"Perhaps the whole of the General Theory was intended as a huge (400-page) joke, and Keynes was appalled to find disciples who took it all literally."

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Over at the Foundation for Economic Education's Anything Peaceful blog, Sheldon Richman highlights libertarian journalist Henry Hazlitt's 1959 book, The Failure of the "New Economcs", which offers a startling take on famed economist John Maynard Keynes:

The more I read the more I thought: Keynes was surely joking. No one in his position could really be that confused, contradictory, and ignorant of economic logic. It had to be a gag on the economics profession, an emperor-with-no-clothes experiment.

Thus I smiled when I got to Hazlitt's statement in chapter XXV, "Did Keynes Recant?" (p. 398):

Keynes was a brilliant man. Much of what he wrote he wrote in tongue-in-cheek, for the pleasure of paradox, to épater le bourgois [shock the middle class], in the spirit of Wilde, Shaw, and the Bloomsbury circle. Perhaps the whole of the General Theory was intended as a huge (400-page) joke, and Keynes was appalled to find disciples who took it all literally.

If it was a joke, Keynes helped inflict much misery and oppression on innocent people just for a laugh. I guess for the elitist Keynes, the well-being of the masses can't be allowed to impede his bold and daring lifestyle. It is for people like him that secularists like me wish there was a place of fire and brimstone.

Read the whole thing here.

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  1. Cornered rats lash out.

  2. And because joe can find a metaphor, he must be right.

  3. Brilliant, well played sir, well played.

  4. Quick, someone use sarcasm to conter the metaphor.

  5. Nigel,
    I thought joe was saying he’s one of the “follow the gourd” disciples, and now he’s pissed.

  6. No no, Nigel, you don’t get it: because Sheldon Richman can find an economist, he must be right.

    Oh, wait. That guy’s a “libertarian journalist.”

    Libertarian journalists do tend to react badly when confronted with the writings of economists.

  7. joe, …what?

  8. Either that’s a joe imitator, or he’s off his meds this morning.

  9. Why should one expect Joe to dis a warfare/welfare guy? Don’t forget you “conservatives” Churchill, like FDR and like Lincoln, was also a warfare/welfare guy.

  10. I’m confused. Who is reacting badly?

    Henry Hazlitt? Or Richard Sheldon?

  11. Richard Sheldon?
    Did somebody spike the coffee on this thread?

  12. This explains everything:
    “Richard Sheldon has been called “the number one Savoyard now living in America.” Born and raised in England, he has enjoyed a life-long interest in the works of William Gilbert and Arthur Sullivan. He quickly became known for his knack with the “Savoy Operas” – or what we know better as the works of Gilbert and Sullivan.”

  13. I’m pretty sure all I’ve drunk today has been water, but this thread is raising doubts.

  14. Okay, I meant Sheldon Richman. And it’s a coke, not a coffee.;)

  15. Nigel, tarran,

    My excuse is that I’m on prescription cough syrup this morning. (I wonder whose it is?)

  16. tarran’s a closet Gilbert and Sullivan fan! Can you do the entire score to the H.M.S. Pinafore a la Sideshow Bob?

  17. Citizen nothing,

    My excuse is that I’m cutting back on the cough syrup and feeling miserable.

    Oh, and I’m a huge Gilbert and Sullivan fan, and I must have had that name rattling around in my subconscious.

  18. Dagny called it!

    And I never sing the entire score of anything.

  19. So, who plans to hang around this afternoon for joe’s periodic diaper changing? Remember, Reason doesn’t really pay for babysitting.

  20. or he’s off his meds this morning.

    Nobody mention kidnapping and it’ll be ok.

  21. Nobody mention kidnapping and it’ll be ok.

    Oh shi-

  22. I am a Savoyard. Is there really a Richard Sheldon who is also a G&S fan? Amazing!

  23. It is for people like him that secularists like me wish there was a place of fire and brimstone.

    What a ridiculously ill-mannered and obnoxious thing to say.

    The trouble with Austrian School influence on libertarianism is that Austrians are completely certain that they have all the answers, and thus those who deviate are apostates from the One True Economics. Which is to say that whatever the merits of their ideas, the advocates tend to be assholes. Wishing that a gentleman like Keynes could burn in hell because his theories were wrong? I rest my case.

