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« Evans and Horwitz on Bagus and Howden on Free Banking | Main | Speaking of Keynes -- Lets Talk About the One Person Who Made Keynes a Sensible Economist, Axel Leijonhufvud »


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See Cowen's take on this at Marginal Revolution --- http://marginalrevolution.com/marginalrevolution/2011/05/did-keynes-favor-planning.html

Steve --- in all honesty I think one can make a stronger case than you are making about Keynes and planning. In my chapter on the Industrialization debate in the Soviet Union in The Political Economy of Soviet Socialism I talk about the influence of that debate on subsequent development of Keynesian ideas, and in Why Perestroika Failed I talk about the nature of the Keynesian task as related to the socialist task. Of course, you are right that Keynes saw himself as "saving capitalism" --- on top of World Trade Center there used to be an exhibit that said John Maynard Keynes (whose name rhymes with brains) the savior of capitalism. But the manner in which capitalism was to be saved was for it to be managed by a technocratic elite.

Again, see his letter to Hayek about The Road to Serfdom, and also consider such Keynesian works as Lerner's The Economics of Control. But also, as Larry White has pointed out, look at the introduction to the German edition, look at his Yale Review paper, and consider the experience in India.

One final issue I'd like to raise for you to weigh is Hayek's Nobel Prize address. It is directed at Keynesianism, and it is called the Pretense of Knowledge. Why?

BTW, this does not mean that I disagree with Steve about the more or less technical point about what _central planning_ actually meant in economics at the time its merits were being actively debated. The idea of _comprehensive central planning_ and the project of the abolition of commodity production was the core claim in 1920. But as Lavoie discusses in National Economic Planning: What is Left?, the idea of economic planning has a broader meaning than just central planning, and the Mises-Hayek critique is NOT limited to the extreme position of _comprehensive central planning_.

The critical reaction is quite simple in terms of motivation:

When you don't like a general point being made, distill it down to the pedantic and fastidious level to show why it's wrong.

Sometimes, this is warranted. Sometimes it isn't.

In the context of contrasting Hayek and Keynes, this distillation of "central planning" by the video's critics is unwarranted pedantic nit-picking. As if people REALLY consider Keynes to a be a socialist or communist. Come on. I'm reminded of Julian Sanchez's wonderful term "Outsight":


If we're going to go down that lane, I don't think HOPE would ever accept a paper that suggests Keynes and Hayek are still around today, and to the best of my knowledge there are no proof that Keynes and Hayek were professional boxers.

Seriously though, I really think the Keynes and Hayek in the video should be interpreted as a metaphor for Keynesians and Hayekians and should not be looked into so deep. If you consider all the anachronicities of their lyrics to the Keynes-Hayek debate, the books and papers mentioned in the videos that weren't around back then, if you consider the fact that it is not clear whether Keynes would have supported the level of public spending of the stimulus plan, etc. it becomes quite clear.

The problem with sorting out the “real” Keynes is that he often held different views at different times, and some of these would sometimes sound in contradiction with each other. Indeed, during his lifetime there was the joke that if 10 economists, including Keynes, were stranded on a desert island, they would have 11 different views about what to do, and Mr. Keynes would hold two of those views.

Nonetheless, it remains a fact that Keynes, through a good part of his life, remained open and sympathetic to government management, regulation, control, and even forms of “planning” at various times in his life.

There was his (in)famous 1933 lecture on “National Self-Sufficiency,” in which he declared, “I sympathize . . . with those who would minimize rather than those who would maximize economic entanglement between nations. . . . Let goods be homespun whenever it is reasonably and conve¬niently possible; and above all, let finance be primarily national.”

And Keynes went on to say in this lecture:

“We each have our own fancy. Not believing we are saved already, we each would like to have a try at working out our salvation. We do not wish, therefore, to be at the mercy of world forces working out, or trying to work out, some uniform equilibrium according to the ideal principles of laissez-faire capitalism . . . We wish . . . to be our own masters, and to be free as we can make ourselves from the interference of the outside world.”

