Friday, October 12, 2007
a kind of new John Law
Lord Keynes has always appeared to me a kind of new John
Law. Like Law, Keynes was a financial genius who made some
real contributions to the theory of money. (Apart from an interesting
and original discussion of the factors determining the
value of money, Law gave the first satisfactory account of the
cumulative growth of acceptability once a commodity was
widely used as a medium of exchange.) But Keynes could never
free himself from the popular false belief that, as Law expressed
it, 'as the additional money will give work to people who were
idle and enabled those already working to earn more, the output
will increase and industry will prosper'.
It was against this sort of view that Richard Cantillon and
David Hume began the development of modern monetary
theory. Hume in particular put the central point at issue by
saying that, in the process of inflation, 'it is only in this interval
or intermediate situation between the acquisition of money and
the rise of prices, that the increasing quantity of gold and silver
is favourable to industry'. It is this work we shall have to do
again after the Keynesian flood.
In one sense, however, it would be somewhat unfair to
blame Lord Keynes too much for the developments after his
death. I am certain he would have been - whatever he had said
earlier - a leader in the fight against the present inflation.
But developments, at least in Britain, were also mainly
determined by the version of Keynesianism published under
the name of Lord Beveridge for which (since he himself
understood no economics whatever) his scientific advisers
must bear the responsibility.
I have been blamed for charging Lord Keynes with a somewhat
limited knowledge of economic theory, but the defectiveness
of his views on the theory of international trade, for example,
have often been pointed out. And the clearest proof seems to me
to be the caricature of other theories which he presented,
presumably in good faith, in order to refute them.
Friedrich A. Von Hayek, A Comment on Keynes, Beveridge, and Keynesian Economics
tarted by ---gallizio
in the ever coined era