The work cumbersomely entitled, The General Theory of Employment, Interest and Money, now commonly abbreviated as “The General Theory,” was published in 1936.
Probably no other book has ever produced in so little time a comparable effect. It has tinctured, modified, and conditioned economic thinking in the whole world. Upon it has been founded a new economic church, completely furnished with all the properties proper to a church, such as a revelation of its own, a rigid doctrine, a symbolic language, a propaganda, a priestcraft, and a demonology.
The revelation, although brilliantly written, was nevertheless obscure and hard to read, but where one might have expected this fact to hinder the spread of the doctrine, it had a contrary result and served the ends of publicity by giving rise to schools of exegesis and to controversies that were interminable because nothing could be settled. There was no existing state of society in which the theory could be either proved or disproved by demonstration — nor is there one yet. FULL ARTICLE
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yeah pyramid building was awesome. if you didn’t get ground up under one of the rocks or die from exhuastion laboring all day to create a model for casinos 5,000 years later. but it kept people busy. jobs!
too bad my keynes wasn’t around to read Ismail khadares “the pyramid”. kheops put lincoln to shame
Keynes provided the “theortical” mathematical basis for ever expanding government. It is a highly asymetric argument: once you begin to believe that economic growth comes from government the argument is always in one direction: In good economic times “we must continue the growth of government or economic growth will stop” or the more benign ” we are so rich we can afford more government” and in bad economic times ” we must increase government spending to create economic growth in a recession”.
No matter what government gets bigger.
In reality economic growth and prosperity come from productivity and population growth. The cyclicality provided by the fiscal and monetary component of government is simply noise adding and subtracting from the long term course of the economy.
In the Old Testament, God would punish Israel for its evil ways by placing “silly young men” in positions of power. Those “silly young men” would implement foolish policies and cause massive loss of life and wealth. Maybe today God does something similar by causing people to follow a silly old economist. I don’t know any other way to explain the quick, widespread acceptance of Keynes’s silliness. It’s as though God gave the majority of people a spirit of stupidity.
When have placebos ever not been popular? That is precisely what Keynes sold, and many continue to buy into. His economics is nothing but a placebo.
note to inquisitor: whilst offering empty hope, placebos do no active harm!
The real PYRAMID is being built by our preoccupation with economic growth. Instead of striving to meet basid needs and enhance happiness, we’re engaged in a pyramid scheme of increasing production and consumption. This growth can only be kept up with increasing population and/or increasing resource extraction and increasing waste generation. Not in our best long-term interests!
Dave Gardner
Producer/Director
Hooked on Growth: Our Misguided Quest for Prosperity
http://www.growthbusters.com
Dave, what Austrian economics books have you read? Lame dude…
“If I am right,” he said,
in supposing it to be comparatively easy to make capital goods so abundant that the marginal efficiency of capital is zero….”
I wonder what brand of absinthe was Keynes drinking when he wrote this.Speaking of which, does anyone know where I can get absinthe?
a question for dave gardner:
why do poor people risk life and limb to immigrate, (often illegally) to the rich, prosperous world? aren’t they happy with the “basics”?
what kind of person rejoices in poverty?
Newson, there are two answers to your question, really a matter of clearing up misconceptions:-
- A great many of those people do not “risk life and limb to immigrate, (often illegally) to the rich, prosperous world”; only some even want to.
- The ones who leave for purely economic reasons (and remember, there may well be other reasons you haven’t tried to separate out, e.g. my maternal grandfather was an Irishman who emigrated to France for political reasons) aren’t doing it from unhappiness with the basics but from unhappiness with things that are even worse than that, and/or (as you imply) the pull of better.
Basically, it’s a lot more complicated than your question depicts.
to pm lawrence: guilty as charged! but you’ll also acknowledge that my riposte is about as exhaustive and nuanced as “growthbusters.com” suggestion that production and consumption are to blame. one-liners invite one-liners.