In his well-known letter to Hayek following the publication of “The Road to Serfdom,” Keynes has often been quoted expressing his sympathy for much of Hayek’s concerns and arguments about planning. But less frequently quoted in a later part of this letter, is what Keynes added:

“I should say that what we want is not no planning, or even less planning, indeed I should say that what we almost certainly want is more . . . Moderate planning will be safe if those carrying it out are rightly oriented in their own minds and hearts to the moral issue . . . Dangerous acts can be done safely in a community that thinks and feels rightly, which would be the way to hell if they were executed by those who think and feel wrongly.”

Thus, planning could be used and trusted to result in good things as long as the right people were in charge or were the advisers to those in power, people such as himself.

And as the Arthur Smithies also pointed out not long after Keynes’ death, “Keynes hoped for a world where monetary and fiscal policy, carried out by ‘wise men’ in authority, could ensure conditions of prosperity, equity, freedom, and possibly peace.”

As for “planning” more directly, Keynes did say in “The General Theory” that he expected the government would “take on ever greater responsibility for directly organizing investment.” In the future, said Keynes, “I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment.”

As the profitability of private investment dried up over time, society would see “the euthanasia of the rentier” and “the euthanasia of the cumulative oppressive power of the capitalist” to exploit for his own benefit the scarcity of capital. This “assisted suicide” of the interest-earning and capitalist groups would not require any revolutionary upheaval. No, “the necessary measures of socialization can be introduced gradually and without a break in the general traditions of the society.”

Yes, this was Keynes’ version of a form of “socialism with a human face.”

As for his forward to the German-language edition of “The General Theory,” which he penned in September and which appeared in the autumn of 1936, he addressed himself to the community of German economists. But by 1936, the only economists left in government, the universities, or the media in Germany were Nazi Economists, or the Nazi version of “fellow travelers” who could be trusted to always to be “working towards” the Fuhrer.

(Yes, there were those who after the Second World War became known as the German ORDO Liberals who helped lay the intellectual foundations for Germany’s postwar “economic miracle,” – Walter Eucken, Ludwig Erhard, et. al. – but they were not in any position to influence German economic policy, that is, those whom Keynes wished to address.)

In the forward to that German edition Keynes said he hoped that his theory would “meet with less resistance on the part of German readers than from English, when I submit to them a theory of employment and production as a whole,” because the German economists had long before rejected the teachings of both the classical economists and the more recent Austrian School of Economics. And, said Keynes, “if I can contribute a single morsel to a full meal prepared by German economists, particularly adjusted to German conditions, I will be satisfied.”

That is, he thinks the community of Nazi Economists will be more open to his “New Economics” precisely because they rejected Classical and Austrian Economics, and were in the tradition of the German Historical School. The implication that one could draw is that “if only” British economists had followed the same intellectual path these German economists had followed, there would be more acceptance of his ideas in his own country.

And, then, at the end of the forward Keynes said:

“The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state, than . . . under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory . . . Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced.”

Keynes clearly understood that the greater the degree of state control over any economy, the easier it would be for the government to manage the levers of monetary and fiscal policy to manipulate macroeconomic aggregates of “total output,” “total employment,” and “the general price and wage levels” for purposes of moving the overall economy into directions more to the economic policy analyst’s liking.

And under the Nazis, Germany had moved in the direction that made that transition to his type of New Economics that much easier. Here was a “tool-kit” for the Nazis Economists to better manage the Nazi planned economy that was formally introduced in 1936, with its “four-year plans.”

It is also worth recalling that in May of 1936, Keynes did a “review” of Beatrice and Sydney Webb’s pro-Stalin book, “A Soviet Civilization,” on the BBC. The transcript may be found in Keynes collected works. He said:

“Until recently events in Russia were moving too fast and the gap between professions and actual achievements was too wide for a proper account to be possible. But the new system is now sufficiently crystallized to be reviewed. The result is impressive. The Russian innovators have passed, not only from the revolutionary stage, but also from the doctrinaire stage. There is little or nothing left which bears any special relation to Marx and Marxism as distinguished from other systems of socialism.

“They are engaged in the vast administrative task of making a completely new set of social and economic institutions work smoothly and successfully over a territory so extensive that it covers one sixth of the land surface of the world. The largest scale empiricism and experimentalism which has ever been attempted by disinterested administrators is in operation. Meanwhile the Webb’s’ have enabled us to see the direction in which things appear to be moving and how far they have got . . .

