Whilst we usually discuss where John Maynard Keynes got things so very right, I have found it engrossing, to research deep into an area in which Keynes got it wrong. Firstly it is, of course, important to mention that Keynes was a superb economist whose theories have shaped the way economics is applied and studied to this day, but not all of his work was perfect as I shall discuss in this article.
The area that I have researched in which Keynes was wrong is in his economic predictions for the future. In 1930, Keynes wrote a slim tract titled "Economic Possibilities for our Grandchildren" in which he predicted to within a small margin the size that the world economy would be near to one hundred years on. This, of course, was an absolutely staggering accomplishment but one finds such ambitions were not rare when delving deep into the history of J.M. Keynes. The far more interesting part is what Keynes got wrong. He wrote that by this point in time, the developed world would have solved or come close to solving the ‘basic economic problem’. Any economics student, past or present, will have begun by studying the famous economic problem: scarcity. The problem occurs due to unlimited wants and limited resources and frankly, this is a larger problem now than Keynes could ever have imagined. The problems of poverty and poorly distributed wealth are issues that I’m sure I don’t have to remind you about in today's society- we see them every day.
In the Western world today, many think their main problem is that they don’t have enough. This is clearly not a reality as the majority of Westerners enjoy great luxury on a daily basis. The driving force for a significant aspect of consumption is that people want to have as much as those who have more than them do. It is, perhaps, particularly relevant for my generation as I am growing up in a world of vast over-consumption compared, even, to the world my parents witnessed as teenagers. I cannot help but feel that Keynes would be somewhat disappointed to see the road that the Western world has taken since his passing. The problem with the world we live in today is, I think, that we are constantly bombarded with prompts to consume and therefore the basic economic problem will never be solved.
John Maynard Keynes once said: “the love of money as a possession -- as distinguished from the love of money as a means to the enjoyments and realities of life -- will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease.” It seems Keynes put too much faith in the future members of society.
The question I found myself asking was ‘How could Keynes make this mistake?’ After all, when studying economics, you are told time after time how John Maynard Keynes was always right. The answer may surprise you. It was, at its root, sheer naivety from the world’s most famous economist. He researched the future in such detail and reached the following conclusion: “If the economic problem is solved, mankind will be deprived of its traditional purpose.” This evidence would lead anyone to believe that the economic problem, therefore, would never be solved. Yet, he went against his initial instinct and came to the conclusion that the generations preceding my own would cure the seemingly incurable. It is a mystery that may never be solved as to why Keynes made such a misjudgement.