Krugman’s introduction to Keynes’s General Theory

Krugman writes:

A reasonable man might well have concluded that capitalism had failed,
and that only…the nationalization of the means of production – could
restore economic sanity….Keynes argued that these failures had
surprisingly narrow, technical causes…

It is well-known that Keynes called for the socialization of investment and euthanasia of the rentier.  Although I do not think he meant it by the 1940s (for background read this paper, or Keynes’s preface to the German-language edition of GT, which is Department of Uh-Oh material), it is odd for Krugman to ignore these passages and present Keynes as an outright enemy of government control or ownership of investment.  Next, Krugman writes:

  1. Economies can and often do suffer from an overall lack of demand, which leads to involuntary unemployment
  2. The economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully
  3. Government policies to increase demand, by contrast, can reduce unemployment quickly
  4. Sometimes increasing the money supply won’t be enough to persuade
    the private sector to spend more, and government spending must step
    into the breach

To a modern practitioner of economic policy, none of this – except,
possibly, the last point – sounds startling or even especially
controversial. But these ideas weren’t just radical when Keynes
proposed them; they were very nearly unthinkable. And the great
achievement of The General Theory was precisely to make them

Arthur Marget and other historians of thought have shown that such ideas were commonplace in pre-1936 macroeconomics, albeit not in Hayek and Robbins.  The American tradition in particular pushed for activist fiscal policy, read for instance Jacob VinerSeveral books document the popularity of this approach, again before the General Theory.


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