Rod O’Donnell, ‘Keynes and Marx: Towards constructive Dialogue’

2017 Political Economy Seminar Series

Rod O’Donnell (University of Technology Sydney), ‘Keynes and Marx: Towards constructive Dialogue’

Date: Thursday 24 August 2017

Time: 4pm-5.30pm

Location: Merewether Seminar Room 398

Abstract: Both Keynes and Marx were philosopher-economists, creative thinkers, and theoretical and practical revolutionaries.  This presentation revisits the complex question of the relationships between their philosophies, economic theories and policies, and politics.  Since every conceptual framework has its strengths and weaknesses, one of its aims is to explore how their respective frameworks might assist in filling gaps, or overcoming deficiencies, in the other without damaging fundamental characteristics.   Given the neoliberal ascendancy, the historical weakness of those critical of capitalism, and the absence of Cold War antagonisms, it seeks a constructive dialogue focused on central similarities and differences.

There are strong common elements.  Early in their careers, both thinkers studied philosophy and economics, both approached capitalism as a system of interacting elements (not just an ensemble of independent individuals), both were critics engaged with analysing and removing its non-optimal outcomes (especially unemployment and inequality), and both proposed forms of socialism accompanied by strong state-driven policies to improve society.  Both were also utopians with long term visions of ethically better futures where present non-optimalities were banished or minimised, comfortable lives were accessible to all, and society looked very different from current capitalsm.  Marx’s goal of ‘from each according to their ability, to each according to their needs’ is entirely compatible with Keynes’s goal of huge transfers of time from the sphere of necessity (work) to the sphere of freedom (leisure, self-development, and social engagement).

Despite similarities in ends, there are stark differences in means due to different conceptions of capitalism, exploitation, socialism, and rational action in pursuit of social transformation. These differences are related to the central, unsolved, and perhaps unsolvable, problem of left politics: reform versus revolution. The philosophical, economic and political foundations of their differences are examined, and suggestions proffered as to the contributions that each theoretical framework might make to the other, without suggesting that a global synthesis is possible. Absent dogmatism, one can either be a follower of Marx with a more enlightened respect for Keynes, or a follower of Keynes with a more enlightened respect for Marx.

What might Keynes offer Marx?  Theoretically, he supplied more sophisticated accounts of decision-making under uncertainty in determining investment and consumption, and the interaction of these aggregates in generating levels of output and employment via the principle of effective demand.   In value theory, although largely expressing his thought in Marshallian terms, his theory is nevertheless open to using alternative theories of value. Modern Marxism can draw on this flexibility by stepping back from previous attachments to the old labour theory of value so as to also accept other exploitation-based theories of value based on new types of production in the modern world. In policy terms, Keynes provided practical, specific blueprints for economic and social change to improve system outcomes in the short term ahead of larger future changes. And his reformist politics are highly relevant where revolutionary upheavals are very unlikely but greatly improved outcomes for weaker groups/classes are still needed.  His ‘liberal socialism’ provides important avenues for exploring disaster-averse options for the longer journey to utopia,  and a necessary emphasis on liberty to avoid totalitarianism.

How might Marx assist Keynes?  In terms of power, he adds much more sophisticated understandings of capitalism as a system grounded on entrenched self-interest, group/class conflict, state capture by capitalist ideology and interests, and the exploitation of weaker groups by stronger ones.  Historical materialism is helpful in counterbalancing Keynes’s idealism which, in seeking its radical changes, relied too much on reason and the power of ideas alone. And class-based politics helps counteract Keynes’s assumed political neutrality of the civil service.

Improving society, let alone approaching utopia of whatever variety, will require coalitions of similarly-minded people, many ongoing political struggles as well as constant persuasion and significant social support within democratic environments.

About the speaker: Rod O’Donnell joined UTS in 2008 as Professor of Economics. Formerly Professor of Economics at Macquarie University (1995-2007), he has an outstanding reputation in research and teaching. He describes himself as a philosophical or conceptual economist, in the sense that conceptual matters are always fundamental, prior to theorisation, and determine the applicability of mathematical tools. This perspective has emerged from his educational formation in engineering, philosophy and economics. His research interests are broad and have generated journal papers, book chapters and books over a number of fields, but are now primarily focused on the thought of JM Keynes in all areas, pluralist economics, Post Keynesian economics, and the foundations of economic reasoning. His major project is the preparation of a large multi-volume edition of Keynes’s remaining significant unpublished writings. In teaching, he has forged innovative methods for the development of rich sets of graduate attributes, and holds five teaching awards (1997-2013), including a 2013 Excellence in University Teaching Award from the Australian Government.