I'm just finishing up his General Theory for the second time. I am taking a lot more from it than I did the first as since then I have primed up a lot more on economics. I think of how the conservative economist Thomas Sowell said that on the subject of economics there is wide agreement between economists even if one is on the Right (Friedman or the Austrian School) the Center (Keynes) or the Left (Marx).
To sum up Keynes' overarching philosophy to economics is that throughout human history the propensity to save has been to high and the urge to invest too low-too much liqiudity preference.
He approvingly quotes some of the old mercantilists who had "the deep-rooted belief in the utility of luxury and the evil of thrift."
This belief during the next two classical centuries disappeared from view where "such wicked sentiments called down opprobrium of two centuries of moralists and economists who felt more virtuous in possession of their austere doctrine that no sound remedy was discoverable except in the utmost of thrift and economy both by the individual and the state. Petty's "entertainments, magnificent shews, triumphal arches, etc." gave place to the penny-wisdom of Gladstonian finance and to a state system which "could not afford" hospitals, open spaces, noble buildings, even the preservation of ancient monuments, far less the splendours of music and drama, all of which were consigned to the private charity or magnanimity of improvident individuals."
Ultimately then, Keynes is a flat denial of the classical idea that savings enriches and consumption impoverishes the community, to the contrary, in some ways it's the reverse.
His ideas had currency for a time, but in recent years the preachers of austerity and thrift have been back with a vengeance. Europe's concern to save money right now in any bailout is doing exactly what Keynes predicted: leading to less rather than more as is the Republican focus on deficits in the middle of a recession. When you think of the Bush tax cuts which were as I have said before, but bears repeating, the worst fiscal policy of modern times, even the less obviously horrendous parts of it were wrongheaded-like the Roth IRA and the whole desire to "stop punishing savers."
I don't know what it's going to take for people to realize what an utter failure that right-wing economic philosophies have been. It's been one failure after another from Reaganomics to Milton Friedman's economic disaster in Chile.
ReplyDeletericeroni, you leave me little to say but "here, here!"
ReplyDeleteAs Keynes has suggested there are many who are a sucker for a theory that seems to deny and contradict common sense and empirical experience and observation at every turn.