Singing Keynes’ praises

Monday night’s BBC documentary Keynes in the Masters of Money series will be followed by two others on Hayek and Marx. The first programme was brilliantly presented by Stephanie Flanders, though perhaps it was too strong in its praise of its subject. The uncritical nature of the programme is not necessarily inappropriate as Stephanie Flanders made clear that she was presenting Keynes as a hugely important figure in post-1930s Britain, rather than as being correct on all matters of economics. Perhaps, by way of balance, Hayek will get the same enthusiastic treatment next Monday.

As a person, Keynes was portrayed by his supporters as a “we are all in this together” sort of a chap. Some might find this difficult to square with his support for eugenics. There is a temptation amongst those of a left-leaning persuasion to assume that those who want to use deliberate government intervention to avoid misery are necessarily more concerned for the plight of all the people than those of us who believe in freedom – this is by no means the case.

Similarly, there was much discussion of his supposed internationalism and his efforts to ensure that we had a world monetary order that enabled the weak to prosper alongside the strong. However, in 1933 Keynes said: “I sympathise, therefore, with those who would minimise, rather than with those who would maximise, economic entanglement between nations.[L]et goods be homespun whenever it is reasonably and conveniently possible. I am inclined to the belief that, after the transition is accomplished, a greater measure of national self-sufficiency and economic isolation between countries than existed in 1914 may tend to serve the cause of peace.” This was not an isolated statement on such matters.

The issue of whether Keynes was right or wrong on the issues we today call “Keynesian” was skirted round. Apart from my own brief appearances, and criticisms from Kenneth Rogoff and some pertinent comments from David Laws, commentators had few reservations.

This article originally appeared on the New Statesman blog. Continue reading here.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

5 thoughts on “Singing Keynes’ praises”

  1. Posted 19/09/2012 at 19:30 | Permalink

    Philip does well to note that the programme hardly concerned itself with whether Keynes himself, or even what we now think of as ‘Keynesianism’, was right in his opinions and proposed policies. For example, Keynes in his most famous book, the General Theory, quite explicitly advocates ‘flexible money’ (i.e. currency debasement) rather than ‘flexible wages’ (i.e. letting the price mechanism work in the labour market). As a result of following Keynesian policies, the pound has lost 98 per cent of its purchasing power in my lifetime, while unemployment today, as for many years past, seems unnecessarily high. Hardly a triumph? To be fair, the programme did admit that the ‘Keynesian’ policies followed by Hoover and Roosevelt failed to bring the United States out of the Great Depression. We are already getting impatient at our current failure to recover from the crisis of 2008, only four years later. But the Great Depression lasted three times as long, from 1929 to 1941! Some years ago, David Henderson gave a series of radio talks under the title ‘The Unimportance of Being Right’. It may be that we attach too much weight to debating cleverly (at which clearly Keynes was a master, if not always a very scrupulous one) and too little to being basically right. I wonder if this is why Hayek often seems to get too little credit in public discussions and Keynes too much. Like Philip, I look forward to seeing how next Mondays programme treats Hayek.

  2. Posted 20/09/2012 at 11:22 | Permalink

    I must revisit the programme; I thought Flanders ran the classic myth in which Hoover’s retrenchment was contrasted to FDR’s open chequebook. Ironically she focused on the Hoover Dam which wasn’t a “New Deal” project; Congress gave the go-ahead in 1928 to construct the dam.

    David, is not dating the end of the Great Depression at 1941 (US entry into the War) offering support to the notion of war prosperity? As Robert Higgs concluded in “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s”:

    “The war itself did not get the economy out of the Depression. The economy produced neither a “carnival of consumption” nor an investment boom, however successfully it overwhelmed the nation’s enemies with bombs, shells, and bullets.”

  3. Posted 20/09/2012 at 16:04 | Permalink

    Tony – you are correct that Hoover was contrasted with FDR that way. However, at least Flanders did cast doubt upon whether all these projects were responsible for bringing the US out of depression (they clearly were not, because depression did not end until 1946). As a watcher, it was easy to perceive bias because there was just so much film of these projects (also the Arizona project in 2008) and of the jobs that they created and Stephanie Flanders only really cast doubt on them in one sentence.

  4. Posted 24/09/2012 at 15:31 | Permalink


    You are right that Flanders did try and suggest that Hoover was against fiscal expansion and then indirectly provide evidence that this was not true by filming at the Hoover Dam.

    However the seeds of doubt were already planted when 11 minutes in she suggested (couldn’t quite bring here self to state it thought) that Keynes was the first person to apply mathematical or scientific analysis to Economics. It was like Jevons, Menger or Walras shouldn’t have bothered.

    The again she suggested that Keynes developed the idea of fiscal stimulus (ignoring all the occasions it had been used before he was even born) then to again inadvertently provide evidence to the contrary when he visited the US to persuade the US and they were already doing it before he got there.

  5. Posted 28/09/2012 at 19:53 | Permalink

    What action might Keynes suggest to deal with our financial crisis today? Maybe there’s a clue in his articles in The Times from 12-14 January 1937 [Collected Works, vol. XXI, p. 385]. Unemployment then was about 7 1/2 per cent of the workforce, much the same as it is now. Keynes wrote: “… I believe that we are approaching, or have reached, the point where there is not much advantage in applying a further general stimulus at the centre… the evidence grows that … the economic structure is unfortunately rigid… We are in more need today of a rightly distributed demand than of a greater aggregate demand; and the Treasury would be entitled to economise elsewhere to compensate for the cost of special assistance to the distressed areas.” Of course, as always with Keynes, it is possible that he might have changed his mind; but it does seem that he would not now be advocating increasing aggregate demand.

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