Here’s a letter that I sent this morning to the Wall Street Journal:
Kudos to Mark Spitznagel for drawing attention to the important but neglected work of the late Ludwig von Mises (“The Man Who Predicted the Depression,” Nov. 7).
But while Mr. Spitznagel is correct that Keynesians ignored Mises’s 1912 book, Theorie des Geldes und der Umlaufsmittel (and its 1934 English-language translation, The Theory of Money and Credit), Keynes himself did not ignore it – and therein lays a revealing tale.
When Mises’s German-language book first appeared in 1912, Keynes reviewed it in the prestigious Economic Journal, dismissing it as being unoriginal. Seems pretty damning, until we learn that Keynes himself, in his 1930 book Treatise on Money, confessed that “in German, I can only clearly understand what I already know – so that new ideas are apt to be veiled from me by the difficulties of the language.”
Keynes’s influential dismissal of Mises’s work was based not on anything as lofty as informed disagreement; it was based instead on incomprehension.
Sincerely,
Donald J. Boudreaux
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Keynes was an incredibly provincial person; I’ve said this before, but he resembled the Boston Brahmans in his mental universe. Compare this to the cosmopolitanism and wide range of intellectual depth of Schumpeter.
Mises.org had an article with essentially the same thesis a while back. I never understood it. And I like Schumpeter a lot – don’t get me wrong. He’s one of my favorite economists after Keynes. But Keynes traveled the world, was in touch not just with the world of economics, but with philosophy, politics, literature, the arts. I’m not sure how else to describe Keynes except for “cosmopolitan with a wide range of intellectual depth” – and to be sure, that was a quality he shared with Schumpeter.
Well, you are simply wrong. Keynes was the consummate snob and a cultural elitist with the very limited worldview that brings.
I didn’t know him personally – I couldn’t say. Even if he was snobby, I don’t see how that means he’s not cosmopolitan with a broad world view and broad intellectual interests. And honestly, the two have very similar experiences. Schumpeter and Keynes both worked in their respective finance ministries (Schumpeter during a period of harsh inflation in Austria, and Keynes during a period of deflation in Britain – which may help to explain their different worldviews), they both were quick studies and prodiges in their respective economics departments, and they both taught economics at the university level. Schumpeter saw the world in his travels in his early life as a lawyer – Keynes saw it in his travels on state business to India, to the Peace Conference after WWI, etc.. They both strike me as very impressive figures.
I’m not sure why you’re so intent on bashing him as a “consummate snob” when you couldn’t possibly know such a thing. At least stick to criticisms that you can be sure of.
And honestly, the two have very similar experiences.Actually, their biographies are rather radically different; which is in part why they diverged so radically in their prognosis, fears, etc. Keynes was part of that class of persons who thought that they could plan the lives of others and thought that this was a role he was entitled to. Schumpeter assumed otherwise.Schumpeter saw the world in his travels in his early life as a lawyer – Keynes saw it in his travels on state business to India, to the Peace Conference after WWI, etc.Traveling as an entrepreneur and traveling as an agent of the state are quite different.
One thing that of course illustrates Keynes personality rather well – and of course the attitude of the people thought were the rightful rulers of Britain and the world – was his fulsome support for the ideology of eugenics, with all that entails.
It’s definitely a criticism worth pointing out. I’d point out a couple things – Keynes had a very characteristically economist interest in eugenics. Inspired as he was by Malthus, it was more of a question of overpopulation than racial purity. It’s still not admirable, but that needs to be pointed out. It’s the difference between the sordid beginnings of Planned Parenthood and the sordid beginnings of the Nazi party. We can talk about them together, but we oughta keep in mind how radically different they are too.
The other thing I would just say is that moral failings like this are part of dealing with historical figures. I’m not about to throw out Washington, Jefferson, and Madison because they are slave holders – but at the same time there’s no point in denying that they were slave-holders too.
It’s like reading Mises’s early response to fascism – it makes you cringe: “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.” He was blinded by the efficiency with which the fascists dispatched the Bolsheviks. He of course never embraces fascism in it’s entirety, but he gets giddy over it in it’s early years. And that says something too. It shows where his sympathies lie. But I don’t think it necessarily means Mises is a fascist any more than I think Keynes is a fascist for his interest in eugenics.
Yes, but the fact that he was a Malthusian makes him a very problematic figure. Furthermore, I don’t believe one can neatly separate Malthusianism from things like racism, classism, etc. As for the aforementioned slaver-holders, there were people in society in the 18th century rejecting slavery (this would include a fair number of slave holders who were inspired by the more radical ideals of the Revolution as opposed to counter-revolutionaries like Washington). People always have alternatives – sometimes they are tough alternatives (getting rid of your slaves which you depend on for your status, etc. being one of them), but they are alternatives nonetheless.