I will stand by my statement that it’s ludicrous to expect we can keep wringing more and more out of a finite system. You can call that a one-liner, and it’s as simple as that. What’s complex is human behavior, our inability to reconcile the limits, and even our inclination to seek that which does not in the end fulfill us. And I wonder who has the higher suicide rate – those with 3 BMWs in the garage of a 6,000 square foot house or those living off the land, barely making ends meet, with no plasma TV-equipped home theater with THX sound? Who is the richer? I’ll be the first to say I like having electricity and indoor plumbing, and I don’t want to deny that to anyone. But it’s pretty phony for the typical growth-booster to pretend that s/he is doing what they’re doing in order to help the impoverished.
Dave Gardner
Producer/Director
Hooked on Growth: Our Misguided Quest for Prosperity
http://www.growthbusters.com
to dave gardner:
adam smith made it quite clear that altruism is not necessary for society to be prosperous and for cooperation to occur amongst disparate groups. most agents are self-interested, but in a competitive market economy, they must provide something in return, and thereby benefitting society at large.
as for happiness, that’s an abstract notion that defies quantification. if you take the time to understand austrian economics you’ll see its very emphasis is on the subjective. which is another way of saying that whilst you happy with pipes and lighting, someone else may be perfectly happy and have 3 bmw’s etc. the poor certainly don’t have as much time to dwell upon anything, unhappiness included.
finally as for finite resources…as demand for a good rises, the price rises, either encouraging more production, or if that is impossible, economization and/or substitution. (check out how little silicon is now needed for computer chips, compared to the 1970′s, same for the copper used in circuity etc).
postscript to dave gardner:
one thing to note about the deleterious effects of keynesianism (and central planning in general) is it’s incredible wastefulness. the japanese government used vast public works programmes in a futile to “buy” themselves out of their long 1990′s recession. because they favoured construction jobs, japan concreted the banks of many of their rivers (friends in the concrete lobby). result was an environmental disaster, and a fortune wasted. likewise bridges to nowhere were built against the wishes of local residents.
a classic american example that comes to mind is the useless slaughter of 6 million pigs in 1933 (fdr) in order to protect agricultural prices. and this while americans were going hungry!
under a sound money system as championed by the austrians, the economy would look completely different to what we see today.
keynesianism gives rise to unsustainable consumption – had there been no monetary stimulus there would never have been any housing bubble, whose bust will see scarce resources wasted. (vacant houses, or houses built too big for physical needs, only because cheap credit was readily available).
In a limited sense dave is right; Keynesianism’s worst fault is that it advocates rampant consumerism, beyond the economy’s means, as opposed to prudence and economizing.
Dave: “But it’s pretty phony for the typical growth-booster to pretend that s/he is doing what they’re doing in order to help the impoverished.”
It’s a strawman argument to claim that capitalism is obsessed with growth. Socialists have never tried to understand capitalism, so they spend their lives boxing with straw men, or shadow boxing. If socialists really understood capitalism, they would know that its essense and obsession is with freedom. Freedom produces the unintended consequence of prosperity.
Many capitalists prefer to use the growth argument for capitalism because they assume, falsely, that socialists really care about the poor, which they don’t. If socialists really cared about the poor, they would hate Castro for impoverishing the Cuban people instead of worshipping at his feet.
Capitalists know that no other economic system in the history of mankind has lifted so many people out of poverty, and that socialism impoverishes people. What capitalists don’t understand is that socialists don’t care. Socialists take their stand on the moral argument against capitalism that private property is immoral. They don’t care that social causes people to starve to death as long as they are morally pure.
But on the issue of growth, if the economy did not grow, while the population continued to grow, it should be obvious that people would become poorer. It’s simple math: a fixed amount of goods must be divided among a larger number of people. Does increasing poverty not bother you?
As with most socialists, intentions are everything and results mean nothing. So you think capitalists are evil because you don’t believe they care for the poor as they claim they do. Of course, your ability to read the minds of all capitalists in one setting makes you a super powerful psychic, but even if you had that power, so what? Why do intentions matter? What if all capitalists were nothing but greedy Scrooges who would steal candy from a baby? That doesn’t change the historical fact that capitalism, and only capitalism, has rescured billions of people from starvation poverty. Just ask the Chinese.