“It leaves me with a strong desire and hope that we in this country may discover how to combine an unlimited readiness to experiment with changes in political and economic methods and institutions, whilst preserving traditionalism and a sort of careful conservatism, thrifty of everything which has human experience behind it, in every branch of feeling and of action.”

While opposed to Soviet dictatorship and oppression, Keynes had long had sympathy for their grand “experiment” in redesigning a society. After a visit to Soviet Russia in 1925, he wrote an essay on his impressions of what he saw. He explained:

“For me, brought up in a free air undarkened by the horrors of religion, with nothing to be afraid of, Red Russia holds too much which is detestable . . . I am not ready for a creed which does not care how much it destroys the liberty and security of daily life, which uses deliberately the weapons of persecution, destruction, and international strife . . . It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here.”

Nonetheless, where Soviet Russia had an advantage over the West, Keynes argued, was in its almost religious revolutionary fervor, in its romanticism of the common working man, and its condemnation of moneymaking. Indeed, the Soviet attempt to stamp out the “money-making mentality” was, in Keynes’s mind, “a tremendous innovation.” Capitalist society, too, in Keynes’s view, had to find a moral foundation above self-interested “love of money.”

What Keynes considered Soviet Russia’s superiority over capitalist society, therefore, was its moral high ground in opposition to capitalist individualism. And he also believed that “any piece of useful economic technique” developed in Soviet Russia could easily be grafted onto a Western economy following his model of a New Liberalism “with equal or greater success” than in the Soviet Union.

This all does not make Keynes a “communist” or a “Nazi” or any other type of central planning totalitarian. And to suggest otherwise would be unfair and unjust to Keynes. Like many of the British liberals of the early decades of the 20th century, Keynes may have lost confidence or belief in laissez-faire economics, but he (like other British liberals of that time) held fast to their desire for and defense of civil liberties and democratic government. The latter was what separated them from the Nazis, and made Hitler the enemy of Western Civilization – which, indeed, he was.

But it remains the fact, that Keynes was open to experimenting with a wide variety of government forms of economic management and planning – depending on the circumstances and requirements – given that he considered that the laissez-faire, or a free market-based, alternative was neither workable nor desirable.

And for all the seeming changes in Keynes’ views over the years, this remained the only ideological and policy constant running through all his ideas and policy recommendations.

Richard Ebeling

what Richard said --- in fact, an emphatic endorsement of what Richard said!

In all of this, I'm surprised no one (whom I've seen at least) has brought up Joan Robinson and the circus. I (try to) address that-


Mathieu's point is well-taken also. Keynes and Hayek are clearly metaphors in the video/song for broad approaches to these issues.

And yes, Pete, if you want to talk about the *influence* of Keynesian ideas, this might go in a different direction. But Keynes himself? I think "central planner" overstates it. And modern Keynesians? Again, overstates it, but nonetheless gets at a fundamental outlook best captured by "top down" rather than "bottom up."

John and Russ have the zeitgest right.

I don't disagree with a word Richard wrote. Indeed, as I did, he refers at the end to Keynes as a "liberal." No doubt Keynes wanted "more" planning and no doubt he was critical of the "bottom up" approach of markets.

But was he in favor of "central planning" in the same sense as so many anti-liberals were at the time? Not that I can see.

Again, Russ and John have the zeitgeist right, even if the phrase "central plan" is not literally accurate.

One last point:

The lyrics do not call Keynes a "central planner." The verse in question is about job creation and stimulus spending and contrasts the bottom up entrepreneurship of Hayek with Keynes' "central plan." Whether that's different from calling him a "central planner" more generally is a good question.

If I have been "outpunched and knocked-out" but won on a technicality like "Keynes" of the video, then I too want to be eagerly interviewed by Ed Stringham, :-).


All the British "central planners" were liberals? That is why Hayek's critique of the "road to serfdom". It is a critique of the relationship between planning and democracy to those who thought they could combine economic planning with liberal democracy.

Planning results in unintended undesirable consequences with respect to both economics and politics.

