Keynes is Not for Us

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 The Keynes We Know and Cite

John Maynard Keynes is often cited these days.  Those who cite him argue that in these economic times, when neither consumers nor corporations have disposable income, government must spend to get us out of this mess.  Or, as Keynes so famously put it, “If the Treasury were to fill old bottles with bank notes, bury them at suitable depths in disused coal mines which are then filled up to the surface with rubbish, and leave it to private enterprise on well tried principles of laissez-faire to dig up the notes again… there need be no unemployment again….”  And no matter how often people try to interpret those words to mean something else, Keynes did indeed say that in times of economic crisis, government must spend to kick-start the economy.

The Keynes We Forget

But he said something else as well.  In 1934, Keynes asked the following question: “How soon will normal business enterprise come to the rescue?  On what scale, by which expedients, and for how long is abnormal government expenditure advisable in the meantime?”  And with this (entirely sensible) question, Keynes proved beyond a shadow of a doubt that he was no politician.  For what he was suggesting here is that while government should spend during bad times, it should cease spending when times are good.  Put another way, when the economy is in crisis we should have unemployment insurance, public works, public libraries, public museums, public hospitals, public fire fighters, and public police.  But in good times these functions should (again) be privatized. 

Once You Create a Public Program, You Create Demand

But of course it can never work that way.  For once a public program is established, people are getting something (often a very expensive something) for free.  As a result, the people who benefit from the newly created public program will be loath to give it up.  Indeed, they will likely vote out of office any politician who tries to make them do so.  And nowhere is this more true than of one of the oldest public services in America: the fire-fighters.

The Fire-fighters

It may be hard to believe but before 1736, fire fighters as government employees, simply did not exist.  Philadelphia, for example, was protected from fires by volunteers who were responsible for purchasing their own equipment and who learned how to fight fires the hard way.  And getting the city to take over this role was no easy task.  Had Benjamin Franklin not made the formation of “the Union Fire Company” something of a personal crusade it is quite possible that the city of Philadelphia would never have opened its purse for what was seen as a quite unnecessary expense.

And yet, can you imagine proposing—in any city today—that we go back to volunteer fire fighters who are responsible for their own equipment and training?  Can you conceive of proposing that the government should have no role in fighting fires?  Of course not because we have come to rely on expensive and professional fire-fighters, armed with expensive and professional equipment, responding promptly (and at great cost) to all fires real and potential.  No volunteer organization could provide us with the level of service to which we now feel entitled because no volunteer organization has that much money.  And so we demand that the government retain responsibility for fire-fighting.

And Thus We Are Not Keynesians

And yet, if we are to follow all of Keynes’ advice, we would have a most vigorous fire fighting program during bad economic times and during good times fire-fighting might go back to being a voluntary system. 

Which goes to show that, no matter what politicians tell us, they are not Keynesians.  And, no matter how sagely we nod, neither are we.

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