A GaryNorth.com site member asked this question:
Why has Keynesianism prevailed? Dr. North, In the 1950’s Henry Hazlett wrote The Failure of the New Economics which demolished The General Theory line by line with clear, irrefutable arguments. I can’t imagine another field of study in which a theory can be dominant after such complete debunking. Is it the triumph of propaganda over fact? Is it that 99% of all econ professors are either spineless or fools? People blame Hayek for not challenging Keynes but Hazlett certainly did the work (though somewhat later). Is the fed funding 90% of econ research so only Keynesians get funded? How do you explain this baffling situation?
I’m glad he asked.
Let us begin with the fundamental principle that undergirds modern economics, and which has undergirded it ever since Adam Smith published The Wealth of Nations in 1776. This principle is called enlightened self-interest. Economics teaches that individuals make decisions in terms of self-interest. This principle was not challenged by Ludwig von Mises, who said that individuals act in order to reduce discontent. Human action is based on a principle of self-interest.
With this as the background, let me discuss the history of Keynesian economics.
HAZLITT VS. KEYNES
Let me begin with the site member’s question: Why didn’t Henry Hazlitt’s book succeed?
Henry Hazlitt was not a Ph.D. He was not a college graduate. By the time that he wrote The Failure of the “New Economics” (1959), he was no longer a New York Times columnist. He did have a column in Newsweek, but Newsweek is not a professional journal. It used to be a popular magazine, so it was not cited by professional economists. (It is no longer cited by anyone.) Hazlitt’s Newsweek articles are available in a collection, Business Tides.
Hazlitt followed this book with Critics of Keynesian Economics (1960). He collected the main journal articles that had been critical of Keynes’s position. This had never been done before.
The book was published 23 years after the publication of The General Theory. More important, it was published 11 years after the publication of Paul Samuelson’s college textbook, Economics, which has been by far the most widely read textbook on economics ever published.
The book was published by Van Nostrand. This was a small publisher located in Princeton, New Jersey. It was not an academic publisher. While I do not know the background of the arrangement, I am fairly certain that the book was subsidized. It was the same publisher that the Volker Fund used in those years to publish a series of free market books, including the first edition of Rothbard’s Man, Economy, and State (1962). It also published, in 1963, Rothbard’s book, America’s Great Depression. None of these books had any impact academically. None was ever assigned to students studying in an institution of higher education that granted a Ph.D. degree in economics. (Twenty years after its publication, historian Paul Johnson used America’s Great Depression to analyze the Great Depression. This was published in Modern Times in 1983, over 30 years ago. No other major historian has mentioned Rothbard’s book. It is still in the memory hole.)
(For the rest of my article, click the link.)