I know little about Mises; I come to libertarianism via Schumpeter, Hayek and Friedman.
To think that most mainstream economists believe that a man who dismissed a book’s premise because he could hardly understand the language is the most important economist in the history of the profession.
“… the most important economist in the history of the profession.”Important? The stock in Keynes seems to rise and fall with the need of government to trot out his theories. He has provided a convenient narrative.
Important to who?
That’s one theory – the other is that after the initial infatuation wore off with some of Friedman’s discoveries, reception to Keynes rises when a recession coincides with low inflation or deflation and extremely low interest rates.
Under your interpretation and your view of the government, I would have thought the government would always need his theories. The stock would always be high, so to speak. I think my interpretation makes a little more sense – it explains why Keynes is popular under big-government Obama, but not big-government Bush, Clinton, or Reagan.
Typical of most critics of Austrian economics. Their very criticisms show that they don’t understand what they are criticizing.
I think the same thing every time someone tells me that they know that Keynes advocates government spending in response to recessions.
More seriously, Keynes utterly botched his Wicksell (also writen in German) as Hayek regularly pointed out.
This may explain something about Mises that had puzzled me.
He was reported to have said that an economist must learn German.
This seemed so un-Misesian, coming from a man who had insisted that economics belonged to all, not just esoteric elites, and was the main and proper study of every citizen. But this insistence on every citizen first learning German seemed more like the economics trade unions’ insistence that he learn mathematics, that, for Mises too, as for the trade union, there was to be a barrier to economics, a licence to practise economics.
But, in light of this story about Keynes, I can better understand what drove Mises to say that.
Most interesting.
Just got through reading that piece in the WSJ by Mark Spitznagel.
Here’s an excerpt:
Referring to Keynes as the anti-Mises, “so what if (he) had lost his shirt in the stock market crash. His book was peppered with fancy math (even Greek letters) and that meant rigor, modernity.”
That perfectly illustrates the contribution of mathematics to economics: the opiate of the incompetent.
To add insult to injury, Mises wasn’t even refuted by Keynes and his ilk. He was just ignored.”
It’s easy to fool the masses with math. Hell I looked at some old P Chem work and I don’t even remember what the hell I was doing.
OT: Congratulations to Northwestern in its victory over Iowa!
Where’s are resided Keynesians to defend the honour of their savior?
I knew Quixote would come to save his King. Where is Sancho?
All I know is that Von Mises Institute is headed by that notorious crackpot Lew Rockwell. Yeah I’m into ad hominems today!
Doug French is the president of the Mises Institute.
http://en.wikipedia.org/wiki/Lew_Rockwell
Llewellyn Harrison Rockwell, Jr. (born July 1, 1944, Boston), widely known as Lew Rockwell, is an American libertarian political commentator, activist, proponent of the Austrian School of economics, and chairman of the Ludwig von Mises Institute.
In December 1981, Ludwig von Mises’s widow Margit gave her approval to Llewellyn H. Rockwell, Jr. to found the Mises Institute. It was formally established in October 1982 and located in Auburn, Alabama. Rockwell serves as its chairman and Douglas French is the president.
With the support of Margit von Mises, who chaired the board until her death in 1993, and such giants as F.A. Hayek, Lawrence Fertig, Henry Hazlitt, and Murray N. Rothbard, who headed its academic programs until his death in 1995, the Mises Institute has grown into the leading scholarly center for research and teaching in the Austrian School of economics, as well as an important research center for classical liberalism and libertarianism.
The Mises Institute has 350-plus faculty members working with it on one or more academic projects. With their help, and thousands of donors in 50 states and 80 foreign countries, the Institute has held more than 1000 teaching conferences, including the Mises University, and seminars on subjects from monetary policy to the history of war, as well as international and interdisciplinary Austrian Scholars Conferences.
http://mises.org/about.aspx
It is the 8th most trafficked econ website in the world, with the other 7 including mostly government data sites, and economist.com
It doesn’t change the fact that Lew Rockwell is a crackpot on foreign issues.
Rockwell threw me out of the Mises Institute, so he can’t be all bad.
And, whatever his faults, he’s still pretty damn good.
A clash of egos.
Rockwell once had an op ed in the the LA Times in which he came out strongy in favor of dissenting opinion. I only wish he’d felt that way about it when he threw me out of his institute for it.
Throw ‘em Out Rothbard and Rockwell, Rizzo, and Horwitz make the Austrian School seem like the Catholic Church.
