On Demand (Part 3)
Section V.2D-V.2E of II.1 ("The Problem of Scale (Part I)"). Considering “The General Theory” of Lord Keynes
V.2D
Keynes convincingly makes the case on ‘the social dangers of the hoarding of money’ and the need for us to orbit a new ethic around “investment” (which entails “saving money,” while “saving money” doesn’t necessarily entail “investing”).346 As a result, I do indeed think Keynes establishes that ‘[t]he absurd, though almost universal, idea that an act of individual saving is just as good for effective demand as an act of individual consumption, has been fostered by the fallacy.’347 When we talking about “savers,” it’s easy to fall into an uncritical acceptance of “the morality of saving money,” but when we talk about “hoarders,” our thinking can dramatically shift, suggesting that even we subconsciously understand that savings must ultimately transition into investing. If Keynes is able to convince of us at least this, he has made the case he seems most concerned to make.
‘A decreased readiness to spend will be looked on in quite a different light if, instead of being regarded as a factor which will, cet. par., increase investment, it is seen as a factor which will, cet. par., diminish employment.’348 When we think “savings,” we tend to think “future spending,” but when we say “hoarding,” the very change in the language makes it clear that Keynes was right to be concerned. Suddenly the connection of “saving” and “investment” is severed in favor of a connection between “hoarding” and “diminishing employment”—the ethics shift instantly once we consider ‘what lies in the other scale.’349 CE argued that increased savings didn’t decrease employment, but instead that the act of saving suggested the person doing the saving was “notably wise,” and thus the “investment to come” would, more likely than not, prove prosperous. For CE, less spending contributed to a lower interest rate, which would cause more investment—the market self-corrected—but Keynes convincingly argued that less spending caused less employment, which caused less spending, and then it didn’t matter what constituted the interest rate: nobody had wages to make investments.
‘The habit of overlooking the relation of the rate of interest to hoarding may be a part of the explanation why interest has been usually regarded as the reward of not-spending, whereas in fact it is the reward for not-hoarding.’350 This is a key distinction: we benefit from interest rates only when spending is for the sake of investing, a contingency which the ethic of “pure saving” fails to delineate (considering this, we could perhaps say that Keynes is more against “hoarding” than “saving,” per se). Surveying CE, Keynes wrote:
‘Certainly the ordinary man—banker, civil servant or politician—brought up on the traditional theory, and the trained economist also, has carried away with him the idea that whenever an individual performs an act of saving he has done something which automatically brings down the rate of interest, and this automatically stimulates the output of capital, and that the fall in the rate of interest is just so much as is necessary to stimulate the output of capital to an extent which is equal to the increment of saving; and, further, that this is a self-regulatory process of adjustment which takes place without the necessity for any special intervention or grandmotherly care on the part of the monetary authority.’351
It was thought that ‘every act of increased saving by an individual necessarily [brought] into existence a corresponding act of increased investment,’ but Keynes broke this “necessary” link, and even went so far as to suggest that ‘the rate of interest may perhaps have an influence […] on the amount saved out of a given income.’352, 353 discuses interest rates extensively in The General Theory, and if you want to skip the details, he basically suggests it is the key and perhaps only relevant signal for long-term expectations of the market: everything else is too random, unreliable, and based on “animal spirits.” Thus, maintaining proper interest rates that maintain “hope in the future” is critical, for without that hope investment and consumption today will dry up (in favor of savings), and, like a self-fulling prophecy, the future will prove terrible. This means that ‘the remedy for [a] boom [or even bubble] is not a higher rate of interest but a lower rate of interest. For that may enable the so-called boom to last […] thus keeping us permanently in a quasi-boom.’354 Admittedly, this sounds crazy, but Keynes is arguing that if we are living doing a “bubble,” we need more productivity and investment to transform the present “bubble” into a reflection of “the real economy”: similarly, if I’m in debt $100, I need a work now to pay for that debt, and if I do, it will be “as if” I was always going to pay for that debt and that it was always financed. By raising interest rates, we signal to the citizens that “the future will be bad,” and that will incentivize them to start hoarding exactly when we need them to start investing to keep the “bubble” from in fact being a “bubble.” The concept of “flip moments,” introduced in The Conflict of Mind by O.G. Rose, is useful here, and it basically means that if investment “justifies” the current bubble, it will be “as if” the bubble was always a reflection of the “real economy,” but if investment doesn’t “back” the bubble, it will be “as if” the bubble could have never been backed and was always going to be unjustified. In this way, what we do “toward” the future shapes our present “now”: our situation isn’t stagnate at all.355 ‘Thus an increase in the rate of interest, as a remedy for the state of affairs arising out of a prolonged period of abnormally heavy new investment, belongs to the species of remedy which cures the disease by killing the patient.’356
When interest rates are lowered and the market falls, it makes it seem as if the hoarders were right to hoard, which makes it seem like the CE ethic encouraging hoarding was wise and rational.357 For Keynes, this shifted the values of the society to lionize the people who Keynes did not view as necessarily moral or charactered, making “the worst kinds of people” those who we idealized and believed we should be like. The very personality of people who save can be “more risk averse” than “willing to take risk”—which brings to mind what Adam Smith said about merchants versus country people in Book 3 of The Wealth of Nations—and so even if people do have money saved, it won’t likely be used to save us, considering which hands control that capital. Considering this, Keynes was not eager to moralize savers.
