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Failure of the New Economics

Failure of the New Economics

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Published by: Educators of Liberty on Jan 25, 2009
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10/16/2011

Now though I have analyzed Keynes's General Theory
in the following pages theorem by theorem, chapter by
chapter, and sometimes even sentence by sentence, to what
to some readers may appear a tedious length, I have been
unable to find in it a single important doctrine that is both
true and original. What is original in the book is not true;
and what is true is not original. In fact, as we shall find,
even much that is fallacious in the book is not original, but
can be found in a score of previous writers.
Frankly, when I began this task I did not think I would
arrive at so sweeping a conclusion. My first thought was

INTRODUCTION

7

that I might do a short work, analyzing Keynes's chief doc-
trines so that the reader who wished a critical analysis
would be able to find one in a brief and readable form. But
when I actually embarked upon a line-by-line analysis, my
experience was strangely like the one John Stuart Mill de-
scribes in his Autobiography regarding his analysis of Sir
William Hamilton: "As I advanced in my task, the damage
to Sir W. Hamilton's reputation became greater than I at
first expected, through the almost incredible multitude of
inconsistencies which showed themselves on comparing dif-
ferent passages with one another/'9

So I have found in
Keynes's General Theory an incredible number of fallacies,
inconsistencies, vaguenesses, shifting definitions and usages
of words, and plain errors of fact. My desire for thorough-
ness in pointing these out has carried the length of this book
much beyond what I originally intended.
There has, however, I venture to think, been a certain
compensation for the length of this analysis. The results are
not merely negative. They do not merely prove that
Keynes's main contentions were wrong. For in dealing with
the Keynesian fallacies we are obliged not only to scrutinize
very closely his own arguments, but the "classical" or "or-
thodox" doctrines that he was denying. And in doing this,
we shall often find that some of these "orthodox" doctrines
have been only dimly understood, even by many of their
proponents. In other cases we shall find errors or gaps in the
usual statement of some of the "orthodox" doctrines them-
selves.

One other possible objection to the present volume re-
mains to be considered. This is that it is directed against
an author no longer in a position to reply. But any advan-
tage that I might gain from this will certainly be more than
outbalanced by the number and controversial ardor of
Keynes's disciples. For the same reason, I make no apology

9 (Oxford, World's Classics edition), p. 234.

8

THE FAILURE OF THE "NEW ECONOMICS"

for the outspokenness of my criticism,10

or for the fact that
I write of Keynes in the present tense and often discuss his
work as if the author were still living. This is, after all, only
a way of confessing that Keynes's doctrines are still very
much alive in the influence they exert.
In one respect the range of the present book is narrower
than I had originally intended. There is no effort to cope
with all the errors in the immense body of Keynesian lit-
erature. Such an effort would have been hopeless, as I real-
ized when I was once well launched on my task. The reader
will find only a few passing references to works of the
Keynesians or "post-Keynesians." Even my references to
Keynes himself are confined almost entirely to the General
Theory,
other of his works being cited only when I am call-
ing attention to some inconsistency or to some statement of
the same doctrine in another form. The examination of the
fallacies of Keynes himself, in the General Theory alone,
has carried me to as great a length as I felt my task could
justify.

Once we have thoroughly examined the fallacies in the
master, we can economize time by not troubling to dissect
them again, usually in an even more vulnerable form, in
the disciples.

In the preface to the General Theory, Keynes tries to
anticipate some general criticisms. He apologizes for the
"highly abstract argument" that is to follow, by declaring
that his book "is chiefly addressed to my fellow-economists"
(p. v), and that "at this stage of the argument the general
public, though welcome at the debate, are only eavesdrop-
pers" (p. vi).

I do not think we can excuse the bad writing in most of
the General Theory on this ground. For Keynes succeeds,

10 Keynes's own attitude is thus described by his biographer: "There is no
doubt that Keynes . . . thought that all was fair in argument, and that a man
should not have a grievance if he was refuted without mercy. ... If sensitive-
ness was not in place in a game, still less was it so in the discussion of public
affairs or economic problems." R. F. Harrod, The Life of John Maynard Keynes,
(New York: Harcourt Brace, 1951), pp. 329-330.

INTRODUCTION

9

as we shall see, in being involved and technical without
being precise. One of the most striking characteristics of
the book is the looseness of many of the leading terms, and
the constantly shifting senses in which they are used.
Attempting to anticipate another criticism, Keynes re-
marks: "Those, who are strongly wedded to what I shall call
'the classical theory/ will fluctuate, I expect, between a be-
lief that I am quite wrong and a belief that I am saying
nothing new" (p. v). This insinuates an argumentum ad
hominum.
It attempts to discredit critics in advance for not
being converted to the new revelation. Actually, as we shall
find, it is not necessary to "fluctuate" between these two
beliefs. Keynes's main "contributions" are demonstrably
wrong, and in those cases in which he is saying something
that is true he is indeed saying nothing new.11
Finally, Keynes presents himself to the reader, not very
modestly, as a great intellectual pioneer "treading along un-
familiar paths" (p. vii). What is strange about this, how-
ever, is that toward the end of his book, in Chapter 23, he
cites as confirmation of the truth of these new path-break-
ing ideas the fact that most of them were held by the
mercantilists of the seventeenth century!

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