And that’s all the more reason to appreciate those real scholars and gentlemen, Roberts and Boudreaux, and a class act, Cafe Hayek.
And it’s no coincidence that they’re not just the classiest but the best.
Let’s not ever forget to give those great men the love they deserve!
RE: “Keynes’s influential dismissal of Mises’s work was based not on anything as lofty as informed disagreement; it was based instead on incomprehension.”
Knowing that Keynes is famous for his dry wit, isn’t it possible that (1.) he reviewed the book in 1912 because he actually did understand it well enough to review it, and (2.) the 1930 remark was just a little bit of self-deprecating humor?
You seem to be searching for a reason to bash Keynes. Why don’t you share the 1912 review with us, and explore whether or not you think he demonstrated an understanding of Mises in the review (although if he thought it was unoriginal my guess is most people here will interpret that dismissal has him simply not understanding it). That would be more illuminating. When questioned what Keynes would do differently with his life he said “I would have had more champagne”. He’s also said “the avoidance of taxes is the only intellectual pursuit that still carries any reward”. Are we going to take him seriously and literally on these too?
Allow me to phrase it this way – aside from his own singular self-depricating remark, do you have any reason to believe that he would review a book in German if he didn’t understand it? Or is the entire argument based on that one-liner?
Daniel, No: Keynes was a really incompetent scholar and economist.
A quote from Henry Hazzlitt’s book length fisking of the General Theory, The Failure of the New Economics:
I strongly encourage you to read it. The number of mistakes that would cause a fresman econ student to get an F on a paper are outstanding.
Can’t promise I’ll read it, but we’ll see. I’m not sure what this post is supposed to accomplish – telling me that Hazzlitt found him to be wrong in every sense that he was original (I already knew Hazzlitt thought this) is supposed to convince me that Keynes is wrong? Did Keynes’s statement that Mises was unoriginal convince you? Now I’m interested in checking it out just out of curiosity – but come on – “what is original is not true” – he checked through every single sentence and he found NOTHING original of value? And you believe that Hazzlitt was smart enough to uncover this but all the people who do think Keynes contributed something important were too stupid to realize? That should make you a little suspicious, tarran. A statement like that should make you wonder about Hazzlitt. He sounds like he has an axe to grind – particularly because he’s so careful to let you know that he doesn’t.
Actually, yes. The first chapter of Hazzlitt’s book is an apology for the length of it, claiming that when he sat down to review the General Theory he had no clue how many fallacies and errors he would turn up.
And yes, he exposes the absolutely shoddy scholarship that went into Keynes’ life work. What’s funny is that a few years earlier, Keynes had published another magnum opus that Hayek fisked and eviscerated in simmilar fashion. Hayek later said that one of his greater mistakes was not giving the General Theory the same trashing in a timely manner: he just thought that Keynes would once again come up with a new craptastic theory and he would be wasting his time arguing with the man.
And yes, given the sheer misery of depressions, permanent crises, persistent unemployment and mind-numbing levels of impoverishing freedom-choking government intervention that his theories have justified and his acolytes have assiduously promoted, Keynes hate is completely justified.
OK, well without specific criticisms you’re basically telling me that Austrians don’t find Keynes convincing. You know what? The feeling is largely mutual. I’m not sure what to do with your statement that Hayek and Hazzlitt aren’t convinced – I already knew that. I think you should be a little more suspicious of someone who says they went line by line through someone’s work and found no original idea that was a good idea. That should automatically be setting off flashing lights for you. It’s implausible on it’s face and it should make you wonder about other things that Hazzlitts says.
“And yes, given the sheer misery of depressions, permanent crises, persistent unemployment and mind-numbing levels of impoverishing freedom-choking government intervention that his theories have justified and his acolytes have assiduously promoted, Keynes hate is completely justified.”
In other words, we have a lot of justification for having an axe to grind. And we’ll keep grinding it till we are done.
“Knowing that Keynes is famous for his dry wit, isn’t it possible that (1.) he reviewed the book in 1912 because he actually did understand it well enough to review it, and (2.) the 1930 remark was just a little bit of self-deprecating humor?”
You seem to be going way out of your way to defend Keynes. Why not just take it for what it is. Isn’t just easier to accept that Keynes didn’t understand it so instead he just went off with what he “thought” is would say, you know his preconceived notions of what Mises said?
Above you said; “I think the same thing every time someone tells me that they know that Keynes advocates government spending in response to recessions.” So why not hold Keynes to that same standard?