Fundamentalist makes a lot of assumptions about my philosophical beliefs. Let me clarify a few things. Perhaps obsession with growth is not inherent in the philosophy of capitalism. If not, then it’s just an unfortunate byproduct. I would agree that as population increases, we must either have economic growth or people will need to find ways to reduce their consumption. That seems to me a compelling reason to embrace population stability or even decline. Yet capitalists defend and even promote population growth.
I expect you will want to immediately label me a socialist when you read that statement. Yet I have not suggested we band together and mandate small families. I am trying to make sure everyone understands the implications of their free choices about family size. See, I love freedom as much as the selfish, greedy capitalist pig!
However, I admire altruism and believe self-interest and profit have brought as much grief to the world as they have good. The modern capitalist model has served mankind for only a small blip in the timeline of human history. Why cling so tenaciously to it? Seems pretty egocentric to assume we happen to be inhabiting the planet when the final answer was achieved. I’m hopeful we’re smart enough to seek and embrace better ways – ways that don’t liquidate the planet’s resources, leaving it vandalized, trashed and desolate. Check out http://steadystate.org/
“There is no business to be done on a dead planet”
- David Brower
Dave Gardner
Producer/Director
Hooked on Growth: Our Misguided Quest for Prosperity
http://www.growthbusters.com
Getting the state out of the money economy and thus ending its obsession with growth at any costs is one way to reduce reckless consumerism…
Dave: “Yet capitalists defend and even promote population growth.”
You’re getting closer to the truth, but no cigar yet. Capitalists don’t defend or promote population growth. Capitalists defend and promote freedom. The desire to have more or fewer children should be left to the individual.
Dave: “I am trying to make sure everyone understands the implications of their free choices about family size.”
I’m curious as to what you think the implications are. I know from the propaganda force fed me in school that a lot of people think that overpopulation causes poverty. But economics has proven that wrong again and again for over a century. Socialists just don’t like to pay attention to the facts so they cling to overpopulation theories.
Dave: “I admire altruism and believe self-interest and profit have brought as much grief to the world as they have good.”
In what way have self interest and profit brought about grief?
Dave: “The modern capitalist model has served mankind for only a small blip in the timeline of human history. Why cling so tenaciously to it?”
You ought to read an economic history of the planet. Angus Maddison’s is pretty good. I can summarize, though: mankind was poor, miserable and hungry from creation. Population grew very little because every few decades large percentages of the population died from starvation. Very little changed until about 1800 when very suddenly people in Europe quit dying from regularly scheduled famines. Since 1800, the wealth, health and well-being of the people in capitalist and semi-capitalist nations have prospered while the rest of the world has persisted in the pre-1800 world of mass starvation. So what’s not to like about capitalism? If the rest of the world adopted it, they could be as wealthy as we are.
Dave: “I’m hopeful we’re smart enough to seek and embrace better ways – ways that don’t liquidate the planet’s resources, leaving it vandalized, trashed and desolate.”
So am I and capitalism has proven to be the best way to accomplish that. So why aren’t you a capitalist?
Fundamentalist, a degree of equivocation is taking place here – you, and I, and the rest of us here, are capitalists in that we are for the free market. Dave is arguing against capitalism as the system that currently exists, i.e. the hampered market economy. It is important to note that the two are different things, the latter suffering from substantial government interference, a lot of which is bent on growth beyond the economy’s ability to handle it. This is after all partly why we’re opposed to inflationary expansions of the money supply and Keynesianism more generally.
Inquisitor: “It is important to note that the two are different things, the latter suffering from substantial government interference, a lot of which is bent on growth beyond the economy’s ability to handle it.”
Very good point. Keynes did believe his system would create a utopia with high growth rates, low interest and falling prices. And I guess a lot of people equate Keynesian econ with capitalism. But how do you explain that to people who have read little besides fiction? They’re never going to understand the differences between Keynesian and Austrian econ, which is the true capitalism.