  24. joe,

    Wow, something brilliant from you right out of the chute. Right on the first thread I noticed you in at any rate.

    Keep up the good work.

  25. Tacohead,

    If he knew his theories were destructively wrong, but promoted them anyway then yes, he comitted a monstrous crime.

    Imagine a clueless guy who puts gasoline in a jet aircraft because he doesn’t know any better, and the aricraft crashes on take-off doing millions of dollars of property damage and injuring a couple of hundred people.

    You might give the guy a pass because he sincerely believed that the plane would run on gasoline.

    However, if the guy wasn’t clueless, and did it on purpose, knowing that the plane’s engines would put out only a fraction of the power needed for flight if fed gasoline instead of jet fuel, then one could only view the action as being malicious, or of evil intent.

    I find Keynes’ famous riposte to the question of the long term effects of his policy prescriptions, namely that “in the long run we’re all dead” to be very telling. It’s not the answer of someone who is convinced of the long term efficacy of his ideas.

    And his ideas have been disastrous. The attempt of governments to control wages and prices invariably lead to shortages and waste. In extreme cases they lead to privation and even famines. Since the General Theory came out, it has been among the justifications used for governments to exercise those disastrous interventions. If he wrote it, knowing that it was bunkum, then one can condemn him just as surely as one can condemn someone for producing propaganda movies for Adolf Hitler.

  26. BTW, One can read Hazlitt’s book online here.

  27. And his ideas have been disastrous. The attempt of governments to control wages and prices invariably lead to shortages and waste. In extreme cases they lead to privation and even famines.

    Americans have been using some form of Keynesian policies for the better part of seventy years. And I’m still looking for all the dead, emaciated bodies. Do you know where they are buried?

    Since the General Theory came out, it has been among the justifications used for governments to exercise those disastrous interventions.

    OMFG, a malefactor taking an ideology and using at an excuse to oppress and destroy?! Say it ain’t so! That’s NEVER happened before.

    If he wrote it, knowing that it was bunkum, then one can condemn him just as surely as one can condemn someone for producing propaganda movies for Adolf Hitler.

    I’m familiar with the argumentum ad Hitleram. But, wow, you just invented the argumentum ad Goebbelsam.

  28. Ele,

    I think it would be more properly named argumentum ad riefenstahlia.

    Keynes is to libertarians
    as _________ is to liberals

  29. joe, Wow, something brilliant from you right out of the chute.

    This proves that Joe is LurkerBold. I never saw that coming. So who’s the mark? 🙂

  30. Keynes is to libertarians
    as _________ is to liberals

    “Milton Friedman”

  31. where’s NM?
    Shouldn’t he be around here about now to tell us all how useful every study of economics is, and that we should all just accept Keynesian Economics as the default?

  32. arg –
    “tell us all how *useless*…”

  33. Lord Tacohead, not because his theories are wrong, but because of the misery he and his theories helped inflict. If he knew his theories were absurd, then he deserved to suffer himself.

  34. Sugarfree has it right.

    BTW, Elemonope, nice strawmen.

    Price controls don’t always lead to death (although I’m sure we could dig up statistical evidence of an increase of deaths as a result of Tricky Dick “We’re all Keynesians now” Nixon’s economic policies.

    Secondly, if he wrote the book knowing it was bunk, then it implies he intended it to be used. Certainly, as his preface to the 1936 German edition shows, he wanted his policy prescriptions adopted. In his book, he asserts that his ideas will bring an end to war, poverty, and wealth inequality. If he is being maliciously false (and note the if, I don’t know whether he is being malicious) then yes, his notions for using inflation to set wage rates and his attempts to redistribute the “unjust” returns incurred by investors are as vile as any syndicalist agitator who encourages mobs to pry open a warehouse doors to help themselves to the contents.

    Again, I think Keynes’ theory is bunk, and that Hazlitt has his number. I think Keynes was a sloppy thinker and a bit of a confidence man who pretended understanding he lacked (I remember reading some eye opening things about his conduct as an undergrad the details of which escape me now). He wrote an earlier book that was demolished by Hayek and is little remembered. A few years latter he came out with this turkey that told people this is how you manage an economy and bring prosperity. I find it hard to credit someone with such a dramatic insight in so short of time. Particularly in light of the fact his brilliant insights are written in what even his fans admit is such impenetrable and difficult to parse prose, which while entertaining in literature is a bad sign in a text book.

