By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
In 1936 Keynes wrote a forward to the German edition of his General Theory. Since then it has, as far as I can see, been ignored by his defenders and held up by his most virulent detractors (notably, Austrian School ideologue Henry Hazlitt). Detractors point to what they perceive to be a damning indictment of Keynes’ system in the form of the following quote:
The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.
In quoting this sentence we are supposed to be led to believe that Keynes possessed some sort of ulterior and, indeed, nefarious motive. But any such presumed motive tends to melt away when the rest of the passage is read:
This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions. Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced.
And so it turns out that Keynes’ critical point is that his theory, being a truly general theory, can be applied to explain any economy. There’s nothing nefarious here, Keynes is simply making the point that his theory is remarkably robust in that it can explain how production and consumption takes place in pretty much any economy – not just in a market economy.
To indict Keynes on this point would be basically the same thing as to indict a sociologist whose methodology could be applied to both a totalitarian state and a democratic one; or a doctor using the same anatomical descriptions to explain the functioning of the body of a healthy man and a sick one. In fact, it shows that Keynes’ is a theory far more in the spirit of science than, for example, neoclassical theory, which only seeks to describe the functioning of rigidly defined market economies.
Indeed, these indictments tell us more about the motivations of the people who make them rather than of Keynes and his followers. The critics implicitly assume that economics should be a practice based on very specific value judgments. Thus a theory that might explain both the economy of Nazi Germany and that of the democratic US is to be distrusted because it does not contain a serious distinction between the two systems; instead it seeks to explain what they hold in common rather than where they differ.
Of course, if you like your thinking mixed up and muddled with value judgments the criticisms made by the likes of Hazlitt are indeed correct: when counting apples one should always take into account in his arithmetic his own personal opinion of the taste of apples.
But it is not surprising that such an approach has its adherents generally chalked up as cranks and ideologues by their academic colleagues (although there is some irony here given that the mainstream implicitly relies on many of the same value judgments, albeit in softer form). Not to mention the irony of their logical systems containing such strong value judgments that seek to have society organised in a very specific manner while at the same time they chastise their opponents for… telling people what to think and what to do – indeed, the whole theory appears to be written in an imperative tone that would not be out of place in the Old Testament. The sheer level of narcissism that such unreflective assertions must necessitate simply boggles the mind – one would be forgiven for thinking that some sort of psychological ‘splitting’ was at work.