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The Critics of Keynesian Economics
This volume, originally published in 1960 by Arlington House, contains the most impressive collection of essays criticizing Lord Keynes's "General Theory" ever assembled in book form. The editor has added a new introduction and preface to this volume. An outstanding anthology which includes a number of important essays otherwise hard or impossible to find in English.
427 pages, Paperback
First published January 1, 1960
About the author
Henry Hazlitt
100 books436 followersHenry Stuart Hazlitt was an American journalist who wrote about business and economics for such publications as The Wall Street Journal, The Nation, The American Mercury, Newsweek, and The New York Times.
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April 4, 2021
This is a valuable compilation of critical essays on John Maynard Keynes's book The General Theory of Employment, Interest, and Money. The compilation was first published in 1960 and the essays were selected by Henry Hazlitt. Since all the essays were previously published with no intention of being compiled, and since most of them consist of reviews of Keynes's book, the compilation becomes a bit repetitive in some instances. But I believe its purpose was mostly to make all these pieces readily available to scholars and interested readers, so one is not really supposed to read this from cover to cover (which I eventually did, though).
Here's a couple words for some of the highlights. The essays and excerpts by Hayek, Cortney, Garrett and Palyi are a bit too short to take special notice.
- a famous chapter by French economist J.B. Say, where he describes what has been called The Law of Markets and which Keynes described as "Say's Law", misleadingly characterizing it as "supply creates its own demand". This original piece is a must read for all economics students, but be advised that it consists of a translation from an edition that was subsequently revised by Say. Also, it seems to me that the English translator was prone to change the tone of the original text a little bit.
- J.S. Mill's also famous essay restating the "Law of Markets" and dealing with the possibility of general economic depressions. Both these texts were included because Keynes leaves a bad impression of them in the General Theory, so Hazlitt tried to make them readily available for people to see how Keynes somewhat "strawman-ed" them.
- Harsh initial reviews by Frank H. Knight and Jacob Viner, two well distinguished economists from Chicago in the 30's (before the Chicago School of Friedman, Stigler, Lucas and Becker). These reviews should have been enough to discredit the idea that the General Theory was a valuable and well crafted book (even though none of them denied that it had some merits in calling attention for important questions). However, both of them were seen as "orthodox", old school classical economists by the rebellious youngsters that were by then falling for Keynes, so both these reviews were pushed aside.
- A very scholarly review by the promising French economist Étienne Mantoux, who later died in combat near the end of WWII. He wrote this review when he was still 23 or 24 years old. Such a bright future he had ahead of him... Ludwig von Mises had high hopes for this boy. And in fact he would come to write a whole book dealing with Keynes's previous analysis of the Versailles Treaty, posthumous published as The Carthaginian Peace: Or, the Economic Consequences of Mr. Keynes.
- A review essay by the keynesian Franco Modigliani, which I believe had substantial influence in the subsequent development of the famous IS/LM model, first introduced by Hicks. Modigliani ends up admitting that with wage and price flexibility, the Keynesian scenario is most unlikely.
- An incisive criticism of Keynes's General Theory by banker economist Benjamin Anderson. It covers a wide variety of problems with the Keynesian system. When it was first published, Anderson gave credit to Mises for having reviewed the manuscript and made suggestions, which I personally found reassuring, since both Mises's contributions to this compilation are actually not very detailed or written for the academic audience.
- I enjoyed R. Gordon Wasson's essay, even though it was not focused on Keynes's GT but instead on Beveridge's Full Employment in a Free Society, which is very much inspired by the former. I was shocked by the ignorance and naivety of the latter's book, which Wasson clearly demonstrates.
- Jacques Rueff's critical review is also one of the highlights, specially for those interested in monetary theory. He provides a very intricate explanation of how an increase in the demand for money can give rise to the circulation of short term credit financing the circulation of liquid goods in high demand. This is a sort of "real bills doctrine"
- Albert Hahn tries to show how his German language book from the 20's anticipated some of the Keynesian propositions from the 30's. It is interesting at points, but one gets the impression that Hahn lived a bit too obsessed with this topic.
- John Williams provides a good explanation and criticism of the Keynesian system. The same can be said of the last article, by McCord Wright.
- Stagg Lawrence's essay is a bit long but actually very enthusiastic. He provides one of the strongest criticisms in the book, specially by covering some of Keynes's absurd propositions and showing how it all leads to a nightmare of political perversity.
- Roepke's essay is valuable for showing how, some decades later, the mainstream opinion within international organizations such as the UN had become completely infected by Keynesian naivety, and would lead to inflation and socialism.