We are moving far away from your original post. But I actually think Ebeling gets to a mind-set that was very common at the time (and persists to a considerable extent even today) related to the necessity of an educated technocratic elite to guide the ship of state to address the social ills of unemployment and poverty.

In other words Steve, one could actually make an argument that could by all reasonable scholarly standards address the issue of Keynes and central planning and get in the top outlets in the history of ideas.

And Ryan Murphy makes a very good point about the Cambridge group that Keynes was part of and their opinions on economic policy questions.

You (and others) are getting hung up on the "liberal" point (including the idea of consumer sovereignty) -- also see the debate in the EJPE from a few years ago on this issue.

Just as a sidenote...

EconStories had endorsements (maybe still does) regarding both the style and the content of the first rap; one of which was from a Keynes biographer who said that they got everything from that point of view right. Not disputing the metaphoric aspect, I would say that accuracy emphatically IS an issue when it has already been flaunted by Poppola and Roberts for their previous collaboration.

I generally agree with what has been said here. I will add that, from a certain perspective, the (admittedly valid) point that Keynes was not a technical "central planner" is made in a self-serving manner by some of the more ideologically progressive economists.

The crux of the matter is that "Round Two" scores some very powerful rhetorical points against centralized planning. This force major gives those sympathetic to Keynesian stimulus an incentive to disavow any idealogical affinity with "central planning."

At the same time, however, any consent to fundamental Keynesian framework (outside the current debate) seems to imply, to those same economists, a concession on the framework of central planning. I've experienced this directly, and I'm sure I'm not alone. I have, in the past, conceded basic AD/liquidity trap/need for expansionist policy, merely for the sake of argument. This concession immediately leads to claims that I must therefore concede the need for general government oversight and central planning. In short: I have yet to meet a progressive Keynesian who, outside the unfavorable environmental created by "Round Two" and its rhetorical equivalent, will not press the logical connection between the need for AD stimulus and broad central planning.

I sense a double standard.


I'm not criticizing John and Russ. I think they have it more than right enough. Again, think about what we're doing here: we're debating the finer points of 20th century intellectual history in the context of the lyrics to a piece of popular music.

One reason this issue is in front of us is precisely because so much of the lyrics are RIGHT that critics are looking for the one opening they can try to drive a truck through (see Caleb's comments too).

Is the use of "central plan" unfair to Keynes? It's all about context. In this context, especially since Keynes is given the chance to refute it, nope.

It's interesting that no one is saying that the song's suggestion that Hayek wanted to do nothing in response to the depression is also unfair. I think that's wrong historically, but Hayek has the chance to respond, just as Keynes did to "central plan."

Is it worse to be called a central planner than to be accused of not caring about the unemployed? Neither one is very nice.

I think that john has a point, and one that I think Steve needs to take seriously. One cannot go around bragging about how accurate something is and urging people to play it in their classrooms (as many did for the first one and are now doing for the second one) and then get all in a huff if somebody raises a point about the accuracy of some of it. That really will not fly.

And in fact there are other inaccuracies in it. A big one? Keynes was not a supporter of what has been called "military Keynesianism," although he certainly did expect the employment outcomes that happened (and worried about the dangers of inflation from the excessive aggregate demand being generated). And while some Keynesians did worry too much about a return to the depression after WW II, there was indeed a 12.7% GDP decline in the US in 1945, sort of a replay of the post-WW I brief plunge of 1919-20.

OTOH, Pete and Ryan Murphy score some points about the Cambridge Circus. I happen to be a fan of Joan Robinson most of the time, and some of her work in particular (see Cambridge capital theory debates). But while she criticized Marx earlier in her career, she went gonzo bat bananas in favor of Maoist China and the North Korean regime later in her life. I don't think Keynes would have done that if he lived as long as Hayek did, but still, ack!

It's all about context Barkley.

For a hip-hop video, the lyrics are more than accurate enough.

For HOPE article, probably not.

John can verify this story, but when I first met him, the summer before the first one came out, he handed me the lyrics and asked my opinion. I said "I could pick a few nits, but this is pretty much right on and more than good enough for what you're doing."

I stand by that, with nits to pick on both sides of the debate, for the second song as well.

