John Maynard Keynes is most famous for two statements.
This first appeared in the final paragraph of his General Theory of Employment, Interest, and Money (1936).
The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist (p. 384).
The second is short and sweet: "In the long run we are all dead." That is from his Tract on Monetary Reform (1923). It appears in a typically obtuse Keynesian passage.
Now 'in the long run' this is probably true. If, after the American Civil War, the American dollar had been stabilized and defined by law at 10 per cent below its present value, it would be safe to assume that n and p would now be just 10 per cent greater than they actually are and that the present values of k, r, and k? would be entirely unaffected. But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.
When Keynes wrote biographies, he was lucid. When he wrote economics, he was incoherent. This is because he understood human motivation, but he did not understand economics.
This is why Keynenianism is so vulnerable. It is incoherent. Keynes was incoherent before he became a Keynesian. He produced multiple theories of economic causation at various times in his career. Not one of them made sense.
His disciples are saddled with the unenviable task of defending and then extending the writings of an incoherent author of various incoherent theories of economic causation. Keynes really was the emperor who had no clothes (in more than one sense).
He is, in short, a sitting duck. So are his acolytes.
THE POST-CRASH MARKET FOR A NEW ECONOMICS
When the present deficit-based world economy comes crashing down on the heads of the masses, it will also come crashing down on the world economic establishment that has used Keynes' name to defend the deficit-based, fiat money-based monstrosity that national governments have created. The General Theory from the beginning was a belated apologia for the early stages of this deficit-based monstrosity.
Keynes in half a century will be regarded as the equivalent of Ptolemy. No one reads Ptolemy's astronomical works. Almost no one ever did. His celestial spheres came crashing down in the 16th century.
It takes entrepreneurship to see what is coming: an economic crash and increased demand for non-Keynesian explanations.
It also takes this: "I told you so. Here is where. Here is when. I sounded the warning. No one listened. It is time for you to listen."
An entrepreneur must do more than forecast correctly. He must put his money where his mouth is. If he is a mere speculator, he must buy low and sell high. If he is an innovator, he must work long and hard to prepare institutionally for these changes. This takes time.
In the realm of ideas, it need not take much money. Self-funding will do just fine.
It is not enough to refute the incoherent master of our era. The entrepreneur must refute him on multiple levels for multiple audiences. He must do so in terms of the criteria that govern discourse in each level. This is different strokes for different folks, but administered by a common whip.
Here is the common whip:
For the national government to increase aggregate economic demand by increasing spending, it must get money from one of three sources: taxpayers, lenders, or the central bank. This requires one of three strategies: coercion, deception, or counterfeiting. Every dollar taxed or borrowed reduces effective demand in the private sector. There is therefore no net increase in effective demand when the government increases its spending. Counterfeiting money is theft. It redirects wealth from the private sector to the state. Conclusion: there are no free lunches. The government cannot increase effective demand.
A critic of Keynes needs to administer the lashes in terms of the greatest pain felt by specific recipients. The whip is equally effective.
There are simple formulas in Keynesianism. They all hinge on the belief that Keynesianism really can turn stones into bread, as Ludwig von Mises so aptly put it in 1948.
One of them is this: C + I + G + X -- M = Y(GDP). For my critique, go here.
THE KEYNES PROJECT
In 2009, I proposed the Keynes project on LewRockwell.com. In 2010, I created this department: Keynes Project.
I outlined exactly what needs to be done, market by market.
Any bright economist at age 25 could begin this project. All it will take is time, brains, dedication, tenacity, and a willingness to thumb his nose at the entire academic economics guild.
It will take someone with the writing ability of Henry Hazlitt. Hazlitt's book, The Failure of the "New Economics", appeared in 1959. This would be a good place to start. But remember this: the book received no attention in academia. It was not just dismissed. It was ignored. Word did not get out.
That was then. This is now. The Internet has made all the difference. Books, videos, blogs, articles, and cartoons can be delivered to anyone in the world, 24x7, free of charge. WordPress.com, YouTube, and document posting sites are sitting there, ready to be used.
The economist who does this will secure his reputation. No one else will have done this.
This is so obvious that I find it difficult to believe that some untenured economist in some obscure college is not working on it.
He should start with the boring tasks, such as preparing a glossary of The General Theory. No one will object. Hardly anyone will notice. But it needs to be done.
Move on to the footnotes of The General Theory. Who did Keynes quote? What was the original context of these quotes? Who were the sources? What were their agendas? What influence did they have?
I did this with Bernard Mandeville's 1705 poem, known as the Fable of the Bees, but which was originally titled The Grumbling Hive. Keynes cited it at length on pages 359-61. I even wrote a rival poem. Why was it important? Because it promoted demand-side economics. Keynes was the consummate demand-side economist.
Demand-side economics does not answer the question: "What productive service did the person doing the demanding perform in order to get the money?"
Step by step, article by article, monograph by monograph, chart by chart, video by video, some dedicated young economist should dissect The General Theory in full public view.
The person who does this will get the reputation of being the person who put a hole into the side of the H.M.S. Keynes. The crash will sink it.
After it has sunk, any drone with a Ph.D. in economics will be able to explain why Keynes was wrong, and why the crash was inevitable.
Here is the correct strategy: "I told you so. Here is where. Here is when. I sounded the warning. No one listened. It is time for you to listen."
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