will be great changes in the code of morals'.
This reference to morals brought Keynes partially back to his youthful concern with the philosophy of ethics. In perhaps one of the most unexpected passages ever to be penned by a mainstream Western economists, Keynes then characterised the love of money purely as a possession as 'detestable' and as a 'disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease'. [19] For someone who had just published a two-volume work called ^A Treatise on Money^ this was a rather surprising admission. But it demonstrated clearly his existential anger with those (mainly in the business and financial worlds) who had acted at the end of the 1920 without any concern for the wider consequences of their actions.
[소제목] Conclusion
A number of more general observations about ^A Treatise on Money^ are worth making. Firstly, although many commentators have pointed out that it still employed the 'traditional' framework of fluctuations around an equilibrium level to provide its underlying theoretical explanation of cycles, it is noticeably how often, when providing examples of what was meant in concrete instances, Keynes turned istead to institutional and behavioral explanations such as investor psychology, traditional customs of financial behavior and context-specific economic policies. For example, when discussing the factors that influenced the movement of security prices, he declared that the market price of a stock was not determined by the value of 'the whole block of the outstanding interest' of a going concern:
Furthermore, in relation to the desired hypothetical equilibrium between savings and investments, according to Keynes there was always a 'fringe of unsatisfied borrowers' that remained after banks had made their investment loan choices, as banks lent money not only in response to changes in the interest rate obtainable from customers, but also in respect of 'the borrower's purpose and his standing with the bank'. [23] This 'borrower rationing', today officially called credit rationing, meant that bank lending could produce investment effects out of all proportion to those which corresponded to the changes that were occurring to the interest rate. Such institutional factors meant that equilibrium between savings and investment could be more difficult to create, as even if the market-rate of interest coincided with the natural rate, banks operated additional factors of control over their loans.
Secondly, ( ... ... ) One example of this potential disharmony was the tension between his apparent equilibrium-style claim that 'it all comes out in the wash', and the more specific analyses of particular instances of financial behavior that he provided, where few tendencies towards automatic harmony could be detected. Some hostile reviews picked up upon this disharmony in a major way.
For example, the Austrian economist F.A. Hayek provided one of the most substantial early criticisms in a two-part articles for the journal ^Economica^. Hayek admitted that the book was stimulating, but argued that Keynes's analysis of the concept of investment was obscure and inadequate, as it failed to consider changes in the value of existing capital across the business cycle, and how its replacement affected the investment process. This meant in turn that Keynes's explanation of cycles was incorrect, as he had not considered changes to the structure of capitalist production (the lengthening or shortening of the average period of manufacture as capital was renewed), which he had erroneously relegated to only a long-run phenomenon. Thus, what had been provided was only a variant on the existing purchasing-power fluctuation explanation of cycles. ( ... ... )
Thus the natural-rate of interest is the rate at which saving and the value of investment are exactly balanced. ... Every departure of the market-rate from the natural-rate tends, on the other hand, to set up a disturbance of the price-level... [5]Moreover, the interest rate also affected the degree of investment and the degree of savings. The higher the interest rate, the more business had to pay to borrow money in order to increase their investment, and the less they would invest; similarly, the higher the interest rate, the more saver would be encouraged to increase their level of savings. Overall, an increase in the interest rate would tend to force the rate of investment to fall relative to the rate of savings. But there was no necessary reason why the market-rate would automatically create a position of equilibrium between the two, i.e. would exactly balance savings with investment. Keynes was beginning to think in terms outside of the confines of the neoclassical approach that had so disastrously failed to prevent the onset of the Great Depression.
Enough of the analysis has now been provided to demonstrate that, above all, Keynes was in 1930 concerned to show how various types of disequilibrium were generated, and how these disequilibria would work their way through the economic system. In this sense the phrase 'it all comes out in the wash' applied not only to monetary changes, but also to changes in investment, savings, consumption and production. All the disequilibria created by the various influences affecting these economic quantities were, however, not permanent, as they created new situations out of which a tendency towards the re-establishment of equilibrium would follow. In this sense Keynes still partially adhered to the classical doctrine of automatic harmony. But where he diverged was in insisting that the economy rarely remained in a position of stable equilibrium for very long, implying that disequilibrium was a more common reality for much of the time. And if this was the case, then economists should make more of an effort to understand these periods of temporary but frequent disequilibrium, rather than assuming that a state of full equilibrium was the natural one. Keynes had reached nearly half way towards the 'new economics' that he would invent a few years later in ^The General Theory^.
