No wonder Willy Hutton gets so confused

This, well:

I regard the economist John Maynard Keynes as offering the most original, insightful and best understanding of contemporary capitalism yet devised. He is my intellectual lodestar, whose thinking has informed all my writing.

We do tend to think there’s rather more to economic commentary than just that one person. But intellectual fads and all that, personal opinion. But it would aid if one understood one’s own intellectual lodestar:

What would later divide both men was Keynes’s belief that free market capitalism has no embedded proclivity to find so-called “equilibrium outcomes” (ie all will be well for all) except perhaps, and then unreliably, in the very long run. Thus the state has a duty to act. Instead Hayek argued that the state, in the name of liberty and freedom, must never interfere in the market’s attempt to find equilibrium, which they will unfailingly do despite any slump – eventually.

That’s very pencil sketch on Hayek but allowable given that lack of detail. On Keynes that’s simply wrong. His insistence was that there are many possible equilibria not all of which were a full employment equilibrium. Which was the state duty, to intervene to shock out of one of those lesser, less desired, equilibria into the desired one. This was, no, really, Keynes’ entire point. Sure the economy would reach equilibrium but perhaps, or even probably, one we don’t like. His entire analysis was about many equilibria, not none.

Sure, sure, we disagree with Keynes as an individual lodestar even as there’s a lot in there that’s both fun and useful - we’ve often made use of the point about people hating, absolutely despising, nominal wage cuts while more gently accepting real ones for example. But to insist upon Keynes being that individual and then not grasp the major macroeconomic point he was making - multiple possible equilibria, not all of them optimal - seems to us to be a failure.

No wonder Willy’s so often confused on matters economic.

Tim Worstall