Milton Friedman on Keynes and the economics profession
In judging Keynes’s overall influence on public policy, it is necessary to distinguish his bequest to technical economics from his bequest to politics. Keynes’s bequest to technical economics was strongly positive. His bequest to politics, in my opinion, was not. Yet I conjecture that his bequest to politics has had far more influence on the shape of today’s world than his bequest to technical economics. In particular, it has contributed greatly to the proliferation of overgrown governments increasingly concerned with every phase of their citizens’ daily lives.
Context. From his essay on John Maynard Keynes, written for the volume of commentaries accompanying a 1989 German facsimile edition of Keynes’s General Theory (1936) and published in English by the Federal Reserve Bank of Richmond in 1997. By Keynes’s “bequest to politics” he means the view, which he illustrates from Keynes’s 1944 letter praising Hayek’s Road to Serfdom, that planning is safe if those carrying it out hold the right moral values.
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Milton Friedman, “John Maynard Keynes” (Federal Reserve Bank of Richmond, Economic Quarterly, vol. 83, no. 2 (Spring 1997), pp. 1 to 23; first published in German translation in 1989, in the commentaries accompanying a facsimile edition of the General Theory (Verlag Wirtschaft und Finanzen, Düsseldorf)., 1997), p. 20. https://miltonfriedman.org/quotes/keynes-bequest-technical-economics-positive-politics-not-1997
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I conclude that Keynes’s political bequest has done far more harm than his economic bequest and this for two reasons. First, whatever the economic analysis, benevolent dictatorship is likely sooner or later to lead to a totalitarian society. Second, Keynes’s economic theories appealed to a group far broader than economists primarily because of their link to his political approach.
Context. From his essay on John Maynard Keynes, written for the volume of commentaries accompanying a 1989 German facsimile edition of Keynes’s General Theory (1936) and published in English by the Federal Reserve Bank of Richmond in 1997. “Benevolent dictatorship” is his name for Keynes’s view that society is best improved by persuading well-meaning officials, chosen for their moral values, to follow economists’ advice.
John Maynard KeynesJournal article, 1997, Federal Reserve Bank of Richmond, Economic Quarterly, vol. 83, no. 2 (Spring 1997), pp. 1 to 23; first published in German translation in 1989, in the commentaries accompanying a facsimile edition of the General Theory (Verlag Wirtschaft und Finanzen, Düsseldorf)., p. 22Checked against the sourceRead the originalThe strongest political influence on a legislative body is exercised by special-interest groups of citizens who favor a government program that confers substantial benefits on them, while imposing small costs on a large number of their fellow citizens. … A corollary is that we cannot correct this situation by electing the “right” people to Congress. Once elected, the “right” people will do the wrong things. And they will be pressured to do so by us, in our capacity as members of special-interest groups, even though we elect them in our capacity as members of a majority outraged by the growth in government’s spending and scope.
Context. From the book’s closing chapter, where the Friedmans set out a numbered list of lessons on how the public will can be translated more effectively into government policy; these are the first two. The ellipsis leaves out one sentence, which calls each such group a corner of an “iron triangle” of beneficiaries, politicians and bureaucrats. The next point says that only the presidency or a constitutional amendment can let the general interest prevail.
Tyranny of the Status QuoBook, 1984, Harcourt Brace Jovanovich, Ch. 9 “The Iron Triangle: How to Defeat It”, pp. 165–166 (with Rose D. Friedman)Checked against the sourceFind the bookKeynes was a great economist. In every discipline, progress comes from people who make hypotheses, most of which turn out to be wrong, but all of which ultimately point to the right answer. Now Keynes, in The General Theory of Employment, Interest and Money, set forth a hypothesis that was a beautiful one, and it really altered the shape of economics. But it turned out that it was a wrong hypothesis. That doesn’t mean that he wasn’t a great man!
Context. Answering whether Keynes was a “natural economist,” after naming Adam Smith, Alfred Marshall, Keynes and George Stigler as the economists he would invite to dinner.
The Romance of EconomicsInterview, 2006, Interview by Tunku Varadarajan, The Wall Street Journal; reprinted in Hoover Digest 2006 No. 4Checked against the sourceRead the transcript
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