Paul Krugman on John Maynard Keynes

“Now I’m not saying that Keynes was right about everything, that we should treat The General Theory as a sort of secular bible - the way that Marxists treat Das Kapital. But the essential truth of Keynes’s big idea - that even the most productive economy can fail if consumers and investors spend too little, that the pursuit of sound money and balanced budgets is sometimes (not always!) folly rather than wisdom - is as evident in today’s world as it was in the 1930s. And in these dangerous days, we ignore or reject that idea at the world economy’s peril.”

“Keynes was no socialist – he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was, given the time it was written, a conservative book.”

“He was declaring that the trouble with the engine was not fundamental, that it was amenable to a technical fix. At a time when many of the world's intellectuals were convinced that capitalism was a failed system, that only by moving to a centrally planned economy could the West emerge from the Great Depression, Keynes was saying that capitalism was not doomed, that a very limited sort of intervention — intervention that would leave private property and private decision making intact — was all that was needed to make the system work. Confounding the skeptics, capitalism did survive; but although today's free-market enthusiasts may find this proposition hard to accept, that survival was basically on the terms Keynes suggested. World War II provided the jump start Keynes had been urging for years; but what restored faith in free markets was not just the recovery from the Depression but the assurance that macroeconomic intervention — cutting interest rates or increasing budget deficits to fight recessions — could keep a free-market economy more or less stable at more or less full employment. In effect, capitalism and its economists made a deal with the public: it will be okay to have free markets from now on, because we know enough to prevent any more Great Depressions.”