In 1930 Keynes wrote his famous essay Economic Possibilities for our Grandchildren. In the essay he made a range of predictions about what the world would be like a hundred years hence. At the heart of the exercise was the impact of increasing productivity and rates of economic growth compounded over several decades. The result would be hugely expanded levels of economic output. In this respect he was correct, although in fact he rather underestimated the rate of growth in economic output over the subsequent 80 years.
But Keynes also envisaged a world in which productivity growth would be such as to create permanent technological unemployment. That is, it would not require all the available labour force to produce all the goods required to satisfy human need. As a consequence, a few people would be fully employed but most people would only have to work part-time. The later would appreciate the sustaining contribution of those who worked full time, for the benefit of all, but there was no longer a need for everyone to devote themselves so exclusively to the pursuit of mammon. The part-timers could turn their minds to higher things: they could devote time to other voluntary activities or cultivate the virtues of the arts and literature.
A few years ago Pecchi and Piga edited very interesting book called Revisiting Keynes in which a selection of leading economists provided their perspective on what Keynes got wrong and what he got right. A fairly obvious criticism of Keynes’ position is its liberal elitist bias and its rather disdainful attitude towards “trade”. Equally, his chronology was a bit wonky, if you take “grandchildren” literally. But two more profound criticisms meant that he was, overall, rather wide of the mark. [Read more...]