Macroeconomics professor mentioned in class last night that Keynesians do not want a big government – they just want government to manage demand in the short run through fiscal policy. Is this really true? Is the ideal size of government in the long run the same for Keynesians and Libertarians? Not even close. Not to me. Keynesians, in general, support a lot more goverment programs in education, “welfare”, warfare, and foreign aid than would libertarians.
Professor also admitted that it might be politically difficult to scale back the expansion of government once the shortfall in demand is cured, and any such permanent growth in government is not a fault of the Keynesian prescription for short term fluctuations. This is one of the many reasons why Libertarians and fiscal conservatives oppose hydraulic Keynesianism. It does not matter what the intentions are, results are different – in this case in terms of the size of the government.
At this point, I brought up Keynes’s remarks in The General Theory about socialization of investment. Here are the exact remarks:
“I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative. ”
Keynes, John Maynard (2010). The General Theory of Employment, Interest and Money (Kindle Locations 9146-9148). Signalman Publishing. Kindle Edition.
Anyone who keeps an open mind on these issues should read and respond to the attacks from their ideological opponents. This is one thing I have heard the opponents of Keynesianism argue more than once. So I was really surprised to hear her immediate reply. The professor told me that she had not heard about this at all – that Keynes would argue in favor of socialism. She also told me that she has not read The General Theory in almost 30 years. Fair enough. I was asked to send her the details of that remark, and I did, after the class. She was not sure what it really meant. She told me that Keynesianism is not the same thing as Keynes. Fair enough. But, to me, that answer remains unsatisfactory.
Implications of that statement are clear to me – a permanently large government that dictates investment in the entire economy. Nevertheless, I want to interpret this in the most charitable way possible. I leave the door open to the possibility that there is something that I do not understand. I am interested in what Keynes possibly meant by that statement back then.