- W.H. Hutt provides his usual criticism of price and wage rigidity and adds to it the pertinent point that the need for price adjustments is not in order to reduce its level, but actually to adjust the relative proportions of each particular sector - thus being a critique of the macroeconomic point of view. He also shows that a reduction in wage rates does not necessarily lead to a reduction in the worker's share of output - since that will be determined both by the wage rate and by the hours worked and the number of employed workers, and the latter two usually depend on the former.
- Arthur Burns's piece is a bit meh.
As a final note, I recommend you actually read Keynes's book in order to fully appreciate this set of critical essays.
Here's a couple words for some of the highlights. The essays and excerpts by Hayek, Cortney, Garrett and Palyi are a bit too short to take special notice.
- a famous chapter by French economist J.B. Say, where he describes what has been called The Law of Markets and which Keynes described as "Say's Law", misleadingly characterizing it as "supply creates its own demand". This original piece is a must read for all economics students, but be advised that it consists of a translation from an edition that was subsequently revised by Say. Also, it seems to me that the English translator was prone to change the tone of the original text a little bit.
- J.S. Mill's also famous essay restating the "Law of Markets" and dealing with the possibility of general economic depressions. Both these texts were included because Keynes leaves a bad impression of them in the General Theory, so Hazlitt tried to make them readily available for people to see how Keynes somewhat "strawman-ed" them.
- Harsh initial reviews by Frank H. Knight and Jacob Viner, two well distinguished economists from Chicago in the 30's (before the Chicago School of Friedman, Stigler, Lucas and Becker). These reviews should have been enough to discredit the idea that the General Theory was a valuable and well crafted book (even though none of them denied that it had some merits in calling attention for important questions). However, both of them were seen as "orthodox", old school classical economists by the rebellious youngsters that were by then falling for Keynes, so both these reviews were pushed aside.
- A very scholarly review by the promising French economist Étienne Mantoux, who later died in combat near the end of WWII. He wrote this review when he was still 23 or 24 years old. Such a bright future he had ahead of him... Ludwig von Mises had high hopes for this boy. And in fact he would come to write a whole book dealing with Keynes's previous analysis of the Versailles Treaty, posthumous published as The Carthaginian Peace: Or, the Economic Consequences of Mr. Keynes.
- A review essay by the keynesian Franco Modigliani, which I believe had substantial influence in the subsequent development of the famous IS/LM model, first introduced by Hicks. Modigliani ends up admitting that with wage and price flexibility, the Keynesian scenario is most unlikely.
- An incisive criticism of Keynes's General Theory by banker economist Benjamin Anderson. It covers a wide variety of problems with the Keynesian system. When it was first published, Anderson gave credit to Mises for having reviewed the manuscript and made suggestions, which I personally found reassuring, since both Mises's contributions to this compilation are actually not very detailed or written for the academic audience.
- I enjoyed R. Gordon Wasson's essay, even though it was not focused on Keynes's GT but instead on Beveridge's Full Employment in a Free Society, which is very much inspired by the former. I was shocked by the ignorance and naivety of the latter's book, which Wasson clearly demonstrates.
- Jacques Rueff's critical review is also one of the highlights, specially for those interested in monetary theory. He provides a very intricate explanation of how an increase in the demand for money can give rise to the circulation of short term credit financing the circulation of liquid goods in high demand. This is a sort of "real bills doctrine"
- Albert Hahn tries to show how his German language book from the 20's anticipated some of the Keynesian propositions from the 30's. It is interesting at points, but one gets the impression that Hahn lived a bit too obsessed with this topic.
- John Williams provides a good explanation and criticism of the Keynesian system. The same can be said of the last article, by McCord Wright.
- Stagg Lawrence's essay is a bit long but actually very enthusiastic. He provides one of the strongest criticisms in the book, specially by covering some of Keynes's absurd propositions and showing how it all leads to a nightmare of political perversity.
- Roepke's essay is valuable for showing how, some decades later, the mainstream opinion within international organizations such as the UN had become completely infected by Keynesian naivety, and would lead to inflation and socialism.
- W.H. Hutt provides his usual criticism of price and wage rigidity and adds to it the pertinent point that the need for price adjustments is not in order to reduce its level, but actually to adjust the relative proportions of each particular sector - thus being a critique of the macroeconomic point of view. He also shows that a reduction in wage rates does not necessarily lead to a reduction in the worker's share of output - since that will be determined both by the wage rate and by the hours worked and the number of employed workers, and the latter two usually depend on the former.
- Arthur Burns's piece is a bit meh.
As a final note, I recommend you actually read Keynes's book in order to fully appreciate this set of critical essays.
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