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Harry Johnson On Keynes

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Keynes was – without any intention of slurring him – an opportunist and an operator….  [I]n 1931 he came out in favor of protection.  These gyrations frequently made him seem inconsistent to his contemporaries; actually, the examples cited can easily be reconciled by reference to the modern theory of second-best, but Keynes never spelled out such a theory.  The General Theory represents the apotheosis of opportunism in this sense, in two ways.  Mass unemployment had lasted so long that it appeared to the average man to be the natural state of affairs, which economics was powerless to explain and political processes  powerless to alter; a new theory of its causes that promised an easy cure was thus virtually certain to sell, provided its author had impeccable professional credentials.  But to be a new theory it had to set up and then knock down an orthodox theory, not merely explain what traditional theory really was and develop its application to the problem at hand – a procedure that Keynes had applied frequently in his younger days…

Earlier in this 1973 essay (entitled “Keynes and British Economics,” and reprinted on pages 77-90 of Johnson’s 1975 collection On Economics and Society [2]), Johnson quite properly derides Churchill’s catastrophic 1925 decision to return Britain to the gold standard at pre-war parity – a policy that even a good freshman economics student would have seen would require a significant reduction in the price level given the inflation that Britian had experienced over the previous ten years.  About this historical calamity, Johnson writes (on page 79):

Had the exchange value of the pound been fixed realistically in the 1920s – a prescription fully in accord with orthodox economic theory – there would have been no need for mass unemployment, hence no need for a revolutionary new theory to explain it, and no triggering force for much subsequent British political and economic history.