The Journal Of

Peace, Prosperity & Freedom

reviewed by vinay kolhatkar

Where Keynes Went Wrong: And Why World

Governments Keep Creating Inflation, Bubbles,
and Busts
Hunter Lewis
Hunter Lewis is a Circle Bastiat contributor on
Mises.org and the author of several bestselling
books, including the widely acclaimed Are the Rich
Necessary?, and the much-anticipated Crony Capitalism in America.
In this book, Lewis laments the fact that not
enough literature exists that rebuts Keynes directly.
Friedrich Hayek apparently planned one but gave
up because Keynes so frequently changed his mind
that Hayek thought it would be a waste of time.1
Lewis has high regard for Henry Hazlitts comprehensive takedown in his 1959 epic The Failure of the
New Economics. Hazlitt exposed the inconsistencies
and fallacies by going through The General Theory of
Employment, Interest, and Money, Keynes magnum
opus, line by line, resulting in a 500-page classic.
Dedicating his book to Henry Hazlitt, Lewis decides to concentrate on the
major fallacies, and even then ends up with over 300 pages plus endnotes. In
part, this is because of the books unusual structure, and in part this is because, as
Hazlitt found, there are simply too many absurdities to cover. Part I of the book

Bruce Caldwell, Why didnt Hayek review Keynes General Theory?, History of Political Economy, Vol. 30, No. 4, 1998, pp. 546-567.

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is a 10-page introduction. Part II is about what Keynes actually said. Part III is
the rebuttal. Part IV looks at Keynes the person going beyond his magnum
opus, perusing the so-called masters Essays of Persuasion, what his colleagues
and biographer experienced, and Keynes extensive use of various misleading
devices such as obscurity, shifting definitions, misuse of mathematics, cause-effect reversals, and unsupported assertions. In Parts V and VI, Lewis concludes
his book by demonstrating the pervasive influence of Keynesianism and its horrendously deleterious effects on contemporary economies.
Part II consists of excerpts mainly from The General Theory, followed by a
commentary on what Keynes most likely meant, with a brief on how that meaning
has been derived. Simply getting to what Keynes actually meant is rendered difficult because The General Theory is very badly written; even his famous pupil Paul
Samuelson a life-long Keynesian himself admitted as much.
In Part III, the same excerpts are taken up again, but this time with the rebuttals. Relying on the paradigms of common-sense free-market economics, Keynes
is very easily refuted.
These are some of the Keynesian excerpts that are taken up for a comprehensive dismissal. It is hard to say which of these Keynesianisms are the most
ludicrous:
1. Interest rates are always too high without government intervention. This
is the primary cause of poverty;
1. The stock market behaves like a casino;
2. The State should decide the volume of investment;
3. In an economic crisis federal agencies should print money, borrow
money, and spend money to get the economy to recover;
4. Gold is a barbarous relic;
5. Consuming more will lead to higher investment;
6. Commodity prices should be managed by the State; and
7. Markets do not self-correct.
These are not the only preposterous statements that Lewis has to deal with. Part
III runs into 165 pages of refutation, and absolute repudiation, of what is essentially The General Theorys whimsical and full frontal assault on the price system,
plus its inconsistencies, arbitrary assertions, and serious logical problems. Part
III is the crux of this work, and it is extremely well done. It is accessible to anyone
with a basic grounding in Austrian or classical theory, and an understanding of
the importance of prices determined in a free market.
Although Lewis achieves his intended mission overall, I have three misgivings:
1. The unusual structure: the chapter headings in Part II and III are the
same except the two digressions in each of Part II and III. The reader
does not have to wade through 68 pages of what Keynes said before

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where keynes went wrong

getting to the repudiation in Part III, but many readers will tend to read
chapters in a sequential fashion. A better structure would have been to
combine the two sections by attacking the assertions in the same chapter as they are enumerated, as well as specifying how the assertions were
arrived at (which admittedly is quite a task in itself, given the obscurity
with which Keynes spoke and wrote).
2. There is an astonishing inconsistency in the take-home sentiment that
Lewis leaves us with. On the one hand, he hopes that Keynes will be
relegated to the position of false utopians like Marx and Mao, and carries a back cover recommendation which loudly proclaims Keynes
demolished and his quack system refuted. However, Lewis is academically reverential in his praise of Keynes wit and writing skills, and for
the most part, states that Keynes was merely wrong (including in the
book title), rather than diabolical or horribly confused. Yet Lewis is also
happy to quote Keynes biographer in ways that suggests a very sinister
motive.
3. Part IV, a small, 11-page account over three chapters, begins to address
the crucial issue of John Maynard Keynes the person. We get a peek
into how he was able to manipulate conformity around his views, and
whether the man himself truly believed what he had put out. Yet, even
as this glorious beginning excites, it does not anywhere near consummate the extremely critical task of unraveling the mystery of how a
quack became a superstar, and set economic science back by hundreds
of years. Without such an understanding, the benevolent will have a
hard time undoing the pervasive damage done by this charlatan to the
canons, methodology, and craft of rational economic science.
Nevertheless, a concise disassembly of Keynes was long overdue, and Lewis
book does precisely that. It should form part of the arsenal of every student of
real economic science.
Axios Press, 2011, 387 pages.

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