To discuss this article visit First Drafts, Prospect’s blog
I have always said that Keynes would live as long as the world needed him. What the world decided, 30 years ago, was that it no longer needed him. The Keynesian revolution had been reduced to a mechanical system for stabilising economies by means of budget surpluses and deficits—more deficits than surpluses, as it turned out, leading to the “stagflationary” crises of the 1970s. Keynes, the theoreticians said, was redundant, having failed to prove that the world needed “Keynesian” policies. The market system was automatically self-correcting; Keynesianism led only to inflation.
And from their point of view, the theoreticians were right. The only acceptable basis of economic theorising is the assumption that human beings are rational maximisers. Grant this, and it follows that the many disturbances to which market economies are prone are the result of outside interferences. For Hayek and Friedman, the culprit was government manipulating the money supply for populist ends. No one who is not an economist believes human nature to be as economics depicts it, yet without its rationality axiom economics could not exist as the science it claims to be.
If you are a subscriber, please log in »
This article is available to subscribers only
Subscribing to Prospect is the most reliable and convenient way to receive the magazine every month, and offers the best value.Subscription Types:
Online
An online subscription offers you complete and unlimited access to the entire website, including our searchable archive of every back issue of Prospect, and a PDF edition of each new issue: all this for just £20 per year. Purchase an online subscription »Renewal
Renew an existing subscription »Institutional access
If you are a library, business organisation or any other large institution that needs a multi-user licence, you can obtain institutional access.
Share
Subscribe to post comments
Print
