DeLong on Hazlitt

by on April 11, 2005 at 7:08 am in Economics | Permalink

Brad DeLong criticizes Henry Hazlitt’s Economics in One Lesson.  First, "because at least half its pages hint that the works of John Maynard
Keynes are an abomination without ever grappling with the Keynesian
argument."

Hazlitt did not say much about Keynes in his famous introduction to economics but he certainly grappled with the Keynesian argument in his lesser-known
The Failure of the ‘New Economics’: An Analysis of the Keynesian Fallacies
.

Second, DeLong quotes Hazlitt:

There are men regarded today as brilliant economists, who deprecate
saving and recommend squandering on a national scale as the way of
economic salvation; and when anyone points to what the consequences of
these policies will be in the long run, they reply flippantly, as might
the prodigal son of a warning father: "In the long run we are all
dead." And such shallow wisecracks pass as devastating epigrams and the
ripest wisdom.

According to Brad this quote is "dishonest" and a "misrepresentation," but Keynes did deprecate saving and recommend squandering.  Famously:

To dig holes in the ground,” paid for out of savings, will increase,
not only employment, but the real national dividend of useful goods and
services. (General Theory, Ch. 16).

Brad seems to think that Hazlitt quoted Keynes out of context because "What Keynes actually wrote in his Tract on Monetary Reform" was:

Now ‘in the long run’ this [way of summarizing the
quantity theory of money] is probably true…. But this long run is a
misleading guide to current affairs. In the long run we are all dead.
Economists set themselves too easy, too useless a task if in
tempestuous seasons they can only tell us that when the storm is long
past the ocean is flat again.

But the misreading is Brad’s not Hazlitt’s.  Keynes is criticizing classical economics for focusing on the long run and this certainly includes the classical focus on savings as a key to economic growth.  Hazlitt, as Brad notes, is restating classical economics so when Hazlitt points out the long-run problems with using spending to increase short-run aggregate demand, Keynes does, in effect, reply "We are all dead in the long run."

For some, it seems, one lesson is not enough. 🙂

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