Challenge to Keynes

For most people, economics has ever been the “dismal science,” to be passed over quickly for more amusing sport. And yet, a glance at the world today will show that we pass over economics at our peril. The influence of economic ideas on human history, especially political history, has been momentous; how different would be the lives of all of us if Karl Marx had never lived and spun his fatal vision! In the twentieth century, the most influential economist has been John Maynard Keynes, who swept the world of economics like an avalanche in 1936 with his General Theory of Employment, Interest, and Money, his teachings quickly becoming a new, entrenched economic orthodoxy.

Now Henry Hazlitt, in a vitally important and desperately needed new book, The Failure of the “New Economics” (Van Nostrand, $7.50), throws down the challenge in a detailed, thoroughgoing refutation of the General Theory. Anyone tempted to scoff at this debate as simply a tempest in an abstract academic teapot, unrelated to the current practical world, might ponder such statements as these, which can be found, unquestioned and unchallenged, in almost any news magazine or newspaper column: “we need no longer worry about a depression, because now government knows how to cure it – with deficit spending and ‘built-in stabilizers'”; “the government’s X billion dollars of military spending is a useful prop to the economy”; “business will improve in the next quarter because government intends to grant more contracts and run a larger deficit”; “to check the threat of inflation, the government should impose high taxation to sop up excess purchasing power”; “the government’s main economic duty is to stabilize the economy and insure full employment”; “in contrast to the capitalism of the nineteenth century, which emphasized thrift and production, our modern capitalism depends for its prosperity on consumer demand.”

MR

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Murray N. Rothbard

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For most people, economics has ever been the “dismal science,” to be passed over quickly for more amusing sport. And yet, a glance at the world today will show that we pass over economics at our peril. The influence of economic ideas on human history, especially political history, has been momentous; how different would be the lives of all of us if Karl Marx had never lived and spun his fatal vision! In the twentieth century, the most influential economist has been John Maynard Keynes, who swept the world of economics like an avalanche in 1936 with his General Theory of Employment, Interest, and Money, his teachings quickly becoming a new, entrenched economic orthodoxy.

Now Henry Hazlitt, in a vitally important and desperately needed new book, The Failure of the “New Economics” (Van Nostrand, $7.50), throws down the challenge in a detailed, thoroughgoing refutation of the General Theory. Anyone tempted to scoff at this debate as simply a tempest in an abstract academic teapot, unrelated to the current practical world, might ponder such statements as these, which can be found, unquestioned and unchallenged, in almost any news magazine or newspaper column: “we need no longer worry about a depression, because now government knows how to cure it – with deficit spending and ‘built-in stabilizers'”; “the government’s X billion dollars of military spending is a useful prop to the economy”; “business will improve in the next quarter because government intends to grant more contracts and run a larger deficit”; “to check the threat of inflation, the government should impose high taxation to sop up excess purchasing power”; “the government’s main economic duty is to stabilize the economy and insure full employment”; “in contrast to the capitalism of the nineteenth century, which emphasized thrift and production, our modern capitalism depends for its prosperity on consumer demand.”