One final innovative element of the 'pure' part of ^A Treatise on Money^ requires consideration. The actual rate of interest, what Keynes called the market-rate, was in reality divided into long-term market rates (for example those on government bonds), short-term market rates (for example those on three-months bills of exchange) and then the official Bank rate set by the monetary authorities. Long-term rates were 'sticky' in relation to mimicking changes in the natural-rate, while the Bank rate affected short-term rates more than long-term. Part of Keynes's originality was to direct greater attention to 'the complex of interest rates effective in the market at any time', suggesting that actual rates which prevailed in private markets were not necessarily a simple reflection of the official rate set by the Central Bank. [6] Understanding what was later called 'the term structure of interest rates' was thus important to explaining how equilibrium and disequilibrium were generated.
[소제목] The international dimension (p. 188)
The above analysis applied to economies of individual nation-states, but ^A Treatise on Money^ also contained a substantial consideration of international factors. As was explained previously, one source of increased funds for UK investment that Keynes had identified in his policy writings across the second half of the 1920s was the withdrawal of funds from overseas sources. It might consequently be expected that in ^A Treatise on Money^, Keynes would explain this element in more detail. And in a sub-section of a chapter presenting the fundamental equations of money entitled ‘Foreign Lending and the Foreign Balance’ this was indeed the case.
p. 189
He defined two basic quantities as follows. The foreign balance (B) was the excess of home-owned output placed at the disposal of foreigners (exports), over foreign-owned output in UK hands (imports). Foreign lending (L) was the excess of the amount of UK money put at the disposal of foreigners (investment abroad), compared to the amount expended by foreigners on investments in the UK. An equation related to these two elements as follows:
L＝B＋GG was the amount of gold exported out of the UK. Hence, if the foreign balance (B) were less than foreign lending (L), the difference would have to be made up through the export of gold. [7] Keynes identified the existence of a 'traditional doctrine' here, which was that foreign lending automatically stimulated the foreign balance, i.e. that increased exports automatically resulted from increased foreign investment, and hence additional exports of gold would not be necessary to balance the two. He then questioned whether this was always the case, as an outflow of gold might instead be the result, if some other conditions were also met. [8]
[7] ...In Keynes's model, the basic condition of external equilibrium for a country was that L＝B (foreign lending equalled the foreign balance). However, [:]
[8] ...
- since the foreign balance depended on relative prices at home and abroad, but foreign lending depended on relative interest rates at home and abroad, there was no automatic link between the two, and therefore disequilibrium was a possibility.[9]
- However, there was radical difference between a disequilibrium created by price level divergences, and a disequilibrium created by interest rate divergences.
- In the former case, the cure was simply a change in price or income levels without any change in interest rates, but in the latter case a change in price levels and also in interest rates would be necessary. Changes in interest rates affected the capacity for future investment, and had a greater knock-on effect in the economy than only price changes.
p.191
( ... ... ) important, as he had dealt with it both in his policy writings and theoretically, in ^A Treatise on Money^. Here he also raised additional issues on the best form of an international monetary system that deserve some consideration.
[소제목] The problem of national economy
In the second volume of ^A Treatise on Money^, devoted to the applied theory, Keynes provided a more concrete analysis of what so worried him about excess international investments by the UK. In the 19th century, the UK was the 'conductor of the international orchestra' of foreign investment, as London was the only major global trading market, and this enabled a successful ^laissez-faire^ attitude to prosper. However, British economists had erroneously 'attributed the actual success of her ^laissez-faire^ policy, not to the transitory peculiarities of her position, but the the sovereign virtues of ^laissez-faire^ as such'. [13] After 1914, New York had become a rival to London as a funnel of international investments, in part because the financial strength of the UK had been seriously affected by the war. As a result, the relative importance of the London market had been substantially reduced, and the consequences of large levels of foreign investment flowing out of the UK would be greater.
This led Keynes to consider a wider question: the problem of national autonomy with respect to the international standard of value and fixed exchange rates, which was another reason to question the wisdom of the UK using the gold standard. In an ideal international gold standard system, differences in national interest rates inevitably produced gold flows towards those countries with higher rates, until uniformity of rates was re-established. However, for Keynes this would mean that the degree of an individual country's power of independent action over interest rates 'would have no relation to its local needs'. [14] Thus, the dilemma of an international monetary system was to maintain the advantages of local currency stability, and 'to preserve at the same time an adequate local autonomy for each member over its domestic rate of interest and its volume of foreign lending'. [15] For Keynes, the diminution of national autonomy that the use of the international gold standard system entailed was another reason why the UK should not have been using it after 1925. ( ... p. 192 unavailable ... )
p.193
( ... ... ) propagating 'slump' psychology. The stock market collapse in 1929 was only a secondary cause of the economic decline, but once it had occurred, it aggravated the situation by further discouraging investment and lowering the natural-rate of interest.
