John Maynard Keynes: Dead 60 Years, Why Should We Care About Him?
Several weeks ago, Rex Bell wrote a blog criticizing the economic theories of John Maynard Keynes. We had a brief discussion of what we call Keynesian economics, which are sometime credited with helping us out of the Great Depression. At the time, I did not know much about Keynes. Indeed, I did not know much about economics, having taken only one low-level economics course in college. Rex’s blog got me interested so I with the help of Google, I was able to find a couple of articles on Keynes and his literally earth shaking economic theory. Here’s a summary of what I found.
Keynes is hated with a passion by some people and revered as practically divine by others. So, for an amateur like me, what you learn about him depends on who you read. Keynes’ economic theories completely turned the world of economics upside down in the early 1930. Contrary to the views prevailing at that time, Keynes said that markets will fail if left to their own devices and that big government, with focused deficit spending, helps maintain a nation’s economy. Specifically, he argued that when an economy cools, you heat it up by cutting interest rates and initiating lots of government spending, particularly in infrastructure, education, and public health (anything there sound familiar?) At the time, this was such a revolutionary thought, that other economists believed he had taken leave of his senses. However, FDR bought in to his theory during his second term and initiated strong deficit spending. It worked! The U.S. slowly came out of the depression. Some will argue that it was WWII that brought us out of the depression, but that’s not exactly true. America was coming out of the depression before we got into the war, even before we began seriously supplying England. The war simply accelerated what had already been happening.
Keynes’ theories prevailed in economic thought and practice until the about 1970 or perhaps a bit later, then a more conservative, government-hands-off policy began. President Ronald Reagan made the laissez faire policy into a practically a religion, and Bill Clinton followed with the claim that the “Era of big government is over.”
Then our economy tanked and we elected Barack Obama, who brought back big government with a passion. We’re talking a trillion dollar deficit and government spending like no one has ever seen. Obama, in his speech to Congress, reinstated the Keynesian philosophy when he said, “I reject the view that says government has no role in laying the foundation for our common prosperity.” John Maynard Keynes, just smiled from his perch in Heaven or Hades (you tell me which).
My
research did not tell me whether or not Keynes’ theories will work
again or not. What I did learn was that there is a great gap driven by
venomous invective between those who support Keynes’ theories and those
who see support a more conservative approach. However, it matters not. Keynes is back and like it or not, we are stuck with him for the next several years.
- Bob Hertzog's blog
- Login or register to post comments
- Printer-friendly version
- 903 reads
The big difference here is we won't be tooling up to produce massive amounts of war goods. There already pretty much on the shelf already. Imo, our problem started with the industrial revolution. We built machines to do most of the jobs, then we let what jobs was left, to leave the country. And the population needing help is far more now. As far as the global financial situation goes, imo we were headed twoard bankruptcy the same day someone invented money. I guess the fact we live in a finite world has not really caught on yet. The only thing that seems to be infinite is the population.
the hardest part of doing nothing, is knowing when your done.
Hello Spacemonkey... Thanks for the comment.
Well, you may be right, but if so, you paint a terribly bleak picture. Personally, I'm not that pesimistic. I wonder if you would want us to return to the farm... pre industustral revolution days. I'm not ready for that.
That, and human stupidity according to Einstein.
“If you treat an individual as he is, he will stay as he is; but if you treat him as if he were what he ought to be and could be, he will become what he ought to be and could be.” ~ Johann Wolfgang von Goethe
What's so bad about returning to the farm? It shouldn't matter where you are or what technology you do or don't have...having a good life doesn't fundamentally depend on these things. Like Troy Turner always said, "Attitude is everything." Wherever you go, Bob, there you are. You bring your problems with you, no matter what drug you use to escape them or what means of travel you use to flee from them.
There was a recent National Geographic story about Blue Zone people - those with the highest longevity, which to me equates with quality of life. Most of these people have a lifestyle more suited to the farm life than to the technology-rich life. Here are some snippets from the article:
"We know that people who make it to a hundred tend to be nice," [Dan Buettner, explorer and author] said.
"They … drink from the fountain of life by being likeable and drawing people to them."
"Buettner has explored and studied the world's centenarian hot spots—which he calls blue zones—over the past several years. The findings appear in a new book, The Blue Zone: Lessons for Living Longer from the People Who've Lived the Longest.
"After scouring the globe, Buettner has found several basic threads that connect the longest-lived: a plant-based diet; regular, low-intensity activity; an investment in family; a sense of faith; and purpose.
"A 60-year-old in Costa Rica has more than a fourfold better chance of making it to 90 than a 60-year-old in America," he said.[WOW!!]
"....They spend one-fifteenth the amount we do on public health, but they spend it in the right places."
Okinawa, Japan, boasts the longest-lived women in the world and has the longest disability-free life expectancy in the world.
