Short Run Economics

Short Run Economics

It was the famous British economist John Maynard Keynes who said, “in the long run we are all dead”. While now he may well be, his philosophy and economics are alive and well, having ruled much of this century from the grave. It would have been more accurate for him to have said “In the long run we are all broke”.

Without question lord Keynes was the most influential economist this century. His work, now dubbed the “Keynesian Revolution”, swept through academic, economic and political establishments, and culminated in his “The General Theory of Employment, Interest and Money” in 1936. It has been said that Keynes was to economics what Darwin was to science.

His work and philosophy completely dominated the Bretton Woods conference in 1944 that saw the establishment of the International Monetary Fund and the World Bank. Bretton Woods heralded the beginning of the unrivaled supremacy of the United States in the global economy with its dollar being instituted as the reserve currency of the world, in place of gold.

According to Keynes biographer Robert Skidelsky, he was completely committed to rational justification of a rearrangement of values” with a short run philosophy of life.  Keynes is well remembered. for his statement ” in the long run we are all dead. Biographer Skidelsky said he had a life long bias against long-term thinking.

Keynes, in an essay entitled “Possibilities for our Grandchildren” said an individuals concern for the future is “a disgusting morbidity” and semi-criminal and semi-pathological. Henry Hazlitt summarized Keynes “General Theory” as a “trans-valuation of all values. The greatest virtue is consumption, extravagance and improvidence. The greatest vice in the General Theory is saving, thrift, and financial prudence.

Without question John Maynard Keynes shallow philosophy and un-time tested economics was greeted with acceptance in more than just the academic establishment. Embraced by social designers and politicians, Keynsian theory of expandable money supply and spending and consumption has deeply permeated every aspect of our society in the 52 years since his death.

At a time when most people still called Gold “The Precious Metal”, it was John Maynard Keynes that coined the phrase Gold “The Barbarous Relic”.  The question that remains in my mind is; will his theories survive in the long run?

by Philip Judge
1997