    I think his intentions were good, but he knew his ideas were built on a weak foundation. He sincerely thought he would make the world a better place. In that regard he was much like Marx, as Hazlitt points out:

    After discussing Keynes insistence that unemployment was the result of a mismatch between the going interest rate and the actual capital investment taking place, Hazlitt wrote:

    It is more instructive to inquire why Keynes put forward this extremely complicated and implausible theory. And here we may have to answer that, siding as he did with the immemorial labor-union insistence that employment is not caused by excessive wage-rates, he had to come up with some theory as to what does cause it. And as he couldn’t blame the labor-union leaders, what more natural (and politically convenient) than to blame the moneylenders, the creditors, the rich? Like Marxism, this is a class theory of the business cycle, a class theory of unemployment. As in Marxism, the capitalists become the scapegoats, with the sole difference that the chief villains are the moneylenders rather than the employers.

    And that, I suspect, rather than any new discoveries of technical analysis, is the real secret of the tremendous vogue of the General Theory. It is the twentieth century’s Das Kapital.

  35. Slightly off-topic, but can someone out there recommend a good Keynesian-slanted book specifically attacking / refuting the Austrian school or Hazlitt? I’m trying to self-educate and I’d like to find a reasonable respectable opposing worldview so I can get a sense of the counter-arguments.

  36. We are all parodists now.

  37. BTW, Elemenope, nice strawmen.

    [Ahem]

    tarran | January 6, 2009, 1:09pm | # posted:

    And his ideas have been disastrous. The attempt of governments to control wages and prices invariably lead to shortages and waste. In extreme cases they lead to privation and even famines.

    I didn’t write that. That was what I was responding to. So, not a strawman, but actually the opponent’s argument. In fact, *your* argument. Sorry that that argument is embarrassing and ridiculous, but that’s not my fault.

  38. So, elemonope, where did I say that “some form of Keynesian policies” caused starvation?

    I said that in extreme cases attempts to control wages and prices lead to famine, as they did in in the Ukraine in the 1930’s.

    Your attempt to equate the U.S. flirtation with command and control of some aspects of the economy with “extreme cases” is a strawman.

    Sorry.

  39. tarran,

    Does that make you a “let them eat straw” person?

  40. “And his ideas have been disastrous.”

    And so where the are applied, we should expect to see disaster. The US has used and continues to use those ideas, and so we should expect the history of the US to be replete with disaster when those ideas are implemented.

    It is not. Hence, your argument is without evidential foundation. You seek to take what is *at best* a weak correlation, and go whole hog for causation. Naughty, naughty.

  41. Good thing the US isn’t in any sort of financial crisis currently.

  42. The Ukranian famines of the 1920s and 1930s weren’t a result of JMK’s policies. Rather, Stalin was deliberately attempting to starve the Ukrainian people as a way to punish their insubordination. He had the NKVD plunder (ahem … “requisition”) as much food as possible from the bountiful and prosperous Ukraine.

    Then again, some historians disagree on that point.

  43. I wouldn’t expect Keynes ideas to result in outright disaster of Zimbabwean proportions, just a good deal of wasted opportunity.

    For instance, consider this quote:

    “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”

    And thus Obama’s top advisors today think the way out of recession is new spending on “green jobs”. It’s the same theory.

  44. “The more I read the more I thought: Keynes was surely joking. No one in his position could really be that confused, contradictory, and ignorant of economic logic.”

    Indeed, if he were all that smart, he should know that transfer payments are a zero sum game.

    one minus one always equals zero

  45. That’s only if you don’t believe in the “multiplier”, Gilbert.

  46. “multiplier”?

    Any number multiplied by zero is still zero.

  47. Joe
    No no, Nigel, you don’t get it: because Sheldon Richman can find an economist, he must be right.

    Actually, he did not have to “find” an economist, Joe – there are them a’plenty at FEE.org and all say that Keynes wrote bunk.

    Also, you misunderstand: Keynes did not simply write a simple essay on a “spend now, place your children in hock” motif. He wrote a whole book on it and on top of that, unreadable. That’s quite an achievement. He new that unreadable drivel tends to wow the illiterate.

