Keynes’s Crumpled Towel Theory of Economic Growth

“An American friend published an article dealing with his personal friendship with Lord Keynes. He tells a story about visiting Keynes in a Washington hotel. In washing his hands, the friend was very careful not to soil more than a single towel. Keynes then crumpled all of the towels and said in that way he was making more jobs for American chambermaids. From this point of view, the best way to increase employment would be to destroy as much as possible. I would have thought that idea had been demolished once and for all by Frederic Bastiat [1801-1850] in his broken window story. But evidently Keynes didn’t understand this tale of Bastiat’s.”

–Ludwig von Mises, Marxism Unmasked: From Delusion to Destruction (6th Lecture, “The Making of Modern Civilization: Savings, Investment, and Economic Calculation”).

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