Acton 2014 Lecture “We’re All Dead: How J.M. Keynes–and His Critics–Went Wrong” (handout here: were_all_dead_outline)
This was a wonderful lecture critiquing both Keynes and his critics, including Hayek. The fundamental flaw in both is a flawed anthropology, which is summarized by Claar as follows:
A Flawed Anthropology –
- Flawed anthropologies lead to flawed economic policy. The Keynesian ideal is imbued with the notion that if we simply know enough economics then we can manipulate people into actions that create maximum employment. This is not economics as moral theory; this is economics as a video game.
- The Keynesian ideal caught hold in the same period that men and women of science began to believe that systematic management of human beings was both possible and useful in all areas of society. (e.g., Dewey)
- Keynes a served as Director of the British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be “the most important, significant and, I would add, genuine branch of sociology which exists.”
- Economics is not about systematic management! For example, even the very expression “the economy” is a modern invention. Keynes never uses it in the General Theory. The closest he ever gets is in just two instances: “economic system” (p. 249) and “economic society” (p. 269).
- In his book Rule of Experts, Timothy Mitchell asserts that as late as the 1930s, no one used the definite article in front of “economy.” The word “economy” meant something like frugality or good stewardship.
The critique on Hayek is as follows:
And What of Vienna? In Law, Legislation, and Liberty Hayek argues that
- Moral rules are socially constructed for evolutionary purposes. We experience moral rules we learn from society as “objective” because they are outside our control; individuals cannot invent their own moralities because that is not how morality works.
- But moral rules are not “objective” in the sense that religious believers or conventional moral philosophers intend. Morality is driven merely by social groups learning how to survive and passing on that information.
- Paul Heyne argues that Hayek fails to articulate his core beliefs in the Road to Serfdom because “…a significant characteristic of Hayek’s thought…[is that h]e was always troubled by the suspicion that he had no adequate grounds for his most important convictions” (from“Ethics on the Road to Serfdom and Beyond,”italics in original)
- To the extent Austrians cannot do economics without answering the question, “how does this connect to transcendent purposes?,” they have not fully freed themselves from Keynes’s influence.
A Word on Austrian Business Cycle Theory –
- Though Austrians model the business cycle in a unique way—emphasizing the intertemporal nature of capital—they nevertheless keep the focus of their analysis upon quantifiable macro-level outcomes (see Roger Garrison’s summary found in Modern Macroeconomics by Snowdon & Vane, 2005)
© 2014, Rick Hogaboam. All rights reserved.