19 September 2010

A Comment Worth Considering – Keynes’ Long Run

Reading F.A. Hayek’s The Fatal Conceit has proven to be a valuable use of time – especially considering the brevity of the work (a slim 140 pages). I find Hayek’s consideration of others’ words especially important and interesting. One quote that bears significance to our current economic (and cultural) situation comes from John Maynard Keynes, whose economic philosophy has been out into active practice recently and most pointedly since President Obama’s inauguration.

Keynes is said to have “justified some of his economic views, and his general belief in a management of the market order, on the ground that ‘in the long run we are all dead” (57). There are a couple of potential explications of Keynes’ proposition.

One is that if the short run is not taken care of – in an economic view, if Keynes’ prescription for spending is not followed – then the long run doesn’t matter, as economic ruin will surely follow. This take would have the public and those who set policy concentrate on short term stability, apparently with the assumption that continual short term stability would necessarily lead to long term stability.

Another, and one which Hayek puts forward, is that the long term is not even a consideration for Keynes. Or perhaps better put, if foreseeable consequences in the long term are either “beyond our possible perception” or indicate failure of the desired short term goals, then it is best to dispose of discussion of the long term altogether (57). After all, if we are indeed all dead in the long term, then we can – perhaps even should – adopt a carpe diem fiscal attitude; make the short term as comfortable as possible and ignore the wall which awaits in the long term. This sort of fatalistic thinking would be only academically interesting, instead of worrisome, if it weren’t being put into practice today.

As our federal government expands spending, entitlements, and bureaucratic growth in pursuit of proving Keynes’ economic theories can pull the nation out of its current recession, it is instructive that Keynes himself dismisses the long run. I suppose that dismissing the long run is forgivable if a theory remains on paper only; if it is not put into practice, it never encounters the long run. But since the Obama administration and the Democrat congress has decided to pursue Keynes’ theory in the short run – to the tune of trillions of dollars – we cannot dismiss the long term impacts of such spending. Given the performance of such spending in the short run, one can only imagine the deleterious effects of the accumulated debt in the long run.

Work Cited

Hayek, F.A. The Fatal Conceit. Chicago: U Chicago P, 1991. Print.

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