Keynes on planning, coda

Russ Roberts responds, and from the comments, Lawrence H. White reports:

In his famous letter to Hayek regarding The Road to Serfdom, after asserting that greater central planning would enhance efficiency, Keynes wrote:

“I should therefore conclude your theme rather differently. I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue.”

That’s not a gotcha, that’s what Keynes (and many others) believed.  They also believed, unlike some of the more recent and typically more mathematical Keynesian models, that investment was quite unstable and that this instability required us to at least consider some fairly radical remedies.  That’s Keynes’s actual model, not what was usually taught at MIT as the Keynesian-neoclassical synthesis.  Government-sanctioned collusion was another remedy for instability, commonly suggested in the earlier part of the 20th century, although that was not Keynes’s tack.

By the way, when Hayek receives such a letter, he probably wonders if it is from Milton Friedman.  (Move around some years for the counterfactual, if need be.)  Better double check that return address.


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