‘There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable,’ Keynes writes forcefully: we needed to stop assuming that “what we believed was moral” was necessarily “what was most economically advantageous.”358 No, this didn’t mean that vice was the answer, but it meant that we needed to ask “What works?” and then determine a corresponding ethic, not the other way around (“truth should organizes values,” to allude to The Conflict of Mind). Given his conclusions in The General Theory, “investing” is what Keynes wants us to moralize, which is a combination of savings, discernment, and bravery. To emphasize “saving money” outside the concert of these other acts is to turn “saving money” into a vice: it becomes mere “hoarding.”
Keynes famous admonished:
‘The more virtuous we are, the more determinedly thrifty, the more obstinately orthodox in our national and personal finance, the more our income will have to fall when interest rises relatively to the marginal efficient of capital. Obstinacy can bring only a penalty and no reward.’359
Keynes is not saying that virtues is bad, but that there is no necessary relationship between what we think is good and what will improve the economy. If we call became monks destined for an Eternity with God, it does not follow that the economy couldn’t crash. For Classical Economics, ‘the events in the United States in the period of 1929-1933 were unexplainable. Keynes took these current events as his point of departure: his new view was going to make the anomaly the ordinary.’360 That being the case, new ethics would be needed to assure the Great Depression never occurred again. Though Keynes himself never offered a list of “the ethics of investing,” in my view, deconstructing “the vices of saving” is not enough; we must also replace them with something positive—“the virtues of investing,” We’ve already mentioned the different motivations of saving—Precaution, Foresight, Calculation, etc.—and here I would like to propose a new list of virtues that increases the probability that saving money “flips” into investing it. For too long, we’ve seen investing as an act of greed, for people invest for the purpose of making more money, but understanding investment so simplistically as contributing to us making the mistakes Keynes has warned against. We must see investing in more complex and dynamic terms. There are real virtues involves, such as:
Courage: We don’t have to face our fears to store our money in a bank, but if we are to invest it, we must put what we’ve earned at risk, possibly losing it all. The less money we have, the more courageous we are to invest it, so this virtue shines brightest for investors in lower classes.
Discernment: It is not easy to know what to invest in, and everything seems like it could generate a profit. How do we see through appearances to determine truth? Not easily, and those who can and are willing to put “skin in the game” to back their assessment are skilled and courageous. It is not enough simply to “put our money in any and every thing”—we have to invest our money in “the right things,” and that is hard.
Future-Oriented: What I invest in today may not come to bear fruit for a hundred years, and it may cost me some pleasures and gratifications today. Investment requires me to think about the future, and arguably a great problem we have today is that not enough people are worried about tomorrow (children used to help with this problem, but children are now optional). To invest, I have to focus on potential, not just on actuality, and that changes my entire way of life. Creative people always keep an eye on potential, suggesting how this value also contributes to the Artifex (as will be explained).
