Keynes and the General Theory Science, Economy and Society by Joseph Belbruno If the economy is a mechanism that

t connects automatically a given quantity of inputs w ith a given quantity of outputs, it is axiomatic that there must be a scientific and mathematical way of ensuring that this economy functions automatically and that can b e obviously by eliminating or avoiding any disturbances (external shocks) or interf erences (political measures and institutions) from influencing or disrupting its operation. Crises therefore are not internal to the economy, but entirely external. In deed it can be said that if the economic laws of the marketplace economy are kep t in place, its reproduction will be in large part spontaneous or automatic. And it is equally obvious that for a society to reproduce the aggregate savings of the so ciety must equal the aggregate investments: this, in a nutshell, is the meaning of Says Law: it is what must obtain to ensure that the sought-after equilibrium of th e economy is attained, whether one adopts socialist or liberal policies.

Says Law is the tangential point that connects the socialist circle with the libe ral line. And it is Says Law the fundamental Law of Economics that makes possible the determination of an economy that operates spontaneously and automatically if the laws of economics are respected, in such a way that civil society, the Economy, can function entirely independently of the Political, of the State, where the St ate is a negative State, like the economy a mere machinery, confined to the protection of the self-regulating market and ensuring that public opinion, the moral and rel igious persuasions of citizens, do not interfere with the market and are confined to the public sphere of debate and deliberation. This homologation of the Politica l, which allows citizens to exist as moral members of a dialectical public sphere, a nd of the scientific necessity of the Economy where the individual attends to his sel f-interest according to his needs, as a bourgeois this homologation of the conventi onal sphere of the Political and the hypothetical mechanism of the Economy is wh at unites both Classical Political Economy with Neoclassical Political Economy.

In this schema, universally accepted before the Great Depression, the State is s een as a nightwatchman state (in Lassalles phrase), as a State of Law, as the enforce r of laws that protect the homologation achieved by the Political Economy for th e efficient operation of the economy in a free society. In this schema, the Stat e plays absolutely no significant part, if it plays any part at all, in the subs tantive functioning of the economy except as a guardian, except as police, ensuring that the self-interests of the individual bourgeois are kept within the ambit of the laws of the market so as to preserve life, liberty and estate. But this is precis ely where the homologation, the equi-valence of the Political sphere and the Eco nomy breaks down. - Because the self-interest of the individual market participant s may not necessarily converge or be consistent with the self-interest of other indi viduals. As Marshall had warned with regard to Jevonss mathematical calculations of marginal utility, these assumed that the individual utilities of the individual w ere compatible with those of other individuals within the sphere of exchange defin ed and regulated by the market! Now, this assumption was mere economic dogma and c ould in no guise lead to the certainty of concrete truth. The laws of economics pres uppose axiomatically the existence of a common utility between all market agents; they postulate the existence of a Smithian enlightened self-interest whereby the s elf-interest of the single bourgeois is somehow compatible with that of every ot her bourgeois at least in the sense that they can co-exist. Even assuming the exis tence of economic laws, it is evident that the agreement by all market participants to abide by them is dependent on the scientific rationality of individuals and on the existence of a civil society in which there is consensus to be governed by a S tate, by political institutions, that will enforce the undisturbed operation of the self-regulating market.

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is precisely the assumption in both Classical and Neoclassical economics of t axiomatic necessity of the existence and of the spontaneous automatic operati of these institutions that Keynes challenges from the very first sentences of t General Theory.

I have called this book the General Theory of Employment, Interest and Money, pl acing the emphasis on the prefix general. The object of such a title is to contr ast the character of my arguments and conclusions with those of the classical [1 ] theory of the subject, upon which I was brought up and which dominates the eco nomic thought, both practical and theoretical, of the governing and academic cla sses of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the s pecial case assumed by the classical theory happen not to be those of the econom ic society in which we actually live, with the result that its teaching is misle ading and disastrous if we attempt to apply it to the facts of experience. (p3)

Rightaway, Keynes invites his readers to reverse the order of analysis of classic al (orthodox bourgeois) economic science: the laws postulated by that science apply o nly as a limiting point of the possible positions of equilibrium; they represent o nly a special case whose characteristics happen not to be those of the economic soc iety in which we actually live. Gone, therefore, are the axioms of economic dogma; go ne are the postulates of economic science with its neat mathematical equations a nd its certainties of rigorous existence of equilibrium. The only existence that is r vant is not that of mathematical equilibria, but the ec-sistence of this society the economic society in which we actually live! There is no necessity to these chara cteristics: they simply happen not to be those of the existential reality in which we actually live. Life is not mathematics; concrete truths are not universal truth. Be neath the apparent automatic functioning of the market laws there lies a social re ality that is as complex as human existence, as meta-physical as the very metaphysi cs that neoclassical economic science despises!

