Misunderstanding Keynes really isn't a good idea

We often enough disagree with Keynes the economist. Often because we both understand him and also understand what he didn’t. Things like political incentives for example.

It’s fair enough to say that in recession government should expand demand and then repair that roof when the Sun shines. Except political incentives don’t work that way - that spending never does get cut. We particularly recall Polly Toynbee’s insistences over the decades - quite, she’s not an economist and this is rather the point we’re making - that when Brown was running surpluses she insisted that there was money there to spend so spend, gloriously, when deficits have appeared she’s argued for spending, gloriously, upon the need revealed by the deficits. Add to that the desire for politicians to spend and not to cut nor tax and we gain a ratchet effect.

Or, more simply, we never do get to that Sun nor the roof repair.

This is different though from the mistake of minsunderstanding Keynes when he was in fact right. As here:

People have predicted that robots will destroy the labour market for decades. As far back as 1933 the economist John Maynard Keynes prophesied widespread technological unemployment was coming “due to our discovery of means of economizing the use of labour outrunning the pace at which we can find new uses for labour”.

No. Keynes did not say that there was going to be some outbreak of that technological unemployment, not as a general feature of the economy. He said that it would be some transient condition. From that same essay, Economic Possibilities for our Grandchildren:

But this is only a temporary phase of maladjustment.

That’s actually the next - and unquoted above - sentence. In the introduction there’s a further discussion:

We are suffering, not from the rheumatics of old age, but from the growing-pains of over-rapid changes, from the painfulness of readjustment between one economic period and another. The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption;

Technological unemployment, as a thing, does not exist. Technological unemployment as a stage, a transience, does.

Getting this right of course tells us what to do about it. The planned and managed economy is slower to adapt than the free market one. Thus the route through the stage is to be more free market and less planned. We do not face an end stage problem about which something must be done, we have an ephemeral issue which is best solved by getting out of the way.

Interesting what you can show if you actually understand Keynes, isn’t it.