Paul Samuelson on John Maynard Keynes

“Yes, Keynes was a genius. Yes, some of his ideas were inchoate and would not have lent themselves usefully to diagramming and symbolic manipulation. Yes, by the time of the Radcliffe committee many of his British admirers were still frozen in the Model T version of his system. And yes, Keynes resented excessive simplifying of his paradigms. Nevertheless, in science it is not the incoherent, inchoate and ineffable that has a cash value. If that were so, Goethe would be a greater scientist than either Einstein or Newton. What matters is the Kuhnian paradigm that people who are not geniuses can use. That which so many scholars independently agreed upon cannot be independent of the text that Keynes wrote down for them to read. What is remarkable is not the cogency of the case that Leijonhufvud manages to muster, which is rather flimsy, but rather how strong was the latent demand in the 1970s for a work to debunk Keynesianism. Harry Johnson put the same point in a different way.”

“An optimist who lived at a time when the world economy was running so badly that clever gimmicks could still work wonders, Keynes's object was to save capitalism from itself. In the end, his prescription in its most simple form self-destructed, as the obligation to run a full-employment humanitarian state caused modern economies to succumb to the new disease of stagflation - high inflation along with joblessness and excess capacity. Economists of the most diverse views are constantly asking themselves: What would Keynes advise if he were now alive. And usually - whether the economist is a free-marketeer like Friederick von Hayek or one with strong interventionist leanings like John Kenneth Galbraith - they pay Keynes the supreme compliment of believing that if brought back to earth, Maynard would be favoring just what each of them happens to favor. One also might wonder what Lord Keynes would prescribe for the huge structural deficit of Ronald Reagan, with the crowding out of investment that it implies once the American economy reattains high levels of employment.”

“You must realize how bad, temporarily, capitalism had become in public opinion. I remember seeing a poll of small town attitudes in local newspapers. They asked questions like "should we nationalize the banking system?" More than half of those editors, about the most conservative group in the world, were in favor of nationalizing the banking system. Father Coughlin, the Detroit demagogue who turned anti-Semitic, complained about "fountain pen money, the perpetrator of great wealth, the money changers in the temple." It was kind of a crude expansionism. Huey Long and "every man a millionaire," or whatever it was. So I would say that Keynes thought of himself as saving the system. And lots of the New Dealers ― original New Dealers, Veblenites, technocrats ― did not like Keynesian economics. They said "that is using palliatives, it's not getting rid of the wicked capitalistic ethos." Keynes told Roosevelt when he came here in 1933 that he needed to spend so much more per month in deficit spending. He gave very precise figures with great self-confidence.”

“Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas.”

“Among economists John Maynard Keynes (1883–1946) did well over a lifetime. He had a high I.Q. and must have been a better-than-average bridge player. Apparently some of his triumphs in currency trading stemmed from his micro- and macroeconomic hunches. However, after scoring well on bets that Germany’s postwar inflation would cause the mark to depreciate, he did go virtually bankrupt when for a few months the mark reversed from its down trend. A kindly City friend enabled him to avoid bankruptcy, a fate worse than death in the post-Edwardian Age. (Again in 1929 a number of people incurred losses when a Keynes-Robertson speculative fund did badly. I learned this from Lionel Robbins. However, in autumn 1932, German Professor Hans Neisser heard Keynes give a lecture at Cambridge, in which he said, “Right now is your lifetime opportunity. Borrow and beg to invest in diversified common stocks that are going to recover now that the pound has ceased to be over-valued.” Not a shabby call.)”