A lasting economic recovery would not occur until the market-rate of interest fell internationally to near its pre-war level, but this would not happen naturally. The remedy was a deliberate policy of controlling the rate of investment so as to assist in the reduction of the market-rate of interest towards its long-term natural rate. Keynes consequently recommended that banks should offer private depositors the very low figure of 0.5% as interest, that the government should lend to local authorities and public boards at the low rate of 3% when the proposed investment schemes were new and immediate, and that the government should place a large amount at the disposal of a newly-formed Bankers' Industrial Development Company at 3% in order to re-equip the private industries of the UK. [17] This latter policy would be a subsidy to private investment in the home market so as to divert funds away from foreign investment. Thus by 1930, Keynes had fully accepted the need for conscious intervention in the economy both in specific policy terms and also in more general theoretical terms, but still conceived of this intervention as a means of getting the 'natural' movement towards equilibrium back on track.
As ^A Treatise on Money^ was designed mainly for professional economists, it gave only short intimations of Keynes's wider socio-political analysis of the slump. In October 1930 , he published an article entitled 'Economic Possibilities for our Grandchildren' that gave such a wider analysis in non-technical terms. He believed that to see the slump and associated pessimism as an indication that a long epoch of continuous economic progress was over was mistaken; rather it represented only the 'growing-pains of over-rapid changes', a painful readjustment caused by one period of development transmuting into another. [18] He expressed a firm belief that wealth creation would in the long run continue unabated, and that when in the future wealth had accumulated beyond a certain point 'there will be great changes in the code of morals'.
This reference to morals brought Keynes partially back to his youthful concern with the philosophy of ethics. In perhaps one of the most unexpected passages ever to be penned by a mainstream Western economists, Keynes then characterised the love of money purely as a possession as 'detestable' and as a 'disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease'. [19] For someone who had just published a two-volume work called ^A Treatise on Money^ this was a rather surprising admission. But it demonstrated clearly his existential anger with those (mainly in the business and financial worlds) who had acted at the end of the 1920 without any concern for the wider consequences of their actions.
[소제목] Conclusion
A number of more general observations about ^A Treatise on Money^ are worth making. Firstly, although many commentators have pointed out that it still employed the 'traditional' framework of fluctuations around an equilibrium level to provide its underlying theoretical explanation of cycles, it is noticeably how often, when providing examples of what was meant in concrete instances, Keynes turned istead to institutional and behavioral explanations such as investor psychology, traditional customs of financial behavior and context-specific economic policies. For example, when discussing the factors that influenced the movement of security prices, he declared that the market price of a stock was not determined by the value of 'the whole block of the outstanding interest' of a going concern:
... but by the small fringe which is the subject of actual dealing ... Now this fringe is largely dealt in by professional financiers ... It is natural, therefore, that they should be influenced ... by their expectations on the basis of past experience of the trend of mob psychology. [20]
( ... ... )
Furthermore, in relation to the desired hypothetical equilibrium between savings and investments, according to Keynes there was always a 'fringe of unsatisfied borrowers' that remained after banks had made their investment loan choices, as banks lent money not only in response to changes in the interest rate obtainable from customers, but also in respect of 'the borrower's purpose and his standing with the bank'. [23] This 'borrower rationing', today officially called credit rationing, meant that bank lending could produce investment effects out of all proportion to those which corresponded to the changes that were occurring to the interest rate. Such institutional factors meant that equilibrium between savings and investment could be more difficult to create, as even if the market-rate of interest coincided with the natural rate, banks operated additional factors of control over their loans.
Secondly, ( ... ... ) One example of this potential disharmony was the tension between his apparent equilibrium-style claim that 'it all comes out in the wash', and the more specific analyses of particular instances of financial behavior that he provided, where few tendencies towards automatic harmony could be detected. Some hostile reviews picked up upon this disharmony in a major way.
For example, the Austrian economist F.A. Hayek provided one of the most substantial early criticisms in a two-part articles for the journal ^Economica^. Hayek admitted that the book was stimulating, but argued that Keynes's analysis of the concept of investment was obscure and inadequate, as it failed to consider changes in the value of existing capital across the business cycle, and how its replacement affected the investment process. This meant in turn that Keynes's explanation of cycles was incorrect, as he had not considered changes to the structure of capitalist production (the lengthening or shortening of the average period of manufacture as capital was renewed), which he had erroneously relegated to only a long-run phenomenon. Thus, what had been provided was only a variant on the existing purchasing-power fluctuation explanation of cycles. ( ... ... )
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