Keynes and central planning

by Russ Roberts on May 1, 2011

in Music, Uncategorized

Barkley Rosser at EconoSpeak says John Papola and I have accused Keynes of having “a central plan” in our rap video. After saying some nice things about the video, he says:

However, I do find it disturbing that increasingly Austrians and some others have taken to charging Keynes with having supported “central planning,” as indeed done in this video. Is this correct? I think that the answer is largely “no,” with it certainly being that answer if one means by that command central planning of the Soviet type that Hayek criticized in his Road to Serfdom (which Keynes praised, btw, when it first came out).

He then discusses whether Keynes’s writings offer any support to the charge. Keynes did talk about the virtues of the “socialisation of investment.” Rosser concludes:

One can argue again here that Keynes is setting himself up for some sort of impossible contradiction, and Hayek may well have argued that such control of investment would lead to his road to serfdom slippery slope. However, it is clear from later passages that what Keynes had in mind was ultimately the control of the aggregate of investment rather than of its specific forms or details.

These almost certainly provide the strongest evidence for Keynes supposedly supporting there being a “central plan.” But it looks at most, putting the two together, like one that involves lots of provision of information and data along with some sort of control of aggregate investment, while leaving most of the decisions up to “private initiative.” This hardly constitutes a “central plan,” and certainly not one of the sort that the actually existing Hayek criticized. The fictional one in the video should have spoken more carefully.

Brad DeLong agrees and says Keynes did not believe in central planning.

Paul Krugman doesn’t even want to get in on the debate–he calls it “truly stupid.”

There’s only one problem with all this and that’s that the accusation against us is something of a straw man. Here’s the line that Rosser is referring to, but in context:

Creating employment’s a straightforward craft
When the nation’s at war, and there’s a draft
If every worker was staffed in the army and fleet
We’d have full employment and nothing to eat


Jobs are a means, not the ends in themselves
People work to live better, to put food on the shelves
Real growth means production of what people demand
That’s entrepreneurship not your central plan

Hayek isn’t saying Keynes is a socialist or wants to centrally plan the entire economy. He is singing about Keynes’s plan to create jobs via government spending. Surely having the government spend, say, $800 billion in stimulus is a central plan of sorts. Maybe we should have said “centralized plan” but it wouldn’t scan as well.

Tyler Cowen comes to our defense. He asks if Keynes favored central planning:

Barkley Rosser and Brad DeLong say no, but it depends on definition and context. Barkley tries to talk his way out of it, but Keynes in the General Theory did advocate “a somewhat comprehensive socialisation of investment.”  “somewhat” — that’s my kind of weasel word!  In any case this was not the same as classical central planning circa 1920, but in a rap video I consider that acceptable license.  By my count “central plan” comes up once in a ten-minute video and most importantly Keynes does not accept the characterization but rather responds that the debate is about spending.  The video is not suggesting that each and every rapped point is true at face value, and if the two characters seem to debate past one another that too reflects the reality at the time.

He then says:

Also consider another piece of evidence, namely the Keynes-approved preface to the German-language (uh-oh) edition of the General Theory:

“Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.”

Read the rest of Tyler’s post. He cuts Keynes some slack but also adds some tension back to the rope.

I’m not going to weigh in here on precisely where Keynes sits on the central planning meter on a scale of 1-100. Or where his policies might lead. That’s another questions. My point here is our lyrics. Are they fair to the views of Keynes and Hayek? I don’t think John Papola and I accused Keynes of being a central planner or a socialist.

Here is the refrain of the Fight of the Century. It is heard six times in the video:

Which way should we choose?
more bottom up or more top down
…the fight continues…
Keynes and Hayek’s second round

it’s time to weigh in…
more from the top or from the ground
…lets listen to the greats
Keynes and Hayek throwing down

Keynes’s roadmap for recovery and prosperity is more top down. Hayek’s is more bottom up. I think that’s a fair assessment. Paul Krugman is not a socialist. Neither is Brad DeLong. Both, however, want a lot more top down control or steering of the economy than John Papola and I want. So in that sense, I think the lyrics are fair to Keynes and Hayek and their modern-day fans.


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