  48. He [k]new that unreadable drivel tends to wow the illiterate.

    And career economists.

  49. Elemenope,

    The US is a disaster, but not because of Keynes. We would eb much better off if the Keynsans were not repressed by the capitalists.

  50. And so where the are applied, we should expect to see disaster. The US has used and continues to use those ideas, and so we should expect the history of the US to be replete with disaster when those ideas are implemented. It is not [sic]

    You don’t go out much, do you? One of the things the Keynesians promised would not happen, happened: Inflation with high unemployment or stagflation, in the 1970s. The Keynesians were defeated in the realm of reality, but in the realm of politics they still thrive.

    And our current crisis has Keynes written all over it. The US Gov. has not learned, or worse – it callously ignores the lessons.

  51. And I’m still looking for all the dead, emaciated bodies. Do you know where they are buried?

    Somewhere in Normandy.

  52. The multiplier relies on the tendency of people to save a part of their incomes. Keynes advocated transfers from savers to spenders, because he believed consumption to be the foundation of incomes.

    This is lunacy, but what it looks like in your example is:

    1*(some mutiplier>1)-1>0

    The first “one” is the transfer spent, and the second “one” is the transfer taxed/borrowed. The magically produced residual comes from an assumed virtuous cycle of consumption.

  53. ” Keynes advocated transfers from savers to spenders, because he believed consumption to be the foundation of incomes.”

    Yes, because those who spent every last cent they made as fast as they could have obviously wound up as the most prosperous and succesfull people down through history.

  54. You can certainly argue that, and I sincerely agree with you.

    Unfortunately, the dangerous thing about Keynes’s ideas as that they provide a seemingly subtle justification for a lot of existing prejudices. You’re up against Jesus, for Pete’s sake:

    I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.

  55. I doubt if Keynes was being a fabulously cynical Fabian when he wrote the General Theory because it is consistent with what was in the air of the ‘Cambridge School’.

    BTW, Hazlitt’s book is available in pdf here.

    Back in college I had to hunt used bookstores in quite a few college towns to find this one.

    Go ahead Krugminions, you have nothing to lose except faith in your god.

  56. And so where the are applied, we should expect to see disaster.

    What, you think the 1970’s weren’t a disaster? Granted, our definitions of what constitutes disaster may be different, but much of the rioting and high crime of the 70’s had, as a major cause, the economic stagnation that had been justified along Keynesian lines.

    Do I think that if Keynesianism was rigorously applied, it would lead to famine? No. While that would have been true as recently as 150 years ago or so, at this point, agricultural technology is advanced enough that that probably wouldn’t happen. I think rigorous Keynesianism would probably lead one to pre-Thatcher Britain. You would see an increase in mortality because people would have less leisure time and would therefore take worse care of themselves, but it would be hard to pinpoint any group of deaths and say that these heart attack victims are the result of the poverty caused by an inflationary policy.

    On the other hand, interventions do begate interventions, and if you follow that road long enough, one starts seeing the problems of Somalia or Ethiopia in the 1980’s.

  57. @some fed

    Most everything Jesus said required the listener to analyze for hidden meanings. There are no rich people after death, only dead people.

    One of my favorite things about my Catholic schooling was the deeper, non-fundamentalist readings of the Bible that went counter to all the grade-school brainwashing that I had, like the miracle of the loaves and fishes was less about *poof* more food and more about getting Jews to share (lol stereotypes).

  58. He new that unreadable drivel tends to wow the illiterate.

    Now, this sentence made me laugh for a good long time.

  59. He new that unreadable drivel tends to wow the illiterate.

    Now, this sentence made me laugh for a good long time.

    You were wowed by it, huh?

  60. You were wowed by it, huh?

    Wow!

  61. State action enters in … to provide that the growth of capital
    equipment shall be such as to approach saturation point
    at a rate which does not put a disproportionate burden on the
    standard of life of the present generation .. . I should guess
    that a properly run community equipped with modern technical
    resources, of which the population is not increasing
    rapidly, ought to be able to bring down the marginal efficiency
    of capital in equilibrium approximately to zero within a single generation.

