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On Keynes as a Practical Economist

Dr. Simon is the author of The State of Humanity and The Ultimate Resource.

John Maynard Keynes’s contemporaries thought that he was the cleverest mortal of the century (putting aside such immortals of physical science as Einstein). Bertrand Russell said of Keynes’s intellect that it was “the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool.”[1] Keynes was impressed by his own cleverness, too. In a letter to a friend who named his son “Keynes Don von Eisner,” Keynes wrote:


He must undertake that he will not only always pronounce the name rightly himself, but will never allow the slightest mispronunciation on the part of others. Tell him firmly that it rhymes with “brains” and that there is no harm in that.

Friedrich Hayek, a Nobel-prize winner and Keynes’s greatest opponent of the 1930s—but also a personal friend—said of Keynes much later, however, that “He was so convinced that he was cleverer than all the other people that he thought his instinct told him what ought to be done, and he would invent a theory to convince people to do it.”[2]

Let us test Keynes as an economist on the subject of natural resources. In his world-renowned The Economic Consequences of the Peace, published just after World War I, Keynes wrote that Europe could not supply itself with food and soon would have nowhere to turn:

[B]y 1914 the domestic requirements of the United States for wheat were approaching their production, and the date was evidently near when there would be an exportable surplus only in years of exceptionally favorable harvest. . . .

Europe’s claim on the resources of the New World was becoming precarious; the law of diminishing returns was at last reasserting itself, and was making it necessary year by year for Europe to offer a greater quantity of other commodities to obtain the same amount of bread. . . .

If France and Italy are to make good their own deficiencies in coal from the output of Germany, then Northern Europe, Switzerland, and Austria . . . must be starved of their supplies.[3]

Could these assertions of impending scarcity have been more wildly in error? Not likely. Keynes was entirely ignorant of the facts and plain wrong in his dogmatic logic. Millions of plain American farmers had a far better grasp of the agricultural reality in the 1920s than did Keynes. So much for Keynes’s wisdom as an economist and a seer into the future.

Obviously one can be both “clever” and destructively wrongheaded.

1.   Robert Skidelsky, John Maynard Keynes: Hopes Betrayed, 1883-1920 (New York: Viking, 1983), p. 124.

2.   F. A. Hayek, Hayek on Hayek—An Autobiographical Dialogue edited by Stephen Kresge and Leif Wenar (Chicago: University of Chicago Press, 1994), p. 97.

3.   John Maynard Keynes, The Economic Consequences of the Peace (New York: Harper and Row, 1971 [1922]), pp. 24, 25, 94.

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