Posted by: aboutalbion | September 19, 2012

Keynes documentary

A couple of nights ago, I enjoyed the beginning of the new three-part BBC series on three influential economists.   The first programme featured John Maynard Keynes (1883-1946), and the others will focus on Friedrich Hayek and Karl Marx.

I appreciated the review of Keynes’ post WW1 opinion, that to humiliate Germany was the surest way of ensuring another war.  What I hadn’t understood before was that at Versailles, Germany (among other things) was asked to pay for all the war damage done to the Allies when everyone could see that it was not in an economic position to do so.

The programme tracked Keynes’ thought about economics to the conclusion that the science of economics was not a predictive science because of the behaviour of human agents.  Apparently, Keynes used the quaint phrase ‘animal spirits’ to describe human freedom, whereas we would now use phrases like ‘market sentiment’ or ‘market confidence’ to describe the unpredictable tides of human economic behaviour.

Apparently, Keynes thought that an economic catastrophe was most likely to occur when the economy was thought to be performing well and stable.

The argument of the programme was that, since Keynes saved capitalism from the Great Depression of the 1930s, it was natural that in the 2008 economic crisis political leaders should adopt the same medicine.

Some of Keynes’ ideas were rehearsed.  Markets needed to be managed because they were not necessarily self-correcting (as had been previously thought).  So in certain circumstances, it was appropriate for governments to borrow and spend on capital projects as a way of maintaining full employment.

Although before Keynes’ time, I can’t help recalling Scotland’s big capital project in the late 1690’s.  By the ‘Darien Scheme’, the Kingdom of Scotland thought it could spend money that it didn’t have so as to secure its economic future.  I read that the failure of the scheme ruined the nobles and landowners who had lent money to the project, and contributed to the union of Scotland with England in 1707.

I anticipate that the full series of three programmes will present us (the viewers) with three plans to “escape” from the ongoing economic crisis, and we will be expected to choose one of them.

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