Niall Ferguson’s Wishful Thinking
The Harvard historian Niall Ferguson is right that Keynesians should learn from experience. But until Ferguson explains why he thinks that austerity was a good thing for the UK economy, his critics will be forgiven for seeing his economic pronouncements as nothing more than political propaganda.
LONDON – Niall Ferguson begins his rejoinder to my rejoinder to his interpretation of the results of the United Kingdom’s recent general election by citing an apocryphal Keynes quote: “If the facts change, I change my opinion. What do you do, sir?” But should the fact that the British economy grew last year by 2.6% have caused Keynesians to change their minds? Would it have caused Keynes to rewrite his General Theory of Employment, Interest and Money?
Ferguson seems to think so. I do not.
Keynes never thought that an economy, felled by a shock, would remain on the floor. There would always be some rebound, regardless of government policy. What he emphasized was the “time-element” in the cycle. With depressed profit expectations, an economy could remain in a semi-slump for years. There would be alternating periods of recovery and collapse, but this oscillation would occur around an anemic average level of activity.
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one? Log in