He wrote a review of the book. I think taking it for what it is would be assuming that he understood it well enough to write a review of the book that would be accepted by one of the most prestigous journals out there. You all seem to go out of your way to attack him – so far out of your way that you’ll dig up a remark he made eighteen years later that I thought was pretty funny to prove that 18 years prior he didn’t understand what he was reading and the editors at the journal were somehow too stupid to realize he didn’t write a decent review of Mises. I’m not trying to say that Keynes was one of the foremost Mises scholars of his day. He absolutely wasn’t. I’m sure he missed nuance. But give me a break – you know Keynes is like catnip to you guys.
You go out of our way to defend him even when 18 years later he owns up to previous mistakes. You go out of your way to defend Krugman when he starts in on “Conservatives want to kill babies” rhetoric as well.
I’ve critiqued a lot of what Krugman has said and I’ve agreed with a lot of what Krugman has said. If you want to spin me as someone that writes blank checks for him you’re going to have to do more than just accuse me of it.
Presuming that “unoriginal” is an accurate synopsis of Keynes’s review, that damns the author, not the thesis. My interpretation of “unoriginal” would be “obvious” or “restatement of what is already accepted” rather than wrong.
Actually Hayek noticed this also in his extend interview for the UCLA oral history project. If I can recall it is in Rosten tape II. Their, Hayek explains the great mind John Maynard Keynes was, although he neglected much of his discipline, citing the same line Dr. Boudreaux has made. It is interesting to note that continental economist of the day where more exposed to different ideas than the British. We should not neglect the economic history.
Also Hayek states that Keynes knew very little of the classics or 19th century economists. I guess he is a better judge of it given he knew Keynes personally though his time spent at LSE and Cambridge during the war.
It can be confusing because a lot of what he refers to as “classical” are what we would now call “neoclassical”. Why does Hayek suggests he’s not familiar with 19th century economists? Does he give an explanation?
In the interview, Hayek explains how very little concerned Keynes was about the history of economic thought and how he disregarded anything written before him. I would encourage you to read the interview for your self: http://www.archive.org/details/nobelprizewinnin00haye It is the Rosen Tape II interview, pages 114 to 123, especially page 119. The whole discussion with Rosten is amazing.
I’ll read it over lunch, thanks. What is your take on it though – where exactly did Keynes come up short?
They are very different experiences – Schumpeter saved his work as an agent of the state, presiding over an inflationary economy, for later.So living and working in India doesn’t give you a broader worldview because of the nature of your employer? You may have to explain that one to me.The departure in what they feared is different for a very simple reason – they experienced very different types of economic hardship in their formative years. They’re both very admirable and very insightful men.
If Keynes was anything like other members of Britain who worked in the Raj then they had very little contact with the India that wasn’t manicured to look excessively British. What economic hardship did Keynes experience exactly? Being bailed out by his parents?
Anyway, this is all I have time for this morning; I have dim sum to go eat.
I told you – Keynes lived through a period of harsh deflation in Britain and Schumpeter actually presided over a period of harsh inflation in Austria. Dim sum, eh? I’m about to make some bacon and eggs – far superior in my mind
They definitely have alternatives, and those were alternatives they didn’t act on. I’m still not going to just throw out Washington and Jefferson – or Keynes for that matter. Keynes’s Malthusianism, by the way, was primarily expressed through his embrace of the idea of a “general glut”. It’s not as if population economics was something that Keynes spent a great deal of time on.
Well, given that line of reasoning Schumpeter experienced dramatic deflation and dramatic inflation.
Don’t forget the hash browns. Essential to a gret brekfast.
Don’t forget the hash browns. Essential to a gret brekfast.
Then why was he such a passionate advocate of eugenics? He made a number of speeches where he argued that eugenics was incredibly important. Or are you arguing that this was a hobby horse that he liked to ride on but spent little time putting much thought into?
You seem to know much more about his interest in eugenics than I do. I know he said it was an important area of study. I know he wrote at least one article in a eugenics journal about population and economics (although I don’t really know what he said in the article). I know he was treasurer of the Cambridge eugenics society. I don’t know whether he was “passionate” about it or not – perhaps you could fill me in.
Even if he was passionate about what he thought of as eugenics, all I’m trying to say is (1.) a lot of different ideas were mixed up under the heading of “eugenics” back then, and that’s important to keep in mind, and (2.) again, I’m not going to throw out the baby with the bath water. In my mind, The Declaration of Independence is no more compromised by it’s author’s practice of slavery and low view of African Americans than the General Theory is compromised by it’s author’s association with the eugenics movement, which was very popular at the time. In the same way that Mises’s “Human Action” isn’t compromised by the fact that he considered fascism the savior of European civilization, and that the merits of fascism would live on eternally throughout history.