Sacrifice: ‘The concept of Hoarding may be regarded as a first approximation to the concept of Liquidity-preference,’ which basically means that people who hoard would prefer to have their money available and free anytime they would like to use it.361 Traditionally, we associate “savers” with “making sacrifices,” because though they could and may want buy something today, they sacrifice their desires today in hopes of something better tomorrow. But Keynes presents us with a vision where it is actually investors who make sacrifices, for they “give up” their “liquidity-presence,” their ability to access their money when and however they want, in favor of an investment (that helps out the economy today, do note). Furthermore, if people “invest,” this is likely not simply a matter of “instantaneous gratification”: investors, just like savers, are indeed likely “giving up’ desires they have on a base and superficial level. Instead of buying a big house, they may settle on a one-story home so that they have more money to invest with (and there’s no need to list out here all the examples of sacrifice various entrepreneurs have made, such as sleeping on a coat for four years in the basement of a storage building). Please also note that “sacrificing” while “facing fears” (which accompany investment) is more noble than “sacrificing” without “facing fears” (and do note that some savers could claim they are “wisely saving money” when really they are scared, meaning the ethics of “saving money” could be used to rationalize trepidation).
Charity: Society would be poor without investment, and no matter how badly I wanted a better way to write essays than with a pen and paper, unless someone invested in computers, there would be no hope for my desire to ever be satisfied. The investments of others can improve the world in which I live, and in that way others express love and charity to me in introducing to my life technologies and possibilities I otherwise couldn’t use. “Helping someone” can be associated with “loving someone,” and in this way investors show love to me.
And so on. By no mean is this meant to be an extensive list; mainly, my point is to show how investment can be thought about in terms of virtue. We have been trained to thinking of “saving money” as a moral act, but here I hope to suggest the possibility of a new way of moral thinking. Saving is only potentially moral: unless it transitions into investment, it does not go far enough.
Adam Smith is usually associated with Austrian economists, but Keynes finds support in Smith for the need to see virtue in investing. As we will expand on, Smith argues that ‘through the greater part of Europe the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country.’362 Smith argues that urban areas free rural areas, and though it can seem like rural areas are where freedom is most emphasized and participated in (for rural people “just want to be left alone, per se”), it is only thanks to cities that rural areas are indeed able to be free (and please note that cities tend to be centers of art and culture, incubating “Artifexian thinking,” as will be expounded on). Now, this isn’t to say that cities are necessarily better than farms, and it’s hard to imagine cities supporting themselves without being surrounded by farmland to grow food (suggesting that what is needed is ultimately a dialectic between “city” and “country”), but it is to say that, during Smith’s day at least, people in the city tended to think and act differently, which made city-dwellers more likely to be investors. In this way, urban values are what created wealth and expanded freedom (what McCloskey called “bourgeois virtues”); it was not the case that freedom created wealth with values being beside the point. Smith writes:
‘Those different habits [of city-dwellers] naturally affect their temper and disposition in every sort of business. A merchant is commonly a bold; a country gentleman, a timid undertaker. The one is not afraid to lay out at once a large capital upon the improvement of his land […] The other, if he has any capital, which is not always the case, seldom ventures to employ it in this manner. If he improves at all, it is commonly not with a capital, but with what he can save out of his annual revenue.’363
Smith sounds a lot like Keynes, doesn’t he? Smith suggests here that “different habits,” along with “temperament and disposition,” matter, and that not all environments incubate the same kinds of people. Cities for Smith tended to incubate “investors,” whereas the country tended to incubate “mere savers.” Wealth resulted from investment, and as we’ll explore later, Smith believed it was investment which increased freedom, which in turn helped stimulate new investment—on and on.
We need to lionize investors more than savers, and savers only insomuch as they become investors. There is nothing virtuous about saving “in of itself,” though once savings are put “in” investment, there is a “flip moment” that reaches back and makes the saving virtuous. But savings that are yet to become “savings in” are only “potentially virtuous” in contributing to us avoid falling below the DEH, but they are also “potentially vices” in failing to help us avoid DEH. Everything comes down to what we do with savings, and “continue to save forever” isn’t a virtuous option (though our “economic ethics” tend to make us think that way). The ethics of savings only comes after they are invested, and if they never are, the savings are wasted and even unethical. If we want to do something good, we must do more than “hold on”; we must be brave and take risks.
