Here’s a letter to the Wall Street Journal:
Benn Steil’s review of Zachary Carter’s sympathetic and, I gather, excellent biography of John Maynard Keynes is a gem (“‘The Price of Peace’ Review: The Economic Engineer,” May 8). One small addition to the record, however, is in order.
Unquestionably, Keynes’s mind was a quick and capacious marvel, and his pen often poetic. But a whopper I.Q. and the resulting intellectual dexterity do not guarantee wisdom. And when fashioning public policy, smarts and the ability to turn a phrase are never as socially useful as are sagacity and good judgment. Keynes lacked the latter, as evidenced by the fact that he ignored the political realities within which his scientific policy prescriptions must be carried out.
As the late Nobel-laureate economist James Buchanan and my colleague Richard Wagner wrote in their 1977 book, Democracy in Deficit: The Political Legacy of Lord Keynes,
Keynes was not a democrat, but, rather, looked upon himself as a potential member of an enlightened ruling elite. Political institutions were largely irrelevant for the formulation of his policy prescriptions. The application of the Keynesian precepts within a working political democracy, however, would often require politicians to undertake actions that would reduce their prospects for survival.
Specifically, Keynes naively assumed that politicians would run budget deficits only during periods of high unemployment, and run balanced budgets or surpluses during times of economic health. Oblivious to political realities – namely, to the pressures on incumbent politicians to increase spending without increasing taxes – Keynes unwisely led the charge in destroying the ethical norms that had previously shamed politicians into acting with some measure of fiscal prudence.
The nearly unbroken run of annual U.S government budget deficits over the past 60 years – deficits in boom times as well as busts, under Republican as well as Democratic presidents and Congresses – is an ugly but appropriate monument to Keynes’s influence.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030