7. The Economist:Arrogance and Pseudo Originality

The Economist:
Arrogance and Pseudo Originality

MAYNARD Keynes’s approach in economics was not unlike his attitude in philosophy and life in general. “I am afraid of ‘principle,’” he told a Parliamentary committee in 1930 (Moggridge 1969, p. 90). Principles would only restrict his ability to seize the opportunity of the moment and would hamper his will to power. Hence, he was eager to desert his earlier beliefs and change his mind on a dime, depending on the situation.

His stand on free trade serves as a blatant example. As a good Marshallian, his one, seemingly fixed, lifelong politicoeconomic principle was a devoted adherence to freedom of trade. At Cambridge he wrote to a good friend, “Sir, I hate all priests and protectionists. … Down with pontiffs and tariffs.” For the next three decades, his political interventions were almost solely concerned with championing free trade (Skidelsky 1983, pp. 122, 227–29).

Then, suddenly, in the spring of 1931, Keynes loudly called for protectionism, and during the 1930s, he led the parade for economic nationalism and for policies frankly designed to “beggarthy-neighbor.” But during World War II, Keynes swung back to free trade. Never did any soul-searching or even hesitation seem to hobble his lightning-fast changes.

Indeed, in the early 1930s, Keynes was widely ridiculed in the British press for his chameleon views. As Elizabeth Johnson writes, He was Keynes the India-rubber man: the Daily News and Chronicle of 16 March 1931, carried an article headed, “Economic Acrobatics of Mr. Keynes”—and illustrated it by a sketch of “A Remarkable Performance. Mr. John Maynard Keynes as the ‘boneless man,’ turns his back on himself and swallows a draught” (1978, p. 17).

Keynes, however, did not trouble himself about charges of inconsistency, considering himself always right. It was particularly easy for Keynes to adopt this conviction since he cared not a tap for principle. He was therefore always ready to change horses in pursuit of expanding his ego through political power.

As time went on, Elizabeth Johnson writes, Keynes “had a clear idea of his role in the world; he was … the chief economic adviser to the world, to the Chancellor of the Exchequer of the day, to the French minister of finance, … to the president of the United States.” Pursuit of power for himself and a ruling class meant, of course, increasing adherence to the ideas and institutions of a centrally managed economy.

Among the good men of the organic elite governing the nation, he placed himself in the crucial role of scholar-technician, the 20th century version of the “philosopher-king” or, at least, the philosopher guiding the king. It is no wonder that Keynes “hailed President [Franklin D.] Roosevelt as the first head of state to take theoretical advice as the basis for large-scale action” (Johnson and Johnson 1978, pp. 17–18).

Action is what Keynes sought from government, especially with Keynes himself making the plans and calling the shots. As Johnson writes,

His opportunism meant that he reacted to events immediately and directly. He would produce an answer, write a memorandum, publish at once, whatever the issue. … In the World War II Treasury, he nearly drove some of his colleagues crazy with his propensity to keep a finger in every pie. “Don’t just stand there, do something” would have been his present-day motto (ibid., p. 19).

Johnson notes that Keynes’s

instinctive attitude to any new situation was to assume, first, that nobody was doing anything about it, and, secondly, that if they were, they were doing it wrong. It was a lifetime habit of mind based on the conviction that he was armed with superior brains … and, Cambridge Apostle that he was, gilled with superior sensibilities. (Ibid., p. 33)

One striking illustration of Maynard Keynes’s unjustified arrogance and intellectual irresponsibility was his reaction to Ludwig von Mises’s brilliant and pioneering Treatise on Money and Credit, published in German in 1912. Keynes had recently been made the editor of Britain’s leading scholarly economic periodical, Cambridge University’s Economic Journal. He reviewed Mises’s book, giving it short shrift. The book, he wrote condescendingly, had “considerable merit” and was “enlightened,” and its author was definitely “widely read,” but Keynes expressed his disappointment that the book was neither “constructive” nor “original” (Keynes 1914). This brusque reaction managed to kill any interest in Mises’s book in Great Britain, and Money and Credit remained untranslated for two fateful decades.

