Sunday, May 1, 2011

Keynes and the Nazis

Tyler Cowen joins a growing list of people who are citing the German preface to the General Theory to argue that Keynes had at least some sympathy with totalitarianism.

It's absurd. It's wrong. It's a complete misreading of the preface.

This is the passage that I think gets to the heart of what Keynes was trying to do in the preface: "But could I hope to overcome the economic agnosticism of Germany? Could I convince German economists that methods of formal analysis constitute an important contribution to the interpretation of contemporary events and to the shaping of contemporary policy? It is, after all, a feature of German character to find satisfaction in a theory. How hungry and thirsty German economists must feel having lived all these years without one!"

Most of the preface involves Keynes tracing out the history of economic thought in Germany, through the German Historical School which rejected Ricardianism for the simple reason that German institutions didn't always coincide with Ricardian assumptions. Predictably, a school of thought grounded in institutional and historical analysis emerged instead. Keynes thought this was unfortunate, and that there was a role for "formal analysis". He thought his theory could provide that role, because he thought his theory was sufficiently general to be useful for economists living with less-than-Ricardian political institutions (like totalitarianism).

The German preface is an intellectual history and a methodological argument directed at the German Historical School.


I go through the preface line by line here.

Here's a challenge - don't comment on this post without having read the preface from beginning to end.


  1. I have heard it said many times that Keynes’ fluency in German was weak and that his failure to fairly review and analyze Mises “Theory of Money and Credit” was due to this. Is this true? Does it have any relevance to Keynes’ writing here? He was clearly not a totalitarian, but I think the quote surely does magnify the top-down nature of his economics.

  2. You are right.

    Contrast Keynes' preface with this astonishing statement by Mises:

    "It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error”.

    Mises, L. von, 1978. Liberalism: A Socio-Economic Exposition (2nd edn; trans. R. Raico), Sheed Andrews and McMeel, Mission, Kansas. p. 49.

    Find me passage in Keynes' writing where he declares fascism "saved European civilization", even if a "emergency makeshift".

  3. "Tyler Cowen joins a growing list of people who are citing the German preface to the General Theory to argue that Keynes had at least some sympathy with totalitarianism."

    He does not make this argument at all and to my knowledge no one else has made that argument either.

    My argument is quite different; my argument is that an economic hypothesis that works better in a totalitarian society is not fit for a liberal society. I've been rather clear about that all along.

    You know, if Keynes wanted to be better understood he should have written far more clearly than he did; instead he comes off as intellectual coward much of the time.

  4. John,

    The tale of Keynes' understanding of German comes from a footnote in his Treatise on Money, where Keynes comments "in German, I can only clearly understand what I already know — so that new ideas are apt to be veiled from me by the difficulties of the language." Many Austrians claim that this is why Keynes was so unkind in his review of Mises' Theory of Money and Credit; the printing Keynes read was written in German.

    In any case, I do tend to find myself distressed at how often my fellow non-Keynesians seem to almost desire to bend over backwards to display Keynes in the worst possible light. A story from the WSJ a couple years ago noted the following about Keynes:

    "During a 1934 dinner in the U.S., after one economist carefully removed a towel from a stack to dry his hands, Mr. Keynes swept the whole pile of towels on the floor and crumpled them up, explaining that his way of using towels did more to stimulate employment among restaurant workers."

    (Full story:

    I saw this anecdote making the rounds on libertarian blogs, and used as evidence of how Keynes was prone to take his desire for increasing employment to absurd levels: what a crank, right? Well, I suppose that's one possible interpretation of his actions. Another, far more simple one is that this event was a sign of a quirky sense of humor, indulging in a bit of self satire. Keynes certainly had his fair share of personality quirks. I'd have been nervous to shake hands with the guy. I just really wish my fellow libertarians wouldn't be so quick to jump to the worst possible interpretation of every anecdote. If that's the battle we're intent on fighting, then we're going to be absent in the battle of ideas.

  5. John -
    I have no idea how Keynes's German was - he is famously witty and self-deprecating and Bruce Caldwell interprets that comment of his to be self-deprecating. I think that sounds reasonable, but clearly that's not something I can know.

    I think this preface demonstrates that Keynes cares a great deal about the progress of economic science and collaboration with other economic scientists internationally. I don't think it offers a shred of evidence that he has a "top-down" approach to things, much less that he is sympathetic to totalitarianism.

