Thoughts on economics and liberty

Continuing the Keynes debate. Have I gone overboard?

My good economist friend has now suggested this, based on this blog post:

Thanks for the link again, but I fear you have derailed yourself, and it does you no good. Nor can I see any benefit from trying to persuade the world that Marshall, Pigou, and Keynes were socialists of any hue, let alone Fabian.

Apart from anything else it devalues political science to use the word “socialist” as a generalised term of abuse as that has no heuristic value at all. Define socialism and set out its main tenets as understood by its protagonists, and then show which of those tenets were espoused by those 3 economists, e.g. absolute equality of incomes. Short answer: none. True socialists vilify Keynes because he was not one of them and because his General Theory did so much to save capitalism as a method of organising the economy but with governmental fiscal support in times of recession, as Obama is trying to do now.

Australia’s Fabians (check their journal) are baying like the Greens for even more stringent carbon taxation – I cannot imagine JMK in their camp, let alone Julia’s.

Anyway I have enjoyed working through your sources. But most are I fear all too obviously biased upfront, apart from Skidelsky and that biography based on Cairncross.

My response

Dear XX

Thanks for your prompt response. 

Having grown up in an environment of Fabian socialism (in India) where every opportunity was taken by an arrogant and ill-informed government to intervene in the economy, I can "smell" socialism at great distance. 
 
I make a particularly sharp distinction between capitalism and socialism. No mixed economy for me. In my view, the whole range of opinions left of centre are socialist (albeit of different hues), ranging from John Rawls's social liberalism, Keynesian socialisation of investment, Laski's Fabian socialism, to Marxian communism.
 
A socialist view is essentially one that imagines that a government can plan economic activities better for citizens than they can do on their own. As soon as a government justifies direct action in an economy, it becomes socialist. 
 
The idea of a government using fiscal policy to deliberately try to "revive" an economy is therefore unacceptable. It implies knowledge of local circumstances which no government can possess. It also implies an ability to out-guess people's optimal (local) decisions through central planning. Both Rudd's and Obama's [or George Bush's] Keynesian interventions in the face of slow-down in so-called "aggregate demand" are therefore anathema in my scheme of things. 
 
The idea that people are stupid and need to use money borrowed by a government in order to motivate them to spend is patronising and untenable. It fails to align with the rational choice model – that people make the best possible decisions (they can) given their local circumstances and knowledge.
 
The government should act as an enabler, permitting information flows (through the unhampered price system) to the local consumer who can then make optimal decisions. Anything beyond that reeks of fatal conceit, and amounts to robbing A to pay B (through taxation/borrowing). There are ethical issues at stake here, apart from issues of feasibility.
 
I've written about the failures of American intervention in the housing market, and its subsequent stimulus here: https://www.sabhlokcity.com/2009/01/building-a-monetary-and-financial-system-for-a-free-society/

Therefore I'm sensitive to any "economist" who claims the knowledge to "plan" an economy by pouring billions or dollars into "projects" to revive it. Keynesianism, in my view, fails a number of tests, including moral.

It is not necessary for someone to want absolute equality in order to be deemed a socialist. Anyone who opposesinequality is a socialist as well (for these two positions are opposite sides of the same coin). 
 
Keynes opposed inequality. In his General Theory he writes: "The outstanding faults of the economic society in which we live are its … arbitrary and inequitable distribution of wealth and incomes.”
 
Thus he considered the "distribution" of wealth/income to be an issue. That is socialist. Why should Keynes be bothered about "distribution" achieved through voluntary trade? That's a legitimate moral outcome. It is immoral to suggest that "distribution" is up for discussion once the underlying trade is ethically conducted.
 
To suggest such distribution (through voluntary trade) is "inequitable" is a purely socialist position. Why does "equity" matter? Envy drives Keynes equally as it drives Marx. Both positions reject the idea of merit and (individual) justice. 
 
Keynes's socialism might be "better" than that of "hardcore" Fabians like Shaw (who went about supporting the administration of poison gas, and was a great fan of the Nazis), but it is socialism nevertheless. 
 
Being so closely based on the underlying model of the Fabians, it is not incorrect to say that Keynes was Fabian in his approach.
 
I'd like to add that I've made these deductions based on certain data. If the data are incorrect, these deductions must change. I'd be happy to be corrected if there is any inaccuracy in the material I've cited.
 
None of my positions are "final" in the sense that I'm always amenable to persuasion. I'd be happy to read more on this subject should you send me relevant material.
 
Regards
Sanjeev

I trust this clarifies. However, I'm open to being proven wrong. Always welcome the opportunity to learn.

Please follow and like us:
Pin Share

View more posts from this author
3 thoughts on “Continuing the Keynes debate. Have I gone overboard?
  1. Sanjeev Sabhlok

    Feedback from economist friend:

    Now you are making a much better case, and I need to sleep on it! Meantime,

     

    I have always detested the fabianism of Nehru and his dynasty, it held India back for 50 years, at untold cost in terms of deprivation and misery.
     
    Keynes’ take on India was rather different.
     
    Keynes’ “socialisation” of investment was very specific to the state of the economy. Sometimes capitalists need to be saved from themselves!
     
    You say: “As soon as a government justifies direct action in an economy, it becomes socialist”.  That is rather extreme. Had Howard/Costello still been in power in 2008 I suspect Costello would have relaxed his aversion to deficits.
     
    Then you say “As soon as a government justifies direct action in an economy, it becomes socialist”. That is nonsense. Margaret Thatcher was no Fabian or any other kind of socialist, but was not averse to direct action. 
     
    I think the rest of your comments here are well worth working up into a paper, so long as you avoid dubious sources – stick to Skidelsky!
     
Social media & sharing icons powered by UltimatelySocial