V.2E
On this theme and as further evidence why “(saving in) investment” is more economically valuable than “(just) saving,” Chapter 10 of The General Theory focuses on the famous “multiplier” that Keynes arguably proves (while giving much credit to R.F. Kahn the concept), and the idea is very simple: if I spend $10, by the time it “moves through the market,” it could be worth $20. Keynes actually offers a detailed examination on how we could actually calculate the multiplier, and Keynes seems to prove that government debt which creates demand always pays for itself. Consumer spending likewise increased GDP above what “consumer savings” could increase GDP, and it’s not a “1 for 1” ratio, meaning that it’s not that $5 spent equates into a “$5 raise in GDP”; rather, it’s more like $5 spent equates into a $6 raise in GDP if the spending is investment. This is critical: Keynes doesn’t deny that “spending is better than no spending,” but he does not think “all spending is equal.” Spending via investment is better than spending which is pure consumption, and we must maintain this point if we are to understand why Keynes is not a Socialist or a Marxism—a common conflation (which we will return to later).
Keynes refers to his multiplier not as a “money multiplier” but as an ‘investment multiplier.’364 Please note how differently the phrase “investment multiplier” strikes the mind versus “money multiplier,” which is what the multiplier is now popularly called. “Money multiplier” suggests that all we must do is create and print money, and more money will naturally result—our job is simple, and all methods of “money creation” will equally get the job done. But “investment multiplier” is a phrase that suggests something different. Investment multipliers investment, which multiplies money in that it multiplies savings and income (because “savings are investments”). Investments multiply investments more than money multiplies money, and unfortunately today these notions seem conflated. Austrian economists often argue that “money multiplier”-efforts ends up destroying the value of the very money is hopes to multiply, bringing about inflation and stagflation, and perhaps Keynes would agree with them, hence his emphasis on the “investment multiplier.” Now, if Keynes had to choose between something or nothing, he might support “money multiplier”-efforts as a political necessity, but I do think it’s important here to note that Keynes probably wouldn’t consider this ideal. Otherwise, we might unfairly blame Keynes for the negative consequences of “money multiplication.”
The conflation of “investment multiplier” with “money multiplier” has contributed to a misunderstanding of Keynesianism (in my view), and once this correction is made, I think even an Austrian can start to find Keynes a little more agreeable. Yes, the phrase “money multiplier” could mean “investment multiplier,” but gradually with time our minds make us forget this signification in favor of what we might prefer. Thinking Keynes supports a “money multiplier,” we get the impression that Keynes just wants spending, and any spending will do—virtue and vice don’t matter at all. This is not the case, and though Keynes critiques the ethic that “saving is always good” (for a “vice saver” is impossible), Keynes does not favor “frivolous spending.” Now, Keynes does think “frivolous spending” is better than no spending, but “frivolous spending” could be so much weather than “investment” that it easily could prove incapable of stopping us from crossing DEH, let alone crossing back over it once we fell below it. Savings outside investment won’t save us, according to Keynes, “frivolous spending” might help but probably not (for money in general can multiply to “some” degree), while “investments” have a real shot at making a difference. Gradually though, Keynes has come to justify the middle position that he discussed ironically and sarcastically at the end of Chapter 10, perhaps because that is what bureaucrats have always wanted. In my mind, it is problematic that we can conflate Keynes with Socialism and Marxism, but we will discuss more of that later on.