The finer points that are relevant to scholars simply don't matter in this context. Different games have different rules. The nits are not gross misrepresentations, and they can be found on both sides.

(And as others have noted, it's somewhat silly to speak of K and H the men, as the point of the video is that they are metaphors for a whole set of ideas that has evolved since the two actual men lived. Hence your point about military Keynesianism isn't persuasive since, in fact, such a thing existed, even if K himself didn't support it.)

It's precisely because they're going for a bigger audience that it would be nice not to give that audience (many of which aren't going to have a background in it) the impression that Keynes is a central planner. Why not say "fiscal plan"? Why not say "stimulus plan".

This isn't about poetic license. I have no expectation that Keynes will win the fight. I have no expectation that he will look particularly good. But to present this as a choice between freedom and central planning is to miscommunicate the debate, and I'm not sure what the point of the video is if it has that effect.

It's not like I'm saying "shame on Papola and Roberts!". But they had to expect that people would be a little surprised when they connected Keynes to central planning. How could you not anticipate that people would respond with a big ol' "WTF?!?!" to that one?

I agree - people need to lighten up a little.

And when - within a couple days - Nazi references start floating around that just cements that this is not some meaningless poetic license. People make connections.

How many times do you think the misinterpreted German preface (click on my blog link for an alternative interpreation) has been passed around on the internet in the last two or three years, compared to the quote where Mises says that the fascists saved Europe?

The Keynes preface has been passed around CONSIDERABLY more, despite the fact that the Mises line is far more damning (I don't think Mises was a fascist - I do think he made a "lesser of two evils in a tough situation" judgement).

It's this sort of egging on that gets me and lots of others called socialists and fascists.

Daniel, please, you remind of the "George Lucas ruined my childhood" crowd making a huge fuss out of a single line like that.

People also need to remember that it is the Hayek character that uses the "central plan" rhyme, and not the Keynes character. Keynes doesn't present his views as being in favor of central planning, it's Hayek's diss. It doesn't commit the Keynes character to anything.

Daniel, if Keynes' German forward was an "outlier" in comparison to everything else he basically had written, I might agree with you.

But as I suggest in the quotes given in my comment, above, it is clear that Keynes virtually throughout the 1920s, 1930s and 1940s, was sympathetic, supportive, and a qualified endorser of the planning experiments of the interwar period.

And from his remarks in that letter that he wrote to Hayek after the appearance of "The Road to Serfdom," which I quoted above, his main criticism was not the possibility of planning or its effectiveness in many instances in comparison to the free market. It was only a concern over its political consequences when in the hands of the "wrong" people. Thus, planning was economically possible and superior to the unregulated market, but was political suspect because of the potential for the abuse of power.

His sympathy for the possibility of planning was reinforced by his elitist attitude about the directing of society. In his two memoirs written in the late 1930s and published after his death, Keynes says at one point that,

“civilization was a thin and precarious crust erected by the personality and the will of a very few, and only maintained by rules and conventions skillfully put across and guilely preserved.”

And Roy Harrod, his friend and first biographer remarked that, “he was strongly imbued with . . . the idea that the government of Britain was and could continue to be in the hands of an intellectual aristocracy using the method of persuasion.”

Keynes may have believed that democratic "values" were essential to a free and liberal society, but at the same time, he clearly also believed that a stable and good society was dependent upon an "elect" who saw things beyond the passing passions of "animal spirits" and could guide the social order in the "right" direction.

That "civilization" was based upon and sustained by "the personality and the will of a very few, and only maintained by rules and conventions skillfully put across and guilely preserved," as he said.

Thus, he had the philosophical beliefs and psychological attitude of a "planner." We should not forget that in his Berlin lecture on "The End of Laissez-faire" in the mid-1920s, he even fluttered with eugenics and the designing of a better human race.

If not for the superior insight and long-sighted understanding of a "social good" by people like himself, it would be, he clearly thought, the end of "civilization."

So while doctrinally it is true Keynes never specifically called for socialist central planning in either its Soviet or Nazi form, he was a philosophical and psychological "fellow traveler" who showed public sympathy and general support for the such experiments in social planning.

Richard Ebeling

I have not seen the video yet, but Richard is certainly correct about the thrust of Keynes' views and the overall intellectual mindset in the 1920s and 1930s.

