Poor Lord Keynes gets bad mouthed a lot these days, as well as macroeconomics in general. In case you don’t know, Keynes revolutionized the world in the 1930’s with a new view of how economies work and what governments should do to avoid bad economic times. Keynes had detractors, but politicians liked his ideas because it gave politicians intellectual cover for taking action – think stimulus package. Economists came to like him too because, under his view of things, there was a need for governments to employ economists – first by the hundreds, then by the thousands.
I don’t know how many people have read Keynes, or how many understood what he was saying. His theory is elegant – even beautiful – but still today some critics claim it was flat out wrong. But even if he was right, his was an impossible dream.
Keynes theory suggest that governments should get heavily involved in the economy during bad times, then step way way back during good times. Guess what: politicians only like the first half of the message. We’ve been following Keynesian philosophy during bad times and ignoring it in good times for 75 years. It strains credulity to believe that when good times return, we’ll take the austere measures Keynesian economics suggests.
I have my doubts about Keynes’ General Theory, favoring instead the contrary insights of von Mises and Hayek. But even if Keynes was dead on right, we have not been able to implement it – nor will we ever be, at least not in a democracy.
I respect anyone who champions a radical intellectual vision, and I especially respect Keynes for the his foresight regarding German reparations after The Great War. But even the smartest guy with the smartest plan has little value if we only give lip service to the plan and the proceed to do something entirely different. I plan that can’t be implemented has extremely limited value.