Garrison on Keynes and Keynesians

by Don Boudreaux on May 2, 2011

in State of Macro

I know of no one who is a more careful and complete student of Keynes’s writings – and of the writings of every variety of Keynesian and post-Keynesian and Post Keynesian and neoKeynesian and YouNameItKeynesian – than Auburn University’s Roger Garrison.  This May 2010 essay by Roger – a review of a collection of essays on the proper interpretation of Keynes – is relevant to the debate over Russ’s and John’s not-so-audacious accusation that Keynes had a soft-spot for top-down direction of the economy.  Here are some key passages from Roger’s essay:

The inherent uncertainty of the future, in his [Keynes’s] view, gave centralized decision making a clear advantage over the decentralization that characterizes market economies. Keynes advocated the “socialization of investment” and the “euthanasia of the rentier.” The rate of interest, which “rewards no genuine sacrifice,” could and should be driven to zero, at which point capital would cease to be scarce and the distribution of income would be more equitable. In a matter of two generations, the economic problem of scarcity can be solved, such that our grandchildren can occupy themselves with questions of aesthetics rather than questions of economics.

This is the uninterpreted Keynes. Post Keynesians emphasize Keynes’s vision of utopia and the associated reform proposals almost to the exclusion of his diagnosis of depression and prescription of short-run, demand-management policies. In fact, standard textbook Keynesianism, whose graphics and equations make the case for monetary and fiscal activism, are repeatedly described in the Davis volume as “bastardized Keynesianism” (Joan Robinson’s term) so as to provide an appropriate contrast with the more radical Keynesianism adopted by the volume’s contributors. If “post Keynesians” did nothing but embrace these utopian aspects of Keynes, they would more accurately be described as Keynesian fundamentalists.


As with almost every other aspect of Keynes’s writing, the phrase “socialization of investment” is in for some interpreting. What did Keynes have in mind? While no one believes that he was thinking of outright state ownership of the means of production, other possible meanings involve further questions that neither Keynes nor his followers have adequately addressed. It is clear in his discussion following the call for socialized investment that Keynes is concerned with the “volume” and not the “direction” of employment.

Keynes argues as if the government — or rather, “forces outside the classical scheme of thought” — could control the volume without affecting any other aspect of the market economy. What sort of powers would government have to wield to be able to exert such a force? And how would the quality of entrepreneurial decisions be affected if entrepreneurs had to anticipate the use — and possible misuse — of such powers? There are no answers to these questions that put socialization in a favorable light.

The simple fact is that the conceptually distinct aspects of “volume” and “direction” as applied to employment or output are governed by a single set of market forces. Joan Robinson, who recognized the actual unity of these market forces but favored a more wholesale form of socialization, chided Keynes for even wanting to control volume without controlling direction. Direction, in her view, needed some controlling, too.


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