How much more do you need to do to effect a central plan than to socialize investment? How much more do you need to do to destroy capitalism than impoverish savers?

Mises' critique of socialism is that it would fail because there was no market for capital. Where is the market for capital in Keynes' plan?

Last week, George Soros participated in a panel at the Cato Institute on the 50th anniversary of The Road to Serfdom. In his prepared remarks (published in Politico), Soros noted that Hayek and Keynes debated the role of the state in the economy. Soros wrote: "Hayek was on one side, Keynes and socialist planners on the other." Soros knows Keynes.

I would just make two additions to Pete and Richard Ebelings’s points. First, In The End of Laissez-Faire (1929) Keynes writes:

“Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance. It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of the Unemployment of Labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and production. Yet the cure lies outside the operations of individuals; it may even be to the interest of individuals to aggravate the disease. I believe that the cure for these things is partly to be sought in the deliberate control of the currency and of credit by a central institution, and partly in the collection and dissemination on a great scale of data relating to the business situation, including the full publicity, by law if necessary, of all business facts which it is useful to know. These measures would involve Society in exercising directive intelligence through some appropriate organ of action over the many intricacies of private business, yet it would leave private initiative and enterprise unhindered. Even if these measures prove insufficient, nevertheless, they will furnish us with better knowledge than we have now for taking the next step.” (pgs 317-318)

If this quote doesn’t capture the direct antithesis of Hayek’s Road to Serfdom, I don’t know what else would. Incremental planning based on “data” by those in power under the pretense of knowledge. This quote particularly echoes similar arguments favoring central planning put forth in the socialist calculation debate.

Second, Keynes didn’t just flirt with the idea of eugenics – he was a director of the British Eugenics Society from 1937-1944. The quote that Ebeling perhaps has in mind from his (1929) piece reads,

…concerning Population. “The time has already come when each country needs a considered national policy about what the size of Populations, whether larger or smaller than at present or the same, is most expedient. And having settled this policy, we must take steps to carry it into operation. The time may arrive a little later when the community as a whole must pay attention to the innate quality as well as to the mere numbers of its future members.” (pg. 319)


I thought we just had a round of people denouncing, with good reason, Soros mistaking Hayek for being a Chicago economist. But now you want to declare that somehow Soros is accurate on Keynes? Um, well, if you say so.


Please read my original post in which I quote exactly the passage you do. I get a different take on it, while identifying it as the point where Keynes came out more strongly than anywhere else for central planning of some sort.

Yes, he was a eugenicist, which, as someone familiar with the work of Levy and Peart, I would expect that you know was very widespread in many circles prior to WW II. There is no question that Keynes was a classist, anti-Semitic snob of the worst order.


Soros had the division right in the political battle. He does understand Keynes (and Knight). And a good deal of what he said about Hayek is correct. Further, when corrected by Bruce Caldwell on his errors, Soros backpeddled. The fact someone is wrong on one issue does not make him wrong on all issues (a point I would have thought need not be made).

There was text and subtext in that panel. If Soros was there, it was because (a) he wanted to talk about Hayek; and (b) he felt Cato was the place to do it. His repeated overall message was the need for the two sides in political debates to talk civily to each other.

I've now watched the video and think the complaints over the line out of the Hayek character about "central plan" are a red herring. I note that, because of them, we aren't discussing the video. The two positons of the historical figures are very accurately portrayed in the video.

Keynes wanted to plan at the state ("central") level. and Hayek wanted to do so at the individual level. That point is made in different words repeatedly in the video.

It is that vital distinction that Soros understood in his comments at Cato.

Mathieu -
Who is making a "huge fuss"? Not me. I'm not the one putting things up on youtube, I'm just suggesting it's misleading. Must I agree or keep it to myself to avoid making a "huge fuss"? You need thicker skin.

Jerry -
re: "How much more do you need to do to effect a central plan than to socialize investment?"

Do you know what Keynes held up as the example of the socialization of investment he was most enthusiastic about? Private joint stock companies. That's the socialization of investment he got excited about in 1926 (supposedly a planning heyday for him). And immediately after waxing poetic about joint stock companies he flatly dismissed the idea of state ownership of the railroads. You all read "socialization" and you think "collectivism" or "public ownership".