Human beings are often very wrong and very morally suspect creatures. It is worth pointing out. But I’m not going to dismiss the Declaration, the General Theory, or Human Action on those grounds alone.
Keynes was born with a silverspoon in his mouth. hence had this urge to tell the whole world how to lead their lives.
Hmm, well, I am suggesting that much of the weakness of his thinking can be explained by the factors I’ve described. You really cannot separate a person’s revealed preferences from their intellectual activity IMHO. I think a pretty good example of that is illustrated in the life of Heidegger.
Why is advocating peace a crackpot ideology?
I don’t always agree with Rockwell, but foreign policy is one area where I agree with him more than disagree with him.
Because he’s not advocating for peace, but appeasement to our enemies. Also throwing Israel to the wolves.
You are mischaracterizing him.
With respect, your comments come off as militarist. If that is your ideology, fine. We can agree to disagree.
See that’s interesting because I’d say Heidegger is another perfect example of where you don’t throw out the baby with the bathwater – particularly because some of his most influential work was published before his Nazi period. There is no “Nazi ontology” or “anti-Nazi ontology”, so I don’t see how Heidegger’s work is poisoned by the association. You mentioned Arendt earlier – she certainly found value in Heidegger despite his Nazism. And if anyone is familiar with the evils of Nazism, Arendt is.
But let’s be careful – Keynes’s failings don’t even come close to Nazism.
You know, you could always read it and find out. The point of the post is not to just declare that Hazlitt performed a line-by-line rebuttal of Keynes, but to then offer the full text in PDF format as the author of the comment has done.
You can reject it offhand saying “Hah, line-by-line, I don’t think so!”. You are welcome to not read it because you are afraid it might change your mind or even just because you don’t have the time or have better things to do.
But given that the full text is now right in front of you, it seems silly to criticize it offhand without having read it. What if it proves you wrong in your “by-the-cover” judgement of it? What are you afraid of?
Sure – I’m just not sure what telling me that Hazzlitt didn’t like Keynes is supposed to do. I may read it – it’s much more of a time constraint issue. But it’s telling I think.
RE: “What if it proves you wrong in your “by-the-cover” judgement of it?”
I’m not judging it – I haven’t read it yet. All I’m saying is that when you read an intro like that you should approach it more skeptically rather than being more convinced. In other words – tarran isn’t really strengthening his point he’s making it more suspect. I research a lot of what people say on this blog to be able to make an informed response, but I think I’m justified in not reading a whole book to respond to one comment
I would agree, and nobody’s expecting you to. Definitely not if responding to one comment is your only purpose. But the book is certainly worth putting on the reading list, if you are truly concerned with learning and judging for yourself what others have to say on the issue and thereby forming a more complete and refined worldview.
The real issue with Keynes was his poor language skills. According to Hayek the man could barely read in german. I think back then journals, books and most other materials where not standardized in english. Now a days you read a Swedish journal in english. Also continental Europeans are more prone to learn different languages due to their heterogeneous cultures. If you assume this, then Hayek and most other continental economist where more knowledgeable on the different trends in economics. I think reading the interviews gives you a general sense of what the economics profession was up until the 1930´s and 40´s. This is also under the assumption that Hayek is being quite honest and not misleading.
I have no doubt Hayek was more knowledgable about Continental economics than Keynes was. I hope I didn’t come across as claiming that. To a large extent British economics and Continental economics was an entirely different discipline at this time. Hayek seems angry at how dismissive the Cambridge school was, but I don’t see why this is necessarily proof that the Cambridge economists were misinformed. Any Austrian blog these days is going to be wholly dismissive of Keynes in the same way.
I read the piece and I’m still not sure what you expect me to get out of it. Hayek essentially just says Keynes didn’t know what he was talking about and had no idea about other schools of thought. I never doubted that Hayek said that. I’m wondering if there’s a good reason to trust Hayek on that.
I think you and I are saying basically the same thing. The whole point of the interviews is to get a sense of what Dr. Boudreaux is saying. But I can´t say if Hayek is angry or not, as you claim, about how dismissive the Cambridge economist were. I am also not saying they were misinformed, its just what comes across for some economists as Hayek states.
About the Austrian blogs. I tend to think most people are fans in the stands routing for one team, then there are the players (some academics) and finally the coaches (path breaking economists), who are really the architects of the game. Most bloggers take to name calling and disregard people. Keynes no doubt was a brilliant man, as was Hayek. And by reading the interview you get the sense the great admiration Hayek has for Keynes as a person not just an economist.
Finally, I just thought you might be interested on what the man (Hayek) had to say. What you get out of it is your own business. I am more of a fan than a player.