More relevant to Dave’s posts is the Keynesian focus on consumer spending as the driving force of the economy. If Dave is opposed to that, then we can probably find a lot of common ground. Dave may not be aware that Austrian econ emphasizes thrift and savings. In addition, the Austrian emphasis on property rights, and opposition to government ownership of resources, would go a long ways toward stopping the exploitation of the earth’s resources.
You’ve mentioned before that Austrians are poor communicators (I know, I am one – I tend to be far too defensive) and need to work on ‘selling’ their (our) ideas, so at the very least we ought to make an effort to distinguish between actual free market capitalism and the Keynesian variant, which does in fact place an excessive focus on consumption beyond the means available to us (notice the contempt for savings that inheres in it.) Anyway, I think you got my point in your latest post.
Uhhh, did anyone else note the timing issue?
I quote:
It is significant to recall that the first definite and conscious application of the theory was made by the New Deal; and when in the third year Mr. Roosevelt began…
The New Deal began in 1933. The third year was thus 1936… The same year the report was published. While I grant they (FDR’s people) may have had a pre-press copy, the author fails to justify this as fact. I think this may be a case of fitting the reality to the facts. More likely, sans actual evidence, Keynes and FDR’s crew were all of like mind, and the similarity of action and paper were coincidental results from similar attitudes.
> In addition, the Austrian emphasis on property rights, and opposition to government ownership of resources, would go a long ways toward stopping the exploitation of the earth’s resources.
The problem with this (while I tend strongly towards property rights myself) is that, like any idea, it can be taken and one can run straight off the end of the earth with it.
Unless you allow for a lot of litigation as to damage to surrounding rights, you run into problems associating with the fact that operating one’s own rights may impinge on those of others
a) some of whom may not be able to afford costly litigation lasting years — this benefits those with deep pockets and allows them to abuse their rights with relative impunity
b) the current structure of things does not always properly encourage interest in long-term effects vs. short term interests (i.e., corporate stockholders don’t necessarily care if the company will be bankrupted by a policy 10 years from now, as long as they make money this quarter)
c) current bankruptcy -v- corporate interests can allow someone to screw things up majorly and then go bankrupt and drop the entire mess into the laps of either the government or those living around the place the mess was made.
d) Sometimes damage is hidden for decades — what about, for example, Love Canal, wherein it was difficult, IIRC, to determine exactly who fouled the site?
Now, one can certainly claim that this is what insurance is for, but…
i) we don’t always require insurance for companies in many circumstances
ii) this puts insurance companies into a nanny-state mode — anyone besides me recall when diving boards were common for household swimming pools? Apartment complexes? Nowadays they are a major liability issue
iii) what happens when an individual or corporation buys “the cheap insurance” and the insurance company goes bankrupt, rather than properly supervise their liabilities?
iv) insurance companies are short-term corporations, too. Anyone else notice how many insurance companies started restricting their policies in hurricane-prone areas after Andrew (1992) and the spate of hurricanes in 2004? This, mind you, after sucking money out of those areas in the “lean-’cane” years from 1970-2000.
My main point is that there are deeper issues here than simply redefining problems as “private property rights”. I believe very much in them on an individual level. I don’t think corporate interests do a very good job protecting the public interest, however, in light of those rights. It’s the general problem of The Sausage Game, something I’m presuming I don’t have to detail to a bunch of people with an economics mindset.
to “oh bloody hell”:
i think you’re quite right. hoover had already had a go at least at spending his way out of the crisis, without any help from keynes. no politician ever had any difficulty spending public monies, the general theory offered a convenient rationalization in selling it to the public.
on the monetary front, that politicians have been tempted to play the currency debasement game since the dawn of civilization, proves that keynes taught them nothing. keynes’ theory was needed to cloak the oldest game in town.
to: “oh bloody hell”
to argue for public ownership because the legal playing field is tilted in favour of “deep pockets” is picking the wrong fight. legal costs are prohibitive because of the state’s regulation of the profession.
the limited liability points you raise seem fair, but are dealt with in the december 24 “daily article” (http://mises.org/daily/2816). the blog is particulary instructive, or was for me, a non-lawyer.
but again, your gripe is with the corporate form as it now stands, a product of extensive state intervention, not a free-market artefact.
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