Can we make Keynesianism work?


Yes, I know, slightly odd question, for why should we want to make it work? Granting politicians the right to splurge money on any old nonsense, whatever the strength of the justification, is unlikely to turn out well.

However, I think we might be able to discern an interesting answer to the question all the same. John Taylor:

In my view the essence of the Keynesian approach to macro policy is the use by government officials of discretionary countercyclical actions and interventions to prevent or mitigate recessions or to speed up recoveries. Since I have long been critical of the use of discretionary policy in this way, I think the Economist is correct so say that I am anti-Keynesian in this sense of the word. Indeed, the models that I have built support the use of policy rules, such as the Taylor rule for monetary policy or the automatic stabilizers for fiscal policy, which are the polar opposite of Keynesian discretion. As a practical prescription for improving the economy, the empirical evidence is clear in my view that discretionary Keynesian policy does not work and the experience of the past three years confirms this view.

Now note what is being said here. It is not a rejection of the idea that bigger budget deficits, fiscal stimulus, can work. This is not a rejection at all of the underlying analysis from Keynes himself.

Rather, it's a rejection of giving politicians the right to spray money around when such deficits, such fiscal stimulus, might work. The problem is the discretion: if we had automatic rules about all this it might well work. As, in fact, Keynes himself realised:

I am converted to your proposal…for varying rates of contributions in
good and bad times. (June 16, 1942). Keynes, Collected Writings, vol.
27, p. 208. 

are able to show fluctuations in income of an order of magnitude which
is significant in the context… So far as employees are concerned,
reductions in contributions are more likely to lead to increased
expenditure as compared with saving than a reduction in income tax
would, and are free from the objection to a reduction in income tax
that the wealthier classes would benefit disproportionately. At the
same time, the reduction to employers, operating as a mitigation of the
costs of production, will come in particularly helpfully in bad times.  (July 1, 1942). Keynes, Collected Writings, vol. 27, p. 218.

Now I will admit that I'm inclined to like such an answer. Given that I have in fact worked in politics, that almost every politician I've ever met was, if we equate knowledge of economics with pre-school education, on the verge of being held back again for another year of remedial shoelace tying then yes, the further we keep them from any of the economic levers that influence our lives the happier I am.

But this should also appeal to those who are Keynesians: the setting up of an automatic stabiliser like variations in national insurance charges would mean that the essence of his insight would be hard baked into economic policy. Without any of us having to worry about the quality of those who manage to climb the political greasy pole

It's also clearly in line with basic common sense: life is better with less politics and fewer politicians..