  6. LK -
    I resisted posting that statement from Mises. That, in my mind, is unambiguous. You can explain it, of course. It's a lesser of two evils approach that Mises took to a very, very desperate situation. Mises is no fascist. But it is frustrating the kind of unfounded crap Keynes gets, when this line by Mises - which is more direct and explicit than anything anyone has dug up on Keynes - doesn't even seem to make a dent in the dialogue.

  7. Kevin -
    It's a quirky sense of humor, but I actually wouldn't be surprised by that anecdote. He was quirky - he was witty - but he was also unapologetically aristocratic and presumably willing to have waiter pick up things for him to make a point or a joke to a dining friend. Like the quality of his German - there's no way I or anyone else can know for sure, but it sound plausible to me.

    Harrod tells another very similar story about Keynes throwing towels on the floor of a hotel for the wait staff to clean up, making the same point to Calvin Hoover - an American Keynesian. Calvin Hoover is an interesting character because he traveled in the Soviet Union and wrote - at Keynes's urging - a book that made the case that the collectivism of the Soviet Union and the collectivism of Nazi Germany were essentially one and the same.

  8. Gary -
    Tyler said that Keynes had an enthusiasm for socialist planning.

    What more do you want?

  9. Daniel,

    No, what he wrote was this:

    "Nonetheless, in Keynes’s time enthusiasm for significant socialistic planning was common. Keynes had it too, at least for a while in the 1930s. It was a milder planning than the worst ideas circulating at the time, but it’s fair game to contrast it with the anti-planning sentiments of Hayek."


    As a person who used to work in a fair number of restaurants I'd say mostly Keynes was an asshole doing that. Actually, I have a better term, asshat. Making more sidework for people who work in restaurants, hotels, etc. is not what I would call humorous or quirky; I'd call it a dick move and a sign of contempt for same people.

  10. Gary,

    I'd be hard pressed to disagree with your assessment of Keynes' antics on that occasion. Daniel also notes that Keynes was an aristocrat who wouldn't have thought twice about having the worker picking up after him. So certainly, looking at that event and thinking "What a jerk" would be an appropriate response.

    But my point was in a slightly different direction. I think he acted like a jerk to indulge his own sense of humor. But many others (David Boaz, for example interpreted that event to show his dedication of make work projects bordered on the neurotic.

    Those are not quite the same thing. You can criticize him for acting like a jerk on that occasion, and fairly so. (I'll resist the temptation, though, because we all have flaws and personal failings, and I could be swiftly knocked off any pedastal on which I tried to stand.) But to invoke that anecdote as an attack on his overall economic theory is off track, if you ask me.

  11. Kevin,

    Well, again, my first reaction is: "What an asshole."

  12. Hmm, my comments keep heading into the ether.

  13. Kevin,

    Anyway, it sounds like that sort of thing that Keynes was commonly engaged in, which IMO doesn't put him in much good light. Your quality as a human being IMO says a lot about the quality of your thoughts.

  14. Daniel,

    "But it is frustrating the kind of unfounded crap Keynes gets, when this line by Mises - which is more direct and explicit than anything anyone has dug up on Keynes - doesn't even seem to make a dent in the dialogue."

    Mises also founded his entire life to establishing a positive case for laissez-faire economics - not to mention the story of him fleeing Nazi Germany during the war. It's an ocean of fighting state intervention and an island of admitting the state is capable of some good (which he really DID believe - Mises was no anarchist.)

    Compared to Keynes who, you must admit, is not readily seen as the "last knight of liberalism" but who is more apt to endorse specific state measures that many of us would consider "top-down."

  15. "My argument is quite different; my argument is that an economic hypothesis that works better in a totalitarian society is not fit for a liberal society."

    Hmm. That sounds absurd. Let's say we discover that a law against murder works better in a totalitarian society than a liberal one. Would that make laws against murder unfit for liberal society?

  16. "Your quality as a human being IMO says a lot about the quality of your thoughts."

    So the fact that Newton was a petulant jerk means his physics was no good? Godel being a nutjob invalidates his mathematics?

  17. Gene,

    "Says a lot" does not mean "invalidates."

    "Would that make laws against murder unfit for liberal society?"

    If it works better in a totalitarian society then I'd find such a law suspect at best (for a whole bunch of reasons - including of course the fact that totalitarian states tend to cook their books). You can't just banish everything you know about totalitarian societies while making such an assessment and Keynes was rather stupid and/or ignorant in doing so.

  18. "But it is frustrating the kind of unfounded crap Keynes gets, when this line by Mises - which is more direct and explicit than anything anyone has dug up on Keynes - doesn't even seem to make a dent in the dialogue."

    "My third example concerns population.

