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.)
Gary,
Why do they not read Keynes own words . . I debated this with a PhD B of A senior VP teaching econ . . he did not like me much but he finally yielded – GOVERNMENT PROPENSITY TO SPEND . . do not work and here is where Keynes denounced his own theory.
Postwar[edit]
After the war, Keynes continued to represent the United Kingdom in international negotiations despite his deteriorating health. He succeeded in obtaining preferential terms from the United States for new and outstanding debts to facilitate the rebuilding of the British economy.[54]
Just before his death in 1946, Keynes told Henry Clay, a professor of Social Economics and Advisor to the Bank of England [55] of his hopes that Adam Smith's 'invisible hand' can help Britain out of the economic hole it is in: "I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago." [56]
Interesting and thought provoking article. You allude to this in mainy places, but I’ll come right out and say it. Even if (though) Keynesian economics is an abject failure in the real world for a majority of the people (at least the productive ones), big government would still persue it because Keynesian benefits fall on those in power and their cronies. The benefits of Austrian Economics fall on the productive classes. So bloated government will always favor Keynesian economics regardless of the real world consequences. The only way that will change is if the productive classes also are the ones in power. Why they are not is another mystery to be solved.
Robert,
Your post is valid – Keynes theory is like Global warming it gives power to the Government agencies. They know it is not true but emotions are easy to move and government free stuff and E=GREEN energy looks free [solar]. The public is just not very well educated.
This Project can end the Agencies of alphabets like IRS, DOC, and grant science.
http://articlevprojecttorestoreliberty.com/articl…
Let's go back to the base definition of Keynesianism: "the view that in the short run, especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the economy)."
This recession, and arguably ALL recessions, has proven that without spending by either the populace as a whole (who had little money to spend) or the government (via these so-called "sequesters"), the economy withdraws on itself and shrinks, causing cost-cutting and job losses. Increased spending by the populace or the government gets money moving in the system again, providing job growth and a boost to the economy.
Just face it. These are proven facts. It's Economics 101. All the money in the hands of a few – with the money not moving anywhere – destroys economies.
Just face it. you're an idiot. Have a nice day.
Like Martin Luther before his death, are you saying Keynes realized the evil men and especially governments did evil with his thoughts. Keynes has destroyed millions of lives and the future of the West.. Luther opened the door for the German government to take over faith. They murdered thousands and even invaded Italian villages and murdered all there, based on this new idea of government faith. Luther was then powerless to stop the government and did drink a bit before he passed away. How many will drink a bit after they realiize they voted for and supported the corruption of an evil influence in the White House and government. Pray ro the USA.