The Misesian Case Against Keynes

This essay was originally published in Dissent on Keynes, A Critical Appraisal of Economics.

I — Classical Economic Theory

It is my goal to reconstruct some basic truths regarding the process of economic development and the role played in it by employment, money, and interest. These truths neither originated with the Austrian school of economics nor are an integral part of only this tradition of economic thinking.

In fact, most of them were part and parcel of what is now called classical economics, and it was the recognition of their validity that uniquely distinguished the economist from the crank. Yet the Austrian school, in particular Ludwig von Mises and later Murray N. Rothbard, has given the clearest and most complete presentation of these truths (Mises [1949] 1966; Rothbard [1962] 1970). Moreover, that school has presented their most rigorous defense by showing them to be ultimately deducible from basic, incontestable propositions (such as that man acts and knows what it means to act) so as to establish them as truths whose denial would not only be factually incorrect but, much more decisively, would amount to logical contradictions and absurdities.

I will first systematically reconstruct this Austrian theory of economic development. Then I will turn to the "new" theory of J.M. Keynes, which belongs, as he himself proudly acknowledged, to the tradition of "underworld" economics (like mercantilism) and of economic cranks like S. Gesell (Keynes 1936). I will show that Keynes’s new economics, like that "underworld" tradition, is nothing but a tissue of logical falsehoods reached by means of obscure jargon, shifting definitions, and logical inconsistencies intended to establish a statist, anti-free-market economic system.

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