    1)The time has already come when each country needs a considered national policy about what size of population, whether larger or smaller than at present or the same, is most expedient.

    2)And having settled this policy, we must take steps to carry it into operation.

    3)The time may arrive a little later when the community as a whole must pay attention to the innate quality as well as to the mere numbers of its future members."

    We have too many people and the wrong ones are breeding! What should we do, Keynes?

  19. Gary,

    "If it works better in a totalitarian society then I'd find such a law suspect at best..."

    You are misinterpreting what Keynes said. Keynes did not say that his theory "worked" better in a totalitarian society. He said it would be "more easily adapted." That's not at all the same thing.

  20. Kevin,

    Say I grant you your point; that looks just as damning to me.

  21. H/T to Prof. White:

    "I should therefore conclude your theme rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue." - From Keynes' letter to Hayek on "The Road To Serfdom"

    What the hell is "moderate planning?" Also, does this not strike everyone as absurdly naive on Keynes' part?

  22. '"Says a lot" does not mean "invalidates." '

    Alright, so just what does Newton's immature personality say about his calculus or his laws of motion?

  23. "If it works better in a totalitarian society then I'd find such a law suspect at best..."

    Gary, here's what Wikipedia says in "Crime in Russia":
    "According to Western experts, robberies, homicide and other violent crimes were less prevalent in the Soviet Union than in the United States because the Soviet Union had a larger police force, strict gun controls, and had a low occurrence of drug abuse."

    So, it turns out that a policy of preventing robberies and homicides works better in a totalitarian society. Are you now suspicious of such a policy?

  24. 'What the hell is "moderate planning?"'

    Gary, are you *really* puzzled by this, or is this just for rhetorical effect?

    Look, I'm going out of town this weekend. I might take several approaches:

    * I could say, "Hey, I'm just going where the breeze takes me!" That would be NO PLANNING.

    * I could get a notebook and map out an hour-by-hour agenda for the entire weekend. That would be HEAVY PLANNING.

    * I could say, "Well, I know I want to get to Milford Saturday morning, and I surely want to return to Brooklyn in time to catch the Celtics game on Sunday. And I'll probably go to mass on Sunday morning." That would be MODERATE PLANNING.

    That really wasn't a very abstruse concept, was it?

  25. Gary, why do you think quoting someone who obviously despises Keynes and wants to make him look as bad as possible should sway anyone?

    And, if everything in those quotes turned out to be absolutely true, what would it say about the value of his economic theories?

    NOTHING, Gary, that's what.

  26. To answer your earlier allusion, yes Gary - I've been deleting several of your comments.

    The comments I've been deleting are entirely off topic, quoting someone who is entirely unsourced, and that are a distraction from the discussion.

    Keynes might have been somewhat of an anti-Semite. I honestly don't know the details, but it wouldn't surprise me. He the sort of anti-Semitism you were attributing to him with no proof was - as Gene said - a little unconvincing and certainly not relevant to this discussion.

    Keynes also had a different sex life than most people. I've posted on it before, in fact. Some people like promiscuous sex with other men. Maybe Gary has a problem with that - I don't know. But we're not going to talk about it here, at this time, particularly as one of a stream of posts that do nothing to explore the thought of John Maynard Keynes on economic methodology, the German Historical School, the Nazis, or economic planning.

    I'm leaving the eugenics comments. I personally have seen no evidence Keynes advocated anything more than voluntary sterilization and birth control motivated by some classism and misplaced concerns about overpopulation. Any tie to Nazi eugenics strikes me as spurious, but since that is more relevant than his sex life, I'm leaving it up.

  27. Daniel,

    It is rather funny that you would delete the comment then comment on the deleted comments. It is your blog obviously, but it makes you look like an asshole.

    It has nothing to do with whether he liked to have sex with men; it has to do with the fact that he had lots of nasty things to say about Jews but he has no problem with a fling with a "Jew boy." The irony is rather bizarre and it is rather obvious what I am getting.

    Trying to paint me as some sort of homophobe is the lowest of the fucking low and kind of typical of liberals. I will not be in anyway coming back to this blog.

  28. Gary -
    1. Don't call me an asshole.

    2. You mentioned that your comments were disappearing and rather than being secretive I thought I'd be open about it so you don't keep posting the sort of comments I find to be a distraction.

  29. Dude, he didn't paint you as "some sort of homophobe"... One thing I can't stand is the inflated semantic range that that word has acquired. It's not prudish or repressed to have a problem with "promiscuous sex", and holding certain traditional moral beliefs about sexuality doesn't (necessarily) constitute homophobia.

