contra Krugman

Paul Krugman writes that Keynesian thought has progressed.

I disagree in comments with the usual

I do not think that Keynesians accept that there is a natural rate of unemployment. The concept is inconsistent with hysteresis. OJ Blanchard and LH Summers are definitely Keynesians. They presented a model without a natural rate in 1986. I don’t know about Blanchard but Summers and his former student JB DeLong continue to stress hysteresis (with an open mind about the sum of autoregressive coefficients of unemployment on lagged unemployment so there model might or might not be consistent with a natural rate but with certainly no evidence of any faith in policy invariant stationarity). Also there is this guy named Krugman (have you heard of him) who shows no sign of faith in a natural rate and writes about life long (OK not permanent but life long) effects of low demand on labor market experience.

Finally Wren Lewis refers to the hysteresis effects of the Thatcher deflation when he isn’t referring to New Keynesian models with no such effects as successful cutting edge models and great progress on 1960 vintage Keynesian analysis of the possible Phillips curve (by Samuelson and Solow who extensively discussed both outward shifts due to increased expected inflation and outward shifts due to cyclical unemployment becoming structural).

Note also that without using the name “Phillips” because he wrote beforee Phillips, Keynes specifically warned that there wasn’t a stable relationship between output and inflation. He noted the case of “flight from the currency” not yet named “hyperinflation” by Cagan rather anticipating the work of say Sargent.

Now it is true that Keynesians were convincedby Friedman mostly that velocity is fairly stable and predictable. But it isn’t.

I assert that Keynesian thought hasn’t made a both scientific and theoretical advance since Keynes where by scientific I mean actually useful in predicting out of sample and by theoretical I mean not just new parameter estimates made with data not available to Keynes using computers not available to Keynes.

Some semi prominent New Keynesians were amused enough to try to come up with examples. They failed.

In any case certainly not the absense of a stable expectations unaugmented Phillisp curve (as predicted by Keynes) nor the discovery of the LM curve which uh you know doesn’t exist.

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