Ran across this witty quotation below while reading a chapter in Peter Boettke’s Living Economics. Here is a link for the original source of the quotation, a debate in the Economist between Luigi Zingles and Brad DeLong. Zingales:
Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behaviour. Medical science has established that one or two glasses of wine per day are good for your long-term health, but no doctor would recommend a recovering alcoholic to follow this prescription. Unfortunately, Keynesian economists do exactly this. They tell politicians, who are addicted to spending our money, that government expenditures are good. And they tell consumers, who are affected by severe spending problems, that consuming is good, while saving is bad. In medicine, such behaviour would get you expelled from the medical profession; in economics, it gives you a job in Washington.
Milton Friedman argued that there was no such thing as Austrian economics or Chicago economics, just good economics. Does Zingales’ argument suggest that good economics don’t really matter – at least in the short to medium term – to policymakers since they are going to choose the arguments that suit their political needs as long as they can get away with it? If so, does that mean that fellow Chicagoan George Stigler is right that economists have very little real impact on policy or at least that Keynes isn’t fully correct that “even the most practical man of affairs is usually in the thrall of the ideas of some long-dead economist”? If Zingales is right, Keynes seems to give too much credit to economists (and philosophers in other Keynes statements) since Zingales posits that political needs drive the selection of the economic ideas used in policy wars. In that situation, it is hard to imagine that in such instances the ideas have a lot of independent effect but rather serve as props that buttress positions that will be argued regardless.
I would note that Zingales was quite clearly wrong about what Keynesian economists do: Keynes’s “How to Pay for the War”, for example, was all about how government non-war and private consumption spending was too high and needed to be cut back…
I’m reminded of the distinction between “crude” or “pop” Keynesianism (more spending is always desirable) and what Keynes actually advocated: a balanced budget over the business cycle.
I think this is a bit of a misrepresentation. As Jason said, Keynes didn’t just endorse deficit spending all the time. Furthermore, many Keynesian ideas, such as the Paradox of Thrift, are fairly easy to see in the current environment.
Before we judge Zingales too harshly, isn’t he talking about Keynesians and Keynesianism rather than Keynes?
Well, it’s not clear who he is talking about, since he does not say. Since it’s a debate with me, you might think I was the “Keynesian”–but I was in favor of tax increases and spending cuts in the 1990s because interest rates seemed on an upward crowding-out trajectory, and I was in favor of tax increases and spending cuts in the mid-2000s on the grounds that when the economy was near full employment good policy would have a falling debt-to-GDP ratio.
If he is not talking about me, and not talking about Keynes, who is he talking about?