Just as Einstein had shattered the uni-versality of Newtonian physics, just as Nie tzsche and Heidegger had trans-valued the old values of Western metaphysics so now does Keynes turn upside down or reverse the perspective of Neo-Kantian and Machia n economics. Nothing is absolute: everything is relative. To orient ourselves in this society we must ensure that the so-called laws of economics that supposedly maximize the welfare of the society do not destroy first in the process of their th eoretical operation the very society on which they are founded: with the result that its teaching [that of orthodox economics] is misleading and disastrous if we at tempt to apply it to the facts of experience.

And the facts of experience teach us instead that there are forms of behaviour or i nstitutions that are peculiar to the economic society in which we live: not all or every (!) economic society, then; only the one in which we live. And this economic so ciety happens to be a capitalist society. Society comes first; economics later. I f we wish to preserve this (!) society a capitalist one we must then adapt existing institutions and adopt new ones that will ensure the survival and reproduction o

f a specifically capitalist society: we must prescribe the institutions that can m ake up a society of capital! To insist with abstract economic laws, to affirm their e ventual triumph in the long run can lead only to the tearing of the fabric of this society on which this economy is founded. The celebrated optimism of traditional economic theory, which has led to economi sts being looked upon as Candides, who, having left this world for the cultivati on of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercise d by an insufficiency of effective demand. For there would obviously be a natura l tendency towards the optimum employment of resources in a Society which was fu nctioning after the [p.34] manner of the classical postulates. It may well be th at the classical theory represents the way in which we should like our Economy t o behave. But to assume that it actually does so is to assume our difficulties a way. Therefore, in the long run we are all dead does not mean (as many superficially ta ke it to mean) that all things must pass! Keynes is saying instead that if we choo se to adopt the long run as an inflexible mode of conducting capitalist society th en, in that long run, we as capitalists, the economic, capitalist society as we know it, in which we actually live.will die (!), and we, the capitalists, will die with it. Keynes is not referring to mankind in general: he is addressing his own class and this society, which is the only form of civilized society that he knows, that h e can conceive as worthy of inhabiting. That it is the survival of bourgeois soci ety that Keynes had in mind, that this was the context in which his famous maxim was uttered, is illustrated clearly and dramatically by Hayeks direct response to the Keynesian subversion of the nature and content of economic analysis, from scie nce to virtual policy.

I cannot help regarding the increasing concentration on short-run effectswhich in this context amounts to the same thing as a concentration on purely monetary fa ctors not only as a serious and dangerous intellectual error, but as a betrayal of the main duty of the economist and a grave menace to our civilization.It used, however, to be regarded as the duty and the privilege of the economist to study and to stress the long-run effects which are apt to be hidden to the untrained eye, and to leave the concern about the more immediate effects to the practical man, who in any event would see only the latter and nothing else.3 (Hayek, The P ure Theory of Capital, p,409). (my emphases)

The polemic with Keynes is evident. In the long run, we are all dead, of course, b ut Hayek hankers by spontaneous, long-term processes (he would refrain from saying na tural, as in the natural prices of long-term equilibrium) - processes that display the underlying logic of human action, - an open-ended notion, to be sure, but one fr om which a pure logic of choice may be distilled (the word used by Bohm-Bawerk in his tirade against the German Historical School) a spontaneous order to be prote cted from the extrinsic short-term policies introduced by interventionist government s and the disturbances that they cause, as displayed by the trade cycle. To interfer e with this pure logic of choice or science of choice is not only an intellectual err or, but a betrayal and a grave menace to civilization itself!

But it is alarming to see that after we have once gone through the process of dev eloping a systematic account of those forces which in the long run determine pri

ces and production, we are now called upon to scrap it, in order to replace it b y the short-sighted philosophy of the business man raised to the dignity of a sc ience. Are we not even told that, "since in the long run we are all dead", polic y should be guided entirely by short-run considerations? I fear that these belie vers in the principle of apres nous le deluge may get what they have bargained f or sooner than they wish, (p410, my emphases).

For Hayek, it is the Keynesian urge to interfere with the spontaneous order of soc ial life as encapsulated in the tenets of economic science that represents a nihil istic betrayal both of science and of civilization. Keyness General Theory is the a bandonment of reason for the very short-run preservation of capitalist society an i nterference with those forces which in the long run determine prices and productio n done in the name of a short-sighted philosophy that can only compound and hasten (sooner than they wish) the decadence and decay and decline of civilization, that is to say, of bourgeois society and its economy.