This is why citing these short snippets is so bad for talking about these things. If you quote one sentence of the German preface he's A-OK with Nazis. If you read the whole preface, though, you realize he's making a methdological point to the German Historical School. If you read one sentence about "socialization of investment" it's easy to draw lines to socialism. If you read a wider scope of what he's written about socialization of investment, you'll see he has things like joint stock companies in mind.

I have read, I think, virtually everything Hayek wrote, and a good deal of Keynes' writings.

And, in my opinion, the lyrics in both videos come amazing close to precisely representing their respective views.

It is outstandingly accurate -- in spite of the criticisms that have been made.

Richard Ebeling


I don't engage you for a reason.

There has been any number of quotations and citations from Keynes that refute your ridiculous interpretation. You simply ignore them, as you do with everything that doesn't fit your world view. To them, you can add Herbert Frankel's Analysis in Money: Two Philosophies.

For a book-length treatment of Keynes' views on ivestment, I would cite Allan Meltzer's Keynes: An Interpretation. His entire life, Keynes worried about what he believed as a chronic undersupply of private invetsment. He changed how he proposed dealing with the issue, but not his underlying view.

Jerry, I don't ignore arguments or evidence that don't fit my world view and I resent the implication. You're driving home why I generally try to stear clear of you - if I offer a different opinion than yours I often get this condescension from you despite the fact that I've never impugned or insulted you.

I agree with your more substantive point - the underlying concern is the level of investment, and the concern about the shortage of investment had its source in an interest rate determined by liquidity preference that was not guaranteed to be consistent with a sufficient level of investment. This has always been my understanding of Keynes.

This would become especially moot if they can secure Skidelsky's blessing like they did in the last one. Here's hoping for that. I'm not sure if that will convince Kuehn, though- I'm under the impression that Skidelsky's understanding of Keynes is the same as that which is presented in this thread.

Ryan -
Convince of what though? I'm not going around and no one else is going around saying "this thing is a travesty" or anything like that. Pointing out that some lines give the wrong impression I hope isn't taken as a dismissal of the video. It's not like it's news that DeLong, Krugman, Barkley, I and others have disagreements about the nature of the man.

The other reason why it's important is that while Steve takes a position that's reasonable (although I'd still disagree with some of it), other people jack it up to a quite unreasonable level. So given that a lot of those people are out there, it's worth putting our 2 cents in, regardless of where Skidelsky comes down.

Yeah yeah, you're right Daniel Kuehn. Russ & John totally misrepresented Keynes by having his jacket light woody maroon instead of bright sandy brown. How could they get it so wrong?


I don't see disagreement about Keynes. I see people going to great lengths to quibble.

I do too John V, and it's very obnoxious. This sort of thing shouldn't even rise to the level of something in need of discussing.

Not wishing to be superficial, but... if one favours government intervention in markets, one is favouring the replacement of private decision-making and planning with decision-making and planning by government. Whether you want to call that planning "centralized" or not is a question of semantics. I am aware that the phrase "central planning" usually refers to a certain high threshold of intervention but that is matter of degree not of kind.

As long as there is a monetary economy, some private decision-making will remain so government planning must always be incomplete. Even in the USSR and China, if I recall correctly, there were times when private incentives or property, and thus private decision-making, were reintroduced (perhaps temporarily?) in various sectors. Add to that that government interventions everywhere typically lead to additional interventions necessary to shore up or sustain the original interventions and that government expenditures as a percentage of GNP can often be well north of 30% even in supposedly market economies. Would Keynes object to the amount of centralized decision-making and planning in, say, modern France (about 60% GNP)? Or to the fact that in Canada most, if not all, of the means of production in the health care sector, are government-owned?

It strikes me that what the critics of the video are really responding to are a) the implied point that central planning is what you get more of when you reduce opportunities for private planning, b) what they consider to be the inconvenient implication of a) for perceptions of governance in modern democratic states (i.e., there is a lot of central planning going on), c) the fact that the public is generally aware that "central planning" failed in the USSR, and d) Russ/John are using a popular medium to communicate these ideas directly to the public. The critics' primary worry, I surmise, is that the public will thus connect modern Keynesian policies with "central planning".

