Monday, 16 June 2014

What would John M. Keynes say about John N. Key?

“The ideas of economists and political philosophers, both when they are right and when they
are wrong, are more powerful than is commonly understood. Indeed the world is ruled
by little else. Practical men, who believe themselves to be quite exempt from any
intellectual influence, are usually the slaves of some defunct economist…”

-John Maynard Keynes

If you’ve ever wondered what ails your Prime Minister economically – extreme economic micro-management; picking winners losers; borrow-and-spend; emissions trading scams; the institutionalisation of cronyism; the idea that a nationwide network of bike paths would revitalise the local economy – then consider that Keynes was right in that quote above.

If so, then it’s no surprise to discover that the defunct economist from whom John Key has plucked his nostrums (I almost said “thinking,” but that would be unfair) is Paul Samuelson, whose best-selling Economics textook has (dis)graced more classrooms than there are dollars in the national debt.

As the Jesuits might have said, show me the boy’s economics textbook, and I will show you the economic policies of the man.

What was special about Paul Samuelson’s tome? It was the book that taught baby-boomers students all the fallacies Samuelson’s bastard-Keynesianism – indeed, that book more than any other turned that bastardry into today’s orthodoxy. It is, according to economist George Reisman, “the leading ‘text-book case’ of the exposition of economic fallacies and anticapitalist doctrine.”

It was Samuelson’s book that crowed in 1989, not long before the Soviet Union finally crumbled, that Soviet production would soon overtake American – “proof,” he said, “that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive” (Samuelson and Nordhaus 1989, p. 837).

No wonder, perhaps, that the Prime Minister thinks the same approach might work in the country’s second-biggest city.

Allow me then to make a suggestion for those unlike the Prime Minister who do want to know more about economics than what you can learn from Samuelson’s vast and indigestible kitchen midden of a book.  A reading suggestion.  In fact, two reading suggestions.

The first is Henry Hazlitt's Economics in One Lesson -- the first lesson being that:

"the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

Something the Prime Minister would have done well to learn much earlier.

And the second suggestion is Gene Callahan's Economics for Real People, a colourful, easy-to-read guide to common-sense Austrian economics -- the only school of economists who predicted the present and still-continuing crisis (as you can see for yourself at the Mises Institute Bailout Reader), and who can explain why the boom and consequent bust happened the way they did. 

Who would have thought you could explain what happened by reference to a drinking party with too few women, and a bus trip across the Sahara?

And don't worry: neither book is expensive, but even if you're on a severe budget they're easy enough to download and read free on PDF.  See:

And if, like the Prime Minister, you find that reading isn't really your thing, or you find it easier to learn in other ways, then you can take advantage of these twelve video interviews with leading Austrian Economists on Hazlitt's Economics in One Lesson, with one interview for each chapter.  Enjoy. :-)


  1. My suspicion is that the truth is even worse. He doesn't actually know many academic economists and instead spouted the only one he could remember from his days at university. It reflects a Prime Minister for whom economic ideas are not important and who has no interest in promoting them. That is why he treated the question as a joke.

  2. To be fair, I think that's Keynes's point: that folk like Key who don't take ideas seriously are, precisely because they're non-serious, slaves to the few ideas they've happened to stumble across in their teenage years -- however defunct those ideas might be.

    It was a good question. I wonder who send it in?


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