Saturday, June 16, 2012

Unlearningecon defends Keynes

This is a very good post by Unlearningecon, mostly addressing Hazlitt's low quality arguments against Keynes.

At the end, he discusses the notion that Keynes had totalitarian sympathies. Unlearningecon writes:

"As a brief note on Keynes totalitarianism: this seems to be based on Keynes mentioning several times that certain policies – both flexible wages (of which he disapproved) and various exchange rate mechanisms & capital controls, as well as active fiscal & monetary policy (of which he approved) – are more easily applied under totalitarian conditions. These observations are quite clearly true -  any economic policy, implemented word for word, is easier to apply under totalitarian conditions. This does not mean that totalitarianism is desirable, and you will not find Keynes saying anything of the sort. Furthermore, even if he did say such things, this is irrelevant to his economics."

Raoul, the commenter on my blog who raised this point, really bungled the issue of Keynes claiming that flexible wages could only be uniformly reduced as a matter of wage policy (personnel policy, basically - wage setting by bargaining betwen firms and workers, as opposed to changes in the price level) in an authoritarian society. He did say this. This was his primary argument for not wanting to reduce wages through "wage-policy". He essentially said look, if all wages have to be reduced and you do it by wage policies in a free society you get all kinds of relative distortions as well; that's why relying on wage policy for this isn't the best way to do it.

So that point is dead in the water. Raoul mistakes Keynes rejecting something because it's authoritarian for embracing it because it's authoritarian!

But then the other point is the old German preface. Unlearningecon essentially concedes the premise of these attacks when he writes "any economic policy, implemented word for word, is easier to apply under totalitarian conditions". That is not the meaning of the German preface. Too many people read that one passage without reading the whole thing, which is actually a short intellectual history of the German Historical School and it's shortcomings. Keynes offers Keynesianism as an alternative to them. It is addressed to these German economists and everything about "working better in a totalitarian society" makes sense when you read it that way. Not only does that phrasing make more sense that way (really - Keynes supporting totalitarianism? - that shouldn't pass the smell test for people), but it doesn't sound as out of place when you interpret it that way - it's more in the context of the rest of the preface.

My extended discussion of the German preface is here.

I really need to write this up more formally some time soon.

Instead of the passage you always hear cited, I think people should be citing this one: "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!"

That is more or less the heart of the preface.


  1. I bet the Keynes critics will find another attempt to find a zinger to use against him.

    "It is, after all, a feature of German character to find satisfaction in a theory."

    Generalizing Germans?! Keynes was a cultural chauvinist and an ethnic bigot!

    1. "Geez, Keynes aggregated economic terms just like Hitler aggregated Jews in concentration camps."

    2. New game?

      "Full employment? The USSR had full employment"

      Oh wait, that one has actually been used.

  2. "Hazlitt's low quality arguments against Keynes"

    To say that is to suppose you have already read the entire book.
    What is the point to make a criticism when you didn't read the book ? To criticize a book without reading it ... is a pure nonsense. And to applaud criticisms by others without reading the book is also a pure nonsense.

    You should read this, instead.

    I'm not impressed by Unlearning's comment. As I said before, if these arguments are the best you have, your side is in more trouble than I thought.

    1. Why should we read the entire book when Hazlitt doesn't understand labour supply curves, *agrees* with Keynes about LP but doesn't realise it, and clearly spends half his time making snarky comments rather than constructive debate. Where he does make criticisms they are just base don stupid misunderstandings, like his tomatoes example.

      I will say the same thing I said to you on my blog: you are not making arguments. All you're doing is saying 'haha, is THAT the best you can do?' Your piece on mises highlights arguments that have been discussed over and over, and you'll have to come up with something new if you want to save Hazlitt.

  3. Daniel,

    To repeat what I have written at Unlearningecon’s, you misrepresent my words by saying I think Keynes embraces these solutions. Indeed, I have plainly seen that the literal meaning is that Keynes rejects them. My point was to direct the attention on the reasons why he rejects theses solutions.

    He rejects them essentially because the conditions are not met for their success, and not because they are intrinsically bad or immoral. Indeed, he writes that these solutions could succeed only in an authoritarian state. Now, as Keynes doesn’t live in such a state, he rejects them as unfitted. He doesn’t say if they are or not immoral. I think this is the literal sense of theses sentences.

    To go further, I believe that the idea Keynes had in mind when he wrote these lines was “What a pity people hold so stubbornly to their freedom! I submit myself to their whims, but what a pity, they don’t know where is there own interest! Things would have been simpler for us if we lived in an authoritarian state! Naughty citizens!”.

    Now I don’t pretend Keynes was a secret member of the NSDAP. I don’t pretend either that he was a totalitarian. But I think it’s crystal clear that he despises economic freedom and that he has obvious authoritarian leanings.
    For the detail, I will answer you directly on the post you devote to this topic.

  4. Oh yes. Full laissez faire in the form of the complete recognition of private property in physical things and bodies with strict enforcement of the non-aggression principle as applied universally to commercial, sexual and intellectual pursuits is easier to apply under totalitarian conditions. These observations are quite clearly true - any economic policy, implemented word for word, is easier to apply under totalitarian conditions.

    How deep. I'm finally convinced.

  5. Of course, as the Imperious Lord Keynes has explained it's just a coincidence that Hitler employed "stimulus" and it is "contemptibly ignorant" of me to point that out.


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