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Undermining John Maynard Keynes

Written by Gary North on February 19, 2015

I have been writing recently about my proposed Keynes project. I have pointed out that no young economist has taken the bait. Nobody wants to devote a lifetime to refute the central economist of the 20th century.

Murray Rothbard would have done a devastating job on Keynes, but he died before he got to the 20th century. He never wrote the third volume of his monumental history of economic thought. If he had, this would have saved us a great deal of time.

I am a debater. I know how to debate in a formal debate, and I know how to debate in print. I have understood the basics of debate ever since my senior year in high school, when I took a public speaking class, and part of that class required us to do public debates. I learned the techniques by the time I was 17 years old. These techniques do not change.

Anyone who wants to take on John Maynard Keynes had better know the basics of debate. I want to go over the basics here, not on the assumption that somebody is actually going to take me up on the deal, but at least so that you will understand how to deal with people who hold a position that you think is incorrect. You have to think in terms of debate.

The first step of the debate is this: identify your audience. You have to understand something about your audience, because you are going to appeal to the audience. You are going to persuade something in the range of 80% of the audience to move in your direction. About 10% of the audience will already be on your side; about 10% will be on your opponent’s side, and the people in the middle are your target audience. You had better know what motivates them. You had better know their frame of reference. You had better know something about the emotional commitment of the audience, because emotion is the basis of winning a debate verbally.

In a written debate, emotion is not so important. In a written debate, you have to stick to logic and facts. There will be some use of emotion (rhetoric), but because people can reread what you have written, you have to back up what you have written by logic and facts.


Let me give an example that was important early in my career: Karl Marx. I wrote my first detailed high school term paper in the social sciences on communism. That was in 1958. A decade later, my book was published: Marx’s Religion of Revolution. I updated it in 1988, which was poor timing: the Berlin Wall went down in 1989. My revision was premature. You can download the book for free here.

Read the chapter on Marx’s economics. This is not the heart of the book. But, with respect to the technical issue of Marx’s economics, this was an important chapter. If you read it, you will see how I structured the debate. First, I pointed out the fact that Marx’s economics were not crucial to his basic philosophy, which was historical materialism, and beyond that, a call to social regeneration through bloody revolution. The title of my book is the thesis of the book: Marx held to a religion of revolution. It is an old religion.

In the introductory section of the chapter on his economics, I pointed out that Marx was not neutral. I wanted to make the case that his system was not based on science. He had always made the claim that his system was scientific, but that claim was totally false. His followers believed it, but in December of 1991, when the Soviet Union committed suicide, the vast majority of his followers simply wandered away. I wish I had written the update in 1992.

In the second section of the chapter, I identified the crucial assumption that Marx made: the labor theory of value. I did this because this was his crucial mistake. The labor theory of value is false. I used the arguments of Eugen von Bohm-Bawerk, which were originally published in 1884, the year after Marx died. His criticisms were fundamental, and they have never been improved on.

Here is my debate strategy. If you can show that the fundamental premise of a man’s position is false, and if your listeners and readers understand the logic of your position, you have disarmed your opponent. If he starts out with a false premise, everything he says after that is going to be false.

In the next section, I got to the specifics: Marx’s theory of surplus value. From a technical standpoint, this was the heart of his economics. It was wrong in and of itself, but there was more to it than that. It was wrong because the labor theory of value is wrong. This was simply a specific application of an erroneous assumption.

Once I had the reader convinced that the labor theory of value is wrong, and next I convinced him that Marx’s theory of surplus value was therefore wrong, everything else was a mopping up operation. I then went on to somewhat minor aspects of his overall theory of surplus value. I showed that they, too, were wrong.

(For the rest of my article, click the link.)

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