    If I am right in supposing it to be comparatively easy to make capital-
    goods so abundant that the marginal efficiency of capital is zero, this may be the most sensible way of gradually getting
    rid of many of the objectionable features of capitalism.

    Not only are my detractors jealous of my erudite style of writing, but they are also envious that it was I who solved the problem of scarcity once and for all and not them. If they were not so burdened with a bias against the wisdom of government and those whose operate its machinery, they may have seen the truth before I did.

  62. Not only are my detractors jealous of my erudite style of writing, but they are also envious that it was I who solved the problem of scarcity once and for all and not them.

    That was really funny! Probably unintentionally, but funny nevertheless.

    [You can’t “solve” the problem of scarcity – a human’s time is scarce to begin with]

  63. You can’t “solve” the problem of scarcity – a human’s time is scarce to begin with

    If you were as bad-ass an economist as you claimed, you would know that the “Problem of Scarcity” refers to *material scarcity*. Actually you’d know that after a few basic classes.

    But you already knew that, right?

  64. you would know that the “Problem of Scarcity” refers to *material scarcity*

    Wrong.

    You never paid money to save time? Put another way, do you not mind delays?

  65. You never paid money to save time? Put another way, do you not mind delays?

    Resources may be spent to alleviate the problem of limited time, but time itself is not generally thought of as capital. And since we try to restrict ourselves to problems which do not require the warping of the time-space continuum to solve, economics is about solving the problems of material scarcity. That that material may be used to make a person’s time more efficient is simply one of the many uses capital can be put to.

  66. First to be clear, generally speaking, it is not capital with which economics is concerned when speaking of scarcity, but goods. Production of goods is the purpose of capital, and goods are simply things demanded by at least one person.

    Let’s try another variation on the concept of time as a scarce good. How about leisure? Leisure is just time unallocated toward obligations.

    Leisure surely is a good. Employment, for example, is not just the rendering of services for compensation, but the rendering of services and the sacrifice of leisure.

  67. [ State action enters in … features of capitalism. ]

    The quote from above points out the silliness of Keynes.

    From Hazlitt’s critique of that very paragraph.


    Nonsense could hardly be carried further. The central
    problem with which economics deals, the problem with
    which mankind has been struggling since the beginning of
    time, is the problem of scarcity, and this problem is assumed
    away in a few blithe words. It is “comparatively easy to
    make capital-goods so abundant that the marginal efficiency
    of capital is zero.”

    Did Keynes stop to think for a moment what this would
    imply? It would imply that capital goods were so abundant
    that they had no exchange value! And if they had no value,
    they would be as free as air or (most) water or other goods
    without scarcity. It would be worth nobody’s while to keep
    such capital goods in repair (unless it cost nothing, not
    even anybody’s labor, to keep them in repair). There would
    be no problem even of replacement. For as soon as there
    were a problem of replacement, it would mean that capital
    goods once more had a value and cost something to produce:
    therefore, presumably, capital goods would cost nothing
    to produce.

    Moreover, if the marginal efficiency of capital were zero,
    it would also mean that no consumer goods would have any
    scarcity, price, or exchange value. For as long as any consumer
    goods anywhere failed to reach the point of satiation,
    and had a price or a value, then capital to help produce
    these consumer goods would have some marginal yield
    above zero.

    A marginal efficiency of zero for capital would mean, in
    brief, such an abundance of everything that neither capital
    goods nor consumers goods would have any scarcity, any
    price, or any exchange value. In such circumstances the
    rate of interest, of course, would also fall to zero-not only
    because the rate of interest and the marginal yield of capital
    tend toward equality, but because it is one of the implications
    of a zero marginal yield for capital that no one would

    CONFUSIONS ABOUT CAPITAL

    want to borrow money for investment. If someone did want
    to borrow money for investment (enough to pay anything
    for the privilege), it would imply that to this borrower, at
    least, capital did have a marginal yield above zero.

    Capital will continue to have a marginal yield above zero,
    in brief, as long as it continues to help in the production of
    consumer goods that have a price above zero. And if these
    consumer goods have a price above zero, it will be not only
    because they fill human wants, but because their supply is
    not unlimited and because they cost something to produce.
    And it is this cost of production (and not some wicked conspiracy
    of the capitalists) that keeps them scarce.

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