The other hot spots include Sardinia in Italy, which has the highest concentration of centenarians—most of which are men—and the Seventh Day Adventists of Loma Linda in California. An Adventist man lives 11 years longer than the average American male.
But in the United States, the life expectancy is 77.8 years—a figure that might actually drop in coming decades due to the impact of obesity, according to the Centers for Disease Control and Prevention.
"As rich as we are as a nation, we don't do a great job," Buettner said."
I haven't fully explored this Blue Zones site, but it looks pretty interesting: http://www.bluezones.com/
Anyway, my point is, Keynes or no Keynes, your quality of life is far more in your own hands than in massive governmental deficit spending, or national healthcare, etc. Maybe we're all looking at the wrong things, after all.
“If you treat an individual as he is, he will stay as he is; but if you treat him as if he were what he ought to be and could be, he will become what he ought to be and could be.” ~ Johann Wolfgang von Goethe
Hi Bard... thanks for your comment. A farm might not be so bad for some folks... I'm really not putting it down, but it is not for me. I like the city... Actually, I like living in Richmond... Close enough to several great cities, but I don't have to live directly in them. Personally, I really don't long for the good old days (except I'd prefer being about 30 years younger). I look forward to what is to come. :}
I do, however, agree strongly with your final point. We make the life we have. Our happiness is up to us.
Hello Spacemonkey... Thanks for the comment.
Well, you may be right, but if so, you paint a terribly bleak picture. Personally, I'm not that pesimistic. I wonder if you would want us to return to the farm... pre industustral revolution days. I'm not ready for that.
the hardest part of doing nothing, is knowing when your done.
Hi Spacemonkey... Wow! That's a really great observation... For my part, I could not agree more....:}
Thinking more about this, you have to consider what he's doing with the deficit spending. Even IF, and that's a HUGE 'IF', deficit spending is the way to bring the economy back.....it really depends what you get for that spending. Jobs should be his single biggest priority or nothing else really matters in the long run. In other words, he isn't really buying anything of value with the deficit spending, he's just plugging leaks. That's insane, imo, JMKeynes or no JMKeynes.
“If you treat an individual as he is, he will stay as he is; but if you treat him as if he were what he ought to be and could be, he will become what he ought to be and could be.” ~ Johann Wolfgang von Goethe
Imo, they blew it. Their trying to put out a fire by throwing paper on it! If the stimulous went direct to the consumers taxpayers they could pay down their own debt, and correct the problem in a more natural way. For those who do not live beyond their means,like myself they would end up with a little bigger nest egg. The intrest alone is killing everything. Maby they should freeze it at 1/2 of 1% on EVERYTHING for the next 5-10 years. But jobs that pay a livable wage for most of the general masses is probably the best answer, along with REASONABLE intrest rates. Btw, I still think they need to close wall st and conduct business without it. Let business suceed or fail on behalf on how it conducts its business, not a bunch of side betting gamblers attempting to get something for nothing.
the hardest part of doing nothing, is knowing when your done.
Hello Bard... Well I know we might disagree on this, but Obama says it is jobs which is the main focus of the stimulus. As I have said, there are a number of things in the stimulus that I wish were not there, but the vast majority of it goes to creating jobs. You write that the stimulus does not purchase anything of value. Let's see: Some of the stimulus is going to encourage the creation of jobs in so called "green" industries. That will create permanent jobs in America and help reduce our importing of foreigh oil. That seems a worthwhile aim to me. Some of the stimulus goes to streamlining the medical-delivery system. That creates jobs, saves lives, and improves health care. Seems like a valuable purchase to me. A very large portion of the stimulus is going to repair America's infrastructure. That creates jobs right now. Some cities have already put people to work on such projects. It also makes a very necessary improvement of our infrastructure. Again, it seems to me like a pretty good purchase to me. Some of the stimulus goes to improving education and helping people get a college degree. That does not create jobs immediately but it improves America's chance of competing with foreign competitors in the future. As I wrote above, there are some expendatures in the stimulus the I would do away with, if I were king, but I'm not. Nevertheless, the vast majority of the stimulus does exactly what it is supposed to do. And by the way, Keynes did say government spending on infrastructure and health care was a good stimulus.
Hi Spacemonkey.... There are some tax cuts in this bill, but mainly it is not good to put the money directly in the hands of tax payers as a tax cult. People will, as you say, pay down their own debt. As good an idea as that is, it is not what you want to do in stimulating the economy... What you want is for people to spend money. You want to get money in the hands of people who will purchase an new car, tv set, refrigerator etc. That stimulates factories to begin production and hiring more workers, who in turn spend their new paychecks, which further stimulates more factories. At least that is the theory. In a weak economy, when people get a tax cut, they tend to save the money. As I say, that is a good idea, but it is not what we want right now. In fact, right now we want people to live beyond their means. I don't mean this in a foolish way. Later, of course, it will be wise for them to save, but righ now we want them to spend, spend, and spend. If we can stimulate that, the economy will boom.