Keynes "End of Laissez Faire"

Keynes on “The End of Laissez Faire is an important summary of common objections to radical capitalism. It is also a fine example of libel and ad hominem. Keynes’s objections have force, but his use of words makes his (lack of arguments) sound even stronger.

A couple of examples of his erudite insults include “We have not read these authors, we should consider their arguments preposterous if they were to fall into our hands” (Section I). With that he actually insults both the intellects who wrote them and the general public who has not read them. However, there is no need to read these as they are simply a matter of faith and “religion” (Section II).

His objections are not new, but it makes for a good summary of these positions. In Section IV he goes through all five of his major objections in the first paragraph. His first point that there is no “natural liberty” in economics can be found in John Stuart Mill (see Mill and Economic Liberty)

His second point that there is no “compact” that confers property rights to those who acquire is a criticism of Locke. David Hume in "of the Original Contract" likewise criticizes this notion of an “original contract”. From reading Keynes, you’d think Hume would never disagree with Locke.

His third point that self-interest differs from the public interest goes against economists in general, but especially Adam Smith. Karl Marx made this point as well.

His fourth point is actually two separate points. First, he argues that often individuals are too ignorant to pursue their own interests wisely. When he is being nice, this ignorance is a fact of the world: No one can know the future. When he is being less kind, this ignorance is the result of people being viewed as generally stupid. Second, he argues that individuals on their own are too weak to get what they want. Adam Smith actually made the same point about labor and business. Labor union leader Samuel Gompers would put into action those words 40 years before Keynes wrote them.

His fifth point is interesting – social units are not dumber than individuals. Recently, in fact, authors like James Surowiecki argue that crowds are smarter than individuals. Ayn Rand would object vociferously. Hayek would argue that it takes generations of crowds to form important traditions. We shall return to this point later in the semester.

The reason I include Keynes is because it is him and Marx that the radical capitalists argue against time and again. Keynes combined this critique of Laissez Faire with a positive work on economics called The General Theory of Employment, Interest and Money. It is this double shot of cutting criticism and putting forward a new theory, much like Marx had done, that eliminated radical capitalism from the academic and political map in the 1920’s, 30’s and 40’s. Three of our authors Hayek, Mises, and Rand lived and began their intellectual journeys in this time period. It is against this backdrop that these three authors will spend the rest of their lives arguing.