Daniel Kuehn complains that Keynes’s controversial preface to the German edition of the General Theory has been discussed more often than the “far more damning” praise of Mises for Italian fascism. He is alluding to a passage in Mises’s 1927 work Liberalismus, where Mises does praise Mussolini’s seizure of power in 1922 (while criticizing Fascism’s reliance on force and neglect of reasoned argument and its international belligerence). But Mises was not alone among non-Fascists in praising the 1922 takeover. In the same year Liberalismus appeared, Churchill met with Mussolini and publicly lauded “Fascismo’s triumphant struggle against the bestial appetites and passions of Leninism,” claiming that “it proved the necessary antidote to the Communist poison.” This was also the position of all the Italian classical liberal economists, starting with Pareto. All of these men believed that Italy, in the immediate post-World War I period, was on the verge of a communist revolution. They had good reasons for this belief, from the actions and statements of the powerful socialist party and the violence of the labor unions. As one of the liberal economists wrote of Fascism in the early 1920s, it was a case of “middle-class self-help.”

Why not say "fiscal plan"? Why not say "stimulus plan".

Sounds like a central plan to me.

Von Pepe is certainly correct; who carries out the stimulus or fiscal plan? The central planners of course; they do it either out of their desires for control over goodies to hand out to cronies and potential donors to help re-election bids, or they do it out of a misguided fatal conceit that they (the elites using "best practices", that is scientism) know better than the masses in the hinterlands. Either way the few supplant the orders that emerge from the voluntary individual actions of the many playing themselves out. By whatever label it is feckless because it substitutes decision-making based on aggregates for decision-making based on intimate knowledge of the particulars of time, place, circumstances, personalities, etc.

John Papola responds --- http://blogs.forbes.com/beltway/2011/05/02/the-question-i-ponder-who-plans-and-spends-for-whom/

I think his response is very well put. Ball back in the other court to rethink.

Ralph Raico -
I want to make clear that I don't think Mises's citation of Italian fascism demonstrates that he is a fascist at all - short-sighted and a little tin-eared to the excesses of fascism if anything.

What is frustrating is that the preface (which should not be controversial) is controversial, and that the Mises passage (which should be controversial, although not completely damning) isn't controversial.

Mises argued that fascism still had remnants of liberalism and that it would hold off the completely illiberal communists. Nothing controversial there. Mises didn't claim that his policies would be best adapted by the fascists, though. Which, of course, it would be, since there wouldn't be people opposing it, as we have in democracies. Nor did Mises have people like Mussolini saying that his works were what fascism was all about, as did Keynes. For some reason, Keynes and Mussolini both agreed that Keynes' ideas were compatible with fascism, but nobody wants to believe them.

Daniel Kuehn has answered none of my objections, simply repeating his original misleading post. Except now he adds that Mises was probably "tin-eared" to "the excesses of fascism--even though in the passage in question Mises criticized Fascism on a number of counts, including its reliance on force rather than reasoned argument, as I pointed out. At the time, Luigi Einaudi extolled the Black Shirts as “those ardent youths who summoned the Italians to insurrection against Bolshevism.” The struggle between the Fascists and Socialists he characterized as a conflict between “the spirit of liberty and the spirit of oppression. Does Kuehn even know who Einaudi was? ” He clearly knows nothing about the Italian circumstances that in the early 1920s gave rise to the Fascist movement. Why does he keep on pushing his untenable position?

Anyway, road was chosen by oneself! Once you've tried your best, never regret!

While the video does give off a pro-Hayek point of view, I think it does a pretty fair job of laying out the two arguments. Yes "central plan" my not be the historical accurate term, but it does capture the essence of the argument in the video. Let's not forget that the debate in the video is about the current crisis, not the rights and wrongs of Depression era policies.

It seems "central planning" has gained the same false stigma as "socialism." Both are ideas, not ideological slurs. In the context of the arguments, both Keynes and his modern followers advocate/d more government/"central" planning than Hayek and his modern followers do. Whining about the historical accuracy of the verbiage does not change the debated facts.

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