Books: Riding the Keynesian Coattails

THE AGE OF KEYNES by Robert Lekachman. 324 pages. Random House. $6.

“It has been said that we are all Keynesians now,” writes Robert Lekachman, borrowing the heading of TIME’S cover story (Dec. 31) on the late John Maynard Keynes. Now that Keynes has been embraced by politicians and popularized by journalists, the academicians are eager to assess again the ideas of the 20th century’s most influential economist. Lekachman, head of the economics department at the State University of New York at Stony Brook, is the first American to analyze at book length Keynes’s life and work and the impact of his thinking on contemporary times.

100 Years of Gospel. Lekachman retells the major elements in the development of a genius: the patrician upbringing, the early triumphs at Eton and Cambridge, the cocksure rise in the British Treasury, the friendships with Virginia Woolf and E. M. Forster, the prolific outpouring of books, each more imaginative and important than the last. The climax, of course, was The General Theory, published in 1936, which argued heretically that economic cycles could be tamed and unemployment and inflation defeated by conscious government manipulation of national budgets, taxes and interest rates. In sum: man could control his economic fate.

Actually, the story of Keynes, who died in 1946, has been told earlier and better by such economists as Sir Roy Harrod, Alvin Hansen, Seymour Harris, Joseph Schumpeter, Robert Heilbroner and John Kenneth Galbraith. Where Lekachman differs from them is in his emphasis on Keynes’s repeal of Say’s Law.

Jean Baptiste Say, an early 19th century French economist, contended that economies were destined to function smoothly, and that slumps or excesses would be self-correcting because the production of goods created exactly the amount of income needed to buy those goods and to invest in facilities to produce more of the same. Despite persistent unsettling booms and busts, economists accepted that notion as gospel for more than 100 years—until Keynes smashed it by explaining that, in the absence of government action, demand can fluctuate sharply since not all wages are spent and not all savings are invested.

Liberal Intervention. Speculating on what Keynes would have prescribed for the 1960s, Lekachman does not echo the fierce individualist from Cambridge, England, but the contemporary critic from Cambridge, Mass.—John Kenneth Galbraith. Faulting everything from “the looming menace of automation” to “the dubious or negative social value of advertising,” Lekachman is angry with America’s “frequently crude and crass material culture” and somehow concludes that the Great Society programs have “powerful tendencies to favor the prosperous.”

To remedy this, he calls for “liberal intervention,” strongly suggesting that the Government should spend much more prodigiously and regulate prices and wages with much more firmness. But he neglects to deal with what should be done when, as at present, an economy cries not for stimulus but restraint. Keynes was a defender of economic freedoms. He actually said that governments should reduce spending or increase taxes in times of inflationary excess demand. It is hardly likely that he would have accepted Robert Lekach-man’s law.