Bryan Caplan  

Keynes and Central Planning

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The new Keynes-Hayek video has been reviving academic interest in history of thought.  The issue: Was Keynes an advocate of central planning?  This is well outside my expertise, but I can't resist quoting the infamous intro to the German edition of The General Theory.  Don't forget who's ruling Germany when Keynes wrote these words:
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 [eines totalen Staates] 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. 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.
Saying that your theory is "much easier adapted to the conditions of a totalitarian state" is hardly the same thing as advocating a totalitarian state, or even central planning.  But would a staunch opponent of central planning have written this passage?  I think not.


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COMMENTS (11 to date)
Eelco Hoogendoorn writes:

where a large degree of laissez-faire still prevails

That is an even more telling sentence. There is no indication he is lamenting this state of affairs, but the way I read it is as an archtypical progressivist attitude: the state will continue to expand because that is obviously the 'rational' course of events.

Ilya writes:

Caplan, one can debate forever about Keynes's views on central planning (and providing some context to the quote above would be useful, as you would find it somewhat dilutes your point), but do spare us the 'who was in charge in 1936' innuendo. Stay classy.

David R. Henderson writes:

@Ilya,
"Who was in charge in 1936" is completely relevant.

Chris Koresko writes:

Ilya: "...do spare us the 'who was in charge in 1936' innuendo. Stay classy."

You're overestimating the depth of at least one reader's background knowledge. I at least wouldn't have made the connection if Bryan hadn't pointed it out, and I'm probably not alone. (I knew who ruled Germany in 1936, but not that Keynes wrote those words in that year).

Marcus writes:

That is interesting. Yet, he may merely have been adapting the marketing of his book to the market it was to be sold in. Businesses do that all the time.

If that is true then it does mean that he was not an ideologue. I do not know if that's true or not.

Still, isn't the criticism of the video with regard to precisely what Keynes the man believed just a distraction?

If we were to all agree that Keynes didn't condone central planning, of what matter is that with regard to the issues raised in the video?

Ilya writes:

Well, as far as I can see from the quotation, Keynes was making the point that his theory is flexible enough to include conditions of a totalitarian state, as well as those of a laissez faire economy. The theory is anot a policy prespription and it is not the same - and he was not - as condoning central planning.

1936 is entirely irrelevant. It is just unfair way of linking Keynes to totalitarianism in a sort of subconcious way. In exactly the same way, Hayek is sometimes linked to Pinochet. Equally as unfair.

Daniel Kuehn writes:

I strongly encourage everyone to read the entire preface - from start to finish - and not just he paragraph that you always get spoon-fed.

It does two things:

- It provides an intellectual history of German economics, and
- It makes a methdological case to the German Historical School.

Keynes was trying to catch with honey what Menger tried to catch with vinegar in the 1880s.

The only thing the preface is evidence of is that Keynes thought the German Historical School did not have a sufficient theoretical foundation, that Ricardianism was inappropraite given German institutions, and that his theory was sufficiently generalizable that German economists could use it.

Then again, if you read a small selection it can be made to sound like he's saying something else.

Don't read a small selection - it's only a few paragraphs long.

Methinks writes:

Well, as far as I can see from the quotation, Keynes was making the point that his theory is flexible enough to include conditions of a totalitarian state, as well as those of a laissez faire economy.

Keynes was a native English speaker. If he wanted to say that his theory is simply "flexible", then he would have (and he does, in fact). He said it is "can be much easier adapted to the conditions of a totalitarian state".

Cahal writes:

Guys, come on. Quotes like these are virtually meaningless - look at this one from Mises:

"It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error."

Of course I'm not going to claim Mises was a fascist, because that would be stupid. Calling Keynes a Central Planner and Totalitarian is equally stupid. Can we talk about actual economics now?

skylien writes:

Regarding Mises quote it would be nice to have also more info about it. Did Mises ever make additional clarifications about this?

Mises wrote that about 10 years earlier than Keynes. And I am not sure but I only can intepret it in this way that he meant that fascism saved Austria (maybe also Germany?) from soviet like socialist revolution and following mass starvations through collectivisations of the means of production etc... Finally becoming only a satellite state of USSR. He must have known how close it was after WW1, since he was in contact with Otto Bauer, the leading Austromarxist, who could have nudged Austria the bloody way. Hitler wasn't on the stage when he wrote that. (Mises also anticipated Hitlers grab for power 1932 and that they could not make their Vienna circle any time soon again)

Has someone a better interpretation or some other facts?

fender writes:

Around 14:00 http://video.google.com/videoplay?docid=8156194834954681639# matter becomes clear.

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