The moment we talk about “money multipliers” versus “investment multipliers,” we might not be discussing Keynes (but perhaps someone who thinks they are a Keynesian). In the following quote, please note the presence of the word “investment” throughout (and also note the opening clause for later):
‘Unless the psychological propensities of the public are different from what we are supposing, we have here established the law that increased employment for investment must necessarily stimulate the industries producing for consumption and thus lead to a total increase of employment which is a multiple of the primarily employment required by the investment itself.’365
We must take a moment now to explain Keynes’s view on “frivolous spending as stimulating,” for the final section of Chapter 10 has caused a terrible amount of confusion. Keynes writes:
‘ […] “wasteful” loan expenditure may nevertheless enrich the community on balance. Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better.’366
What does this mean? Keynes seems to be suggesting a political reality: if politicians devoted to Classical Education won’t allow the “investments” that Keynes supports—say in infrastructure, job’s programs, etc.—then it’s still better for the State to do something versus nothing. This is not what Keynes wants, but it’s what Keynes will accept as a matter of compromise (and that he’ll discuss to further make his point on the power of his multiplier, for if even “frivolous spending” can produce wealth, imagine what “smart investment” could do?). What follows next in Chapter 10 (Section VI) has sometimes been attributed to Keynes as something he “supported,” and I feel that has contributed to people thinking that his work could be conflated with Marxism and Socialism, a terrible mistake (as will be explained). In reality, Keynes is suggesting that if his policies lead to “wasteful spending,” it will be only because the politicians educated in Classical Theory will force such to be the case, and Keynes is willing to so “sacrifice himself” because he so strongly believes in his multiplier. “Accept” isn’t a simile for “support,” and to correct this misunderstanding, we will quote Keynes at length multiple times:
‘It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly ‘wasteful’ forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.’367
Keynes is saying here that if x is “partially wasteful,” politicians will judge it in terms of business and conclude it is “wasteful,” and thus be against it. On the other hand, if x was “entirely wasteful,” it would not be judged in terms of business, and politicians would easily support it (perhaps thinking it wasn’t wasteful at all, the wastefulness being so “all-consuming” that it becomes invisible). Keynes continues:
‘For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.’368
This is a single sentence that has an incredible amount packed into it. First, Keynes is saying that we would prefer to hand out money to people than investing money in social improvements, which suggests again why Keynes isn’t a simple Socialist (though he often supports Socialism), for he is saying we shouldn’t support handing out unemployment when we can instead as a State create demand by launching investment opportunities (that the unemployed could work). After making this point, Keynes proceeds to critique “Classical Thinking” by highlighting how goldmining, which for Keynes is entirely worthless, is adored by bankers and accepted as a great solution to economic woes. This is madness to Keynes, and the fact gold-mining is viewed so favorably suggests that gold-mining is entirely wasteful, not just partially, but he doesn’t help make his point clear when on the next page he says, ‘Thus gold-mines are of the greatest value and importance to civilization’—what’s going on?369 Well, that will require further analysis; first, we must breakdown the most famous passage of Chapter 10:
‘If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines, which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again […] there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing [emphasis added].’370
First, please note that Keynes is parodying gold-mining, which he just extensively bashed and criticized. Second, Keynes is trying to make the point that his “investment multiplier” is so effective that even investing stupidly is better than nothing and/or holding savings that aren’t investments. Keynes is saying that is General Theory works so well that we could bury bottles full of money and it would still prove better than “pure savings,” but that doesn’t mean necessarily that Keynes is saying we should bury bottles full of money or that bottles full of money will save us from the DEH. It’s better than “pure savings,” but it’s likely not as good as the “investment multiplier,” and it would seem that’s what we need to avoid DHE. What Keynes writes in Chapter 10 is “proof of his concept,” not a suggestion of what “will work” to save us from DEH, though it’s far more likely to do so than “pure savings.”
Keynes makes the point that Egypt was wealthy even though it was foolish, which suggests the power of “stupid investment,” just as long as it generates employment that can then stimulate demand and consumption elsewhere in the economy. Keynes doesn’t support building pyramids, but ‘if there are political and practical difficulties in the way’ (mainly politicians trained in Classical thought), he will accept building pyramids.371 By this, Keynes may hope to suggest that the very fact pyramids are “better than nothing” should make politicians less nervous to accidentally “spend frivolously,” for it is better to try and fail than “wisely abstain” and fall across the DEH. The “multiplier” will catch us, Keynes is saying, so let’s act. Critically though, Keynes wants us to invest not just “hand out money,” and it is questionable if Keynes would “support” “handing out money” (such as seems to happen now regularly in the name of Keynesianism), even if he would probably “accept it,” baring all other options (likely due to Classical Thinking politicians).
If Pyramids and gold-mining have created wealth, what are we worried about when it comes to “wasting money” on highways? We shouldn’t be, but I fear the point Keynes (sarcastically) tries to make in Chapter 10 is muddled around the time when he says, ‘Thus gold-mines are of the greatest value and importance to civilization.’372 This sounds like a contradiction, and though it’s not, he shouldn’t have worded his next points like he did: it caused infinite confusion that I will attempt to unwind. Basically, Keynes is simply making the point that goldmines are a giant waste and yet still manage to increase wealth and, this being the case, there’s no telling what his “investment multiplier” will accomplish.
