When it first appeared, it was a ray of hope to those of us who were undergraduates. Here, for the first time, was a chapter-by-chapter, concept-by-concept refutation of Keynes’s General Theory of Employment, Interest, and Money (1936). By 1959, the central idea of Keynes’s book had captured academia all over the world. It had also captured economic policy, manifested in the United States by the Employment Act of 1946, and manifested internationally by the International Monetary Fund.
There had been a few academic articles critical of certain aspects of Keynesian economics. Hazlitt assembled them into one volume, which was published the following year: The Critics of Keynesian Economics. But these articles were barely known inside the academic economics guild, and unknown outside.
There was Arthur Marget’s turgid, two-volume study, Theory of Prices (1943). It was unknown then;
it is less known now. Few libraries had a copy. No undergraduate ever heard of it — or graduate student, for that matter.
Then came Hazlitt, armed with a penetrating mind, a thorough understanding of Austrian School economics, and writing skills honed by four decades of practice. He had a tremendous advantage over professional economists: he had not gone to college. He was not constrained by peer pressures to write in the language of the academy. He therefore did what economists rarely do. He got to the point in language that any intelligent, self-disciplined reader could understand.
He began with a traditional observation that applies perfectly to Keynes’s General Theory: what was new in the new economics was not correct, and what was correct was not new. Once you grasp this simple point, you are immunized.
Hazlitt was a master stylist. Keynes was, too, as The Economic Consequences of the Peace (1919) illustrates. But in The General Theory, he became garbled, obscure, and downright obtuse. This should have been a tip-off in 1936: Keynes was involved in a sleight-of-hand operation. He was making the case for government spending by means of a series of political promises, none of which was connected to the logic of economic causality.
No one read Keynes in 1959. Almost no one ever has. He was interpreted — and reworked — by Paul Samuelson in his best-selling Economics textbook, beginning in 1948, two years after Keynes died. Samuelson wrapped the Keynesian prescription — more government spending — in the swaddling clothes of graphs and simple equations.
The Keynesian system boils down to this: G is the significant discretionary factor. G is government spending. Confiscating the money, borrowing the money, and printing the money have no net negative economic repercussions. When there is a recession, increase G. In short, G comes from the tooth fairy.
Hazlitt’s book had no impact on academia. No department of economics was going to assign a book written by a high school graduate who did not rely on academic journals to make his case against the preeminent economist of the era by 1959.
The book was little known in conservative circles because, in 1959, such circles were limited mostly to housewives who clipped newspaper columns on Communism. The really intellectual ones clipped the Congressional Record. As for academia, the Journal of Law and Economics began that year. Friedman’s Capitalism and Freedom was two years away.
There was The Freeman, whose target audience was the intelligent layman who may have gone to college, but who had never read an article in an academic journal. There was Christian Economics, a fortnightly tabloid sent to over 100,000 pastors for free by the world’s richest Calvinist, oil tycoon J. Howard Pew. It was read by few of those who received it. In those circles, Hazlitt was well known, but this did not save his book on Keynes from oblivion. Reading Economics in One Lesson, and remembering only the fallacy of the broken window, is not the same as reading The Failure of the “New Economics.”
Four years later, W.H. Hutt’s book appeared, Keynesianism: Retrospect and Prospect, published by Regnery, the conservative publishing house. Hutt was not skilled at making himself clear, and this book was especially muddled. It was not visibly Austrian, either.
And so it has gone, decade by decade. Hazlitt’s book is still the best overall critique of Keynes ever written. It needs to find a new audience.
So, I have made an offer to Lew Rockwell. I will donate $5,000 to the Mises Institute to pay some bright young economist to write a study guide for the book, one along the lines of Robert Murphy’s study guide to Rothbard’s Man, Economy, and State.
The offer has an additional condition: a series of 25-minute audio presentations of the workbook, suitable for drive time.
I hope some untenured junior economist will devote his entire career to refuting every aspect of the the General Theory, in every venue possible. In the same way that we need some junior historian to devote his career to exposing every nefarious plot of the New Deal, so we need an economist to refute this single book.The historian would not be given tenure unless he first devoted himself to seemingly neutral articles on this or that New Deal program. Yet I am asking an untenured economist to show his true colors early. He had better be a very sharp economist, skilled in the paraphernalia of economic communication: equations by the bushel and statistics by the trainload.