    Anyway, I think if Daniel thought you were a homophobe he wouldn't hesitate to say so.

  30. Daniel,

    (1) I would never do such a thing on my blog; I'd think it a dick move on my part.

    (2) That's fine, but then commenting on something you dislike then erasing is rather lame. And of course keeping all the comments around my comments that comment on my comments, well, that makes very little sense as well. Again, your blog though.

    (3) To top it all off, trying to insinuate that I am some sort of homophobe sort of took the cake really. Remember, I'm not of one of the monotheistic desert religions; I don't carry around a bunch of baggage from Leviticus, etc.

    (4) I'm out. The the marginal utility of this blog has decreased to, well, nothing.

  31. Evan,

    "It's not prudish or repressed to have a problem with 'promiscuous sex'..."

    Actually it is.

    We live in the era of the condom and birth control after all; the "traditional moral beliefs" (and what is and is not traditional is always disputed) are a bit like the admonition against eating pork - kind of helpful (if mythologized) at one point in time, but increasingly pointless.

    I'm out. Peace.

  32. I think you mistake this decade for some previous one where "Promiscuity? Cool! Wanting to set limits on one's penis? How lame!" was more in vogue.

    With regard to modern technologies, I take it that while children and diseases are serious consequences of sex that can be controlled by us a bit more so than in past eras, an equally serious consequence of sex is the intimacy it allows or disallows between two people.

    Making sex masturbatory by eliminating exclusivity (and so making yourself the only constant of your sexual unions) or eliminating physical consequences (and so making yourself the only end of your sexual unions) has certain affects on one's sexual life. I'm not expecting everyone to act according to my own beliefs about sex, and I don't really care what others do for the most part, but there's nothing pointless about certain traditional views of sexuality that insist upon monogamy or believe that sexual action should be ordered toward biological sexual purposes of reproduction and not merely be about erotic desire.

  33. ... I know I'm taking this conversation way off course, but I'm interested in seeing how many times Gary will say he's not saying anything else. We're up to three so far.

  34. "I think you mistake this decade for some previous one where 'Promiscuity? Cool! Wanting to set limits on one's penis? How lame!' was more in vogue."

    While the Promise Keepers make a good show of things, the current world average for sex partners by an individual in a life time is a little over eight. Obviously the numbers vary; Austria still has the highest number of sex partners for men (~30) and New Zealand for women (~23) if I recall those numbers correctly.

    "...but there's nothing pointless about certain traditional views of sexuality that insist upon monogamy..."

    The main reason they insisted on such was to control the bodies of women; they being rather patriarchal societies run almost exclusively by men. They arise almost wholly from a desire to make sure a man's offspring is his own for various purposes related to the transfer of property generationally, etc. In societies where women have a choice over their sexual partners, and that choice is a meaningful one, they don't have those sorts of problems with male domination nearly as much. That choice of course breaks down traditional sexual mores and leads to greater sexual freedom.

  35. Evan,

    You're more than welcome to continue this conversation on my blog:

    I'll start an open thread even. I'll call it "Evan Defends Traditional Sexual Relations Open Thread."

  36. Evan predicted to me over gmail it would be two or three days before you came back :)

  37. re: "You're more than welcome to continue this conversation on my blog"

    Hey! Stop siphoning off my traffic! :-D

  38. I don't doubt lots of folks have sex with lots of folks... but I can't imagine Austrian men or Kiwi women give nearly as much of a damn about arguing down monogamy as you do. Really, what's the point in getting all bent out of shape when someone feels it's important to strictly regulate their sexual life? Do you scowl at dieters or people who avoid watching TV too? Your brand of libertinism strikes me as pretty lock-step and monotonous.

  39. ...I'm also not sure why the political reasons of traditional patriarchies would invalidate, say, JPII's theology of the body. You make the mistake of Nietzsche in thinking that drawing up a genealogy settles a matter (Morgenröte Bk. 1 Para. 95), as if traditions of reasons don't evolve over time. You make a good point that old instrumentalisms don't hold as much current use... why not carry that idea where it leads and conclude that existing sexual beliefs that resemble old ones probably don't resemble the old ones as far as instrumentalist justifications are concerned.

  40. Evan,

    You're welcome to engage in a discussion about this on my blog:

    I will answer your questions there.

  41. Wait.

    Disputed readings of the preface to a famous economic and social treatise?

    Oh. The irony.

  42. Gary: "I would never do such a thing on my blog; I'd think it a dick move on my part."

    Maybe you don't have equally obnoxious commentators?


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