‘Ancient Egypt was doubly fortunate, and doubtless owed to this its fabled wealth, in that it possessed two activities, namely, pyramid-building as well as the search for the precious metals, the fruits of which, since they could not serve the needs of man by being consumed, did not stale with abundance. The Middle Ages built cathedrals and sang dirges. Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York. [emphasis added] Thus we are so sensible, having schooled ourselves to so close a semblance of prudent financiers, taking careful thought before we add to the “financial” burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment.’373
Dang. The part I emphasized is important: the whole end of Chapter 10 is full of “if/then”-clauses that are easily to misunderstanding. If politicians won’t let us build roads, then it’s better to bury bottles of money than to save money we do nothing with; if politicians won’t do what makes sense, then we should accept whatever “investment” we can get, because we know that’s better than nothing. Numerous “if/them”-clauses fill the end of Chapter 10:
‘Just as wars have been the only form of large-scale loan expenditure which statesmen have thought justifiable, so gold-mining is the only pretext for digging holes in the ground which has recommended itself to bankers as sound finance; and each of these activities has played its part in progress—failing something better [emphasis added].’374
‘In addition to the probable effect of increased supplies of gold on the rate of interest, gold-mining is for two reasons a highly practical form of investment, if we are precluded from increasing employment by means which at the same time increase our stock of useful wealth [emphasis added].’375
Keynes praises goldmining only to make the point that the investments he supports are far more logical and yet less likely to receive support from Classical Economists who will likely support goldmining. The fact goldmining has worked isn’t because of the gold, Keynes wants to say, but because of “the multiplier” which it has been hiding this whole time. We were tricked by gold to think gold made us rich, when gold was instead a means to the end of “the multiplier” we didn’t realize was present (same logic applies to pyramid building). Keynes is here to make us see what we always looked at but never saw, and he’s so confident that he sees clearly what he points at that he’s willing to bury bottles full of money to prove himself right. It’s not what he wants to do, but if it will wake people up to the truth of the General Theory, he’s willing to accept these terms, which suggests the topic of Keynes and Socialism, a topic which readers can investigate further with this endnote.376 And for those who would like great detail on the thinking of Keynes and a few more critiques against “self-regulating CE,” please see this endnote, which will consider the work of Dr. Hyman Minsky.377 But it is here we will turn back to the main inquiry of our work: “What is demand?” So far, four points can be highlighted:
1. There exists a “demand event horizon” (DEH).
2. If the market falls below that DEH, the market will “practically” not self-correct.
3. Therefore, the market is not necessarily “self-correcting.”
4. Maintaining demand is critical, and that effort is best served through “investment” versus merely “saving money.”
This leaves us with a key question that Keynes affirms:
5. Can the State actually create demand, or can the State only stimulate demand already present? (This is to ask if the State can help us from falling below the DEH?)
I want to stress something very important here: it is possible to affirm points 1 through 4 and not affirm 5. In discussions about Keynes, all of these positions can be conflated together as if they standard or fall together, but this is not necessarily the case. Hayek could be right about the State’s inability to “save the economy” while Keynes was right about the DEH and primacy of demand. Our investigation in that way might be more difficult, but I will leave that consideration for this endnote.378 In sum, it might be the case that though it’s not so that the State can do absolutely nothing to help the economy, it could be that ultimately what recovers an economy is beyond the State’s capacity to assist—or any “low causal” means at all. This is to say that everything might hinge upon something “high order,” mainly the presence or absence of “intrinsic motivation” and/or “creativity.” And indeed, I think that is the case, given “the dialectic between creativity and energy” and the fact that what constitutes an “investment” becomes more difficult to tell with time (as endnote 378 explores). To put the case generally, which considers Hayek and Keynes together, investing in a highway required more so just “general knowledge,” but the more advanced technologies become, the more based on “particular knowledge” they tend to be (and so customized and particular), and that means the State is less positioned to be able to effectively identify what would constitute an effective “investment” for a particular people in a particular place (throwing a monkey-wrench in “New Deal”-esq spending). In my view, this suggests there is a point “lacking demand” where there is nothing the State can do. There’s only us. But what does that mean?