The peculiar point about Keynes’s review is that Mises’s book was highly constructive and systematic, as well as remarkably original. How could Keynes not have seen that? This puzzle was cleared up a decade and a half later, when, in a footnote to his own Treatise on Money, Keynes impishly admitted that “in German, I can only clearly understand what I already know—so that new ideas are apt to be veiled from me by the difficulties of the language” (Keynes 1930a: I, p. 199 n.2). Such unmitigated gall. This was Keynes to the hilt: to review a book in a language where he was incapable of grasping new ideas, and then to attack that book for not containing anything new, is the height of arrogance and irresponsibility.⁴

Another aspect of Keynes’s swaggering conceit was his conviction that much of what he did was original and revolutionary. His letter to G.B. Shaw in 1935 is well known:

I believe myself to be writing a book on economic theory that will largely revolutionise … the way the world thinks about economic problems. … For myself I don’t merely hope what I say, in my own mind I’m quite sure. (Hession 1984, p. 279)

But this belief in his braggadocio was not confined to The General Theory.

Bernard Corry points out that “From about the beginning of his economic work he claimed to be revolutionising the subject.” So imbued was Keynes with faith in his own creativity that he even proclaimed great originality in a paper on business cycles that was based on D.H. Robertson’s Study of Industrial Fluctuations, shortly after the book was published in 1913. Corry links this attitude to the insistent emphasis of the Bloomsbury Group on “originality” (by which, of course, they mainly meant their own). Originality, he points out, was “one of the fixations of the Bloomsbury Group” (Crabtree and Thirlwall 1980, pp. 96–97; Corry 1986, pp. 214–15, 1978, pp. 3–34).

Keynes was greatly aided in his claims of originality by the tradition of economics that Alfred Marshall had managed to establish at Cambridge. As a student of Marshall and a young Cambridge lecturer under Marshall’s aegis, Keynes easily absorbed the Marshallian tradition.

It was not that Marshall himself claimed blazing originality, although he did make claims to independent inventions of marginal utility and he was secretive, jealous of students who might steal his ideas. Marshall developed the strategy of maintaining a hermetically sealed Marshallian world at Cambridge (and hence in British economics generally). He created the myth that in his 1890 magnum opus, the Principles of Economics, he had constructed a higher synthesis, incorporating the valid aspects of all previously competing and clashing theories (deductivism and inductivism, theory and history, marginal utility and real cost, short run and long run, Ricardo and Jevons).⁵

Because he successfully pushed this myth, he therefore spawned the universal view that “it’s all in Marshall,” that, after all, there was no need to read anyone else. For if Marshall had harmonized all the one-sided, one-eyed economic views, there was no longer any reason except antiquarianism to bother to read them. As a result, the modal Cambridge economist read only Marshall, spinning out and elaborating on cryptic sentences or passages in the Great Book. Marshall himself spent the rest of his life reworking and elaborating The Text, publishing no less than eight editions of the Principles by 1920.

For the rest, there was the legendary Cambridge “oral tradition,” in which Marshall’s students and disciples were delighted to listen to and pass on the “Great Man’s” words, as well as to read his lesser seminal writings in manuscript or in commission hearings, for Marshall kept most of his shorter writings out of publication until near the end of his life. Thus, the Cambridge Marshallians could take unto themselves the aura of a priestly caste, the only ones privy to the mysteries of the sacred writings denied to lesser men.

The tightly sealed world of Marshallian Cambridge soon dominated Great Britain; there were few challengers in that country. This dominance was accelerated by the unique role of Cambridge and Oxford in British social and intellectual life, especially in the years before the educational explosion that followed World War II. Since the days of Adam Smith, David Ricardo, and J.S. Mill, Great Britain had managed to dominate economic theory throughout the world, so Marshall and his sect managed to assume hegemony not only of Cambridge economics but of the world (see Crabtree 1980, pp. 101-05).⁶

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⁴ In view of his friendship with Keynes, Hayek’s account of this episode characteristically misses Keynes’s arrogance and gall, treating the story as if it were merely unfortunate that Keynes did not know German better: “The world might have been saved much suffering if Lord Keynes’s German had been a little better” (Hayek [1956] 1984, pp. 219; see also Rothbard 1988, pp. 28).

⁵ There is no space here to elaborate my conviction that this was a false and even pernicious myth, that what Marshall really did was not to synthesize but to reestablish the dominance of Ricardo and Mill and their long-run equilibrium and cost-of-production theories, overlaying them with a thin veneer of trivialized marginal-utility analysis.

⁶ Thus, as late as World War II and shortly thereafter, my honors seminar at Columbia College consisted of a chapter-by-chapter reading and analysis of Marshall’s Principles. And when I was preparing for my doctoral oral examination in the history of thought, the venerable John Maurice Clark told me that there was no real need for me to read Jevons because “all his contributions are in Marshall.”