Where Keynes Went Wrong

Hunter Lewis’s book Where Keynes Went Wrong was the greatest literary surprise of 2009, a welcome relief from a slew of awful books on economics appearing in the popular press. Lewis’s book is thoroughly Austrian, a recapitulation of Hazlitt’s argument against Keynes applied to contemporary problems, and is accessible to anyone with a basic economic understanding. He has learned from Rothbard, Reisman, Hutt, Rueff, Mises, and Hayek.

It rightly begins with what Keynes himself said. For many people, this part might be the biggest surprise, since, in fact, Keynes is rarely read today. The next section shows precisely where Keynes made mistakes, so many of them that his judgment has to be reversed. Where Keynes said that spending and not saving is the path to prosperity, the author shows that this is in fact the path to poverty.

Lewis takes apart the parade of paradoxes that are strewn through Keynes’s work. He points out that most are not paradoxes at all; they are simply untrue!

The common mistake in Keynes is treating history as theory and theory as history. For example, he will observe a superficial empirical pattern and proclaim it a law. It is left to Lewis to show how the pattern does not actually hold up, giving example after example. He then shows the correct theory that fits all existing facts.

One is left with a sense of astonishment that such a tissue of fallacies could have so deeply embedded itself in into the mainstream opinions of media and government and academic leaders — even public consciousness. Lewis smashes the edifice completely in this extremely well-done book.