Also, if that endnote is correct, as technology becomes more particular and complex, doesn’t that mean the State should change from “investment multiplier”-strategies to “money multipliers?” If the State can’t tell what it should invest in, why not just give the money to the people and let them decide? Well, that’s a very good point, but here’s the problem: we can give people all the money in the world, and it won’t matter if they aren’t creative. Giving money to Artifexians or “the creator class” might grow the economy, but it’s not clear if generally handing the money out would make such a difference. Unfortunately, if people are receiving money while not being Artifexian, they may have little incentive to become Artifexian, so it’s possible “money multipliers” would hurt the economy. That said, perhaps what seems to be a “money multiplier,” like Universal Basic Income, actually turns out to be an “investment multiplier,” because the extra paycheck makes it possible for people to stay at home and work on their own projects, one of which becomes the next “alternative energy source.” Indeed, that’s possible, so we can’t be quick to assume that what “looks like” a “money multiplier” isn’t actually an “investment multiplier,” but I will say that the likelihood UBI ultimately proves to be an “investment multiplier” is greatly relative to how present an Artifex is in the society; furthermore, we should be careful to assume that UBI will create and/or grow an Artifex. None of that should be assumed, but for those interested in the topic of “Universal Basic Income” and “Basic Income,” please also see this endnote.379 Personally I can see the benefits of such a program but also the risks, so we likely need experimentations (as I’m aware are currently happening around the world), so I will leave the topic of UBI up to researches and specialists.
The more complex technology becomes, the more assessing it becomes a matter of “particular knowledge” versus “general knowledge.” It doesn’t take a rocket scientist to tell if a small town needs a road connecting it to the factory, but it does take a rocket scientist to tell if we should invest in mining meteors for resources. The special interest groups who will benefit from the project will likely tell us it will, but the special interest groups who stand to lose from meteor mining will likely tell us the opposite. And so the effectiveness of FDR Economics can wane as technology increases and space is thus made for special interest groups to raise in and win our support. And so the State can weaken just as Rauch describes in Government’s End.
To review and close this section, in my mind, Lord Keynes proves both the DEH and that demand is paramount, but if the State can’t effectively create demand anymore as of say 2021, everything hinges on the Artifex (which ironically a State following Keynesianism might unintentionally hinder). What do I mean by the Artifex? Well, it’s a term from the paper “The Creative Concord” by O.G. Rose, and it generally refers to “those who create the means of production” from within a Marxist framework. Creators, artists, and entrepreneurs are all examples of artifexians, and I will ultimately argue that the Artifex is the source of demand in an economy. The State can invest all the money it wants, but if there is no Artifex, it will not matter. We live and die by our creativity.
For our purposes in this work, we can think of the Artifex as the Children. To spread Childhood is to spread the Artifex, which is to suggest that what we need to address the concerns of Belonging Again is also what we need to address the concerns of Modern Capitalism. The sociological and the economic live and die by the same question of Childhood and the possibility of its spread.
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Notes
346Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 161.
347Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 211.
348Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 185.
349Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 174.
350Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 174.
351Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 177.
352Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 178.
353“Out of a given income” is another phrase (similar to “saving is investment”) which uniquely captures Keynesianism, for Keynes is saying here that when we “hoard” money, we are literally “subtracting it” from our income—it’s practically useless. Worse yet, as will be discussed, it may even cause a “negative multiplier effect,” meaning that as every $100 invested tends to produce say $150, every $100 hoarded tends to make that $100 worth only $50. For this reason, stopping “hoarding” is utterly critical.
354Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 322.
355Here, we can associate Keynesianism with Hegel’s “Absolute Knowing,” for “the subject” changes and influences “what is the case.” For more on Hegel, please see the work of Dr. Cadell Last.
356Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 323.
357Please note that it is assumed by CE that hoarders will now start to spend since the yield on savings is so much lower, an assumption Keynes challenges.
358Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 157.
359Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 111.
360Minsky, Hyman. John Maynard Keynes. Columbia University Press, 1975: 57.
361Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 174.
362Smith, Adam. The Wealth of Nations, Volume I. The Glasgow Edition. Liberty Fund, as authorized by Oxford University Press, 1981: 422.
363Smith, Adam. The Wealth of Nations, Volume I. The Glasgow Edition. Liberty Fund, as authorized by Oxford University Press, 1981: 411.
364Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 115.
365Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 118.
366Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 119.
367Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 129.
368Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 129.
369Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 130.
370Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 129.
371Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 129.
372Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 130.
373Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 131.
374Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 130.
375Keynes, John Maynard. The General Theory of Employment, Interest, and Money. Orlando, FL: First Harvest/Harcourt, Inc., 1964: 130.
376-378To be posted separately.
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