It's 1944: John Maynard Keynes Would Like a Word on Abundance

The Meeting of Two Economic Giants

Get in the Delorean. I’m setting the time to June 28, 1944.

It’s the summer of 1944. John Maynard Keynes sets sail for the United States and, while at sea, reads Friedrich von Hayek’s newly released book, The Road to Serfdom.

The idea of complete centralisation of the direction of economic activity still appalls most people, not only because of the stupendous difficulty of the task, but even more because of the horror inspired by the idea of everything being directed from a single centre. If we are nevertheless rapidly moving towards such a state this is largely because most people still believe that it must be possible to find some Middle Way between “atomistic” competition and central direction. Nothing indeed seems at first more plausible, or is more likely to appeal to reasonable people, than the idea that our goal must be neither the extreme decentralisation of free competition, nor the complete centralisation of a single plan, but some judicious mixture of the two methods.

• The Road to Serfdom, 1944 Friedrich von Hayek

He arrives in Atlantic City, New Jersey, and writes to Friedrich von Hayek his review of the book. In the review, John critiques two points in The Road to Serfdom: first, that where one draws the line on how much regulation, oversight, and planning a government does is subjective and informed by the line drawer’s moral code and values. The second point, a corollary to the first, is that this line-drawing is almost always not informed by the morals and values of the community the government serves.

What I see in the book Abundance by Ezra Klein and Derek Thompson is an attempt to reframe the problem. Instead of drawing the line on how big government is, they suggest: “whether government is bigger or smaller is the wrong question. What it needs to be is better. It needs to justify itself not through the rules it follows but through the outcomes it delivers.” The book is not interested in giving a framework for this. John Maynard Keynes would say the same to Ezra and Derek to what he wrote to Friedrich:

But you give us no guidance whatever as to where to draw it. In a sense this is shirking the practical issue. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly underestimate the practicality of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for, since you are trying to persuade us that so soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.

Klein and Thompson’s “outcomes-based” governance in Abundance merely repackages the same line-drawing dilemma Keynes identified in 1944: it shifts the question from “how big should government be?” to “which outcomes matter?” without solving who defines success or how those definitions connect to community values.

Morals and Outcomes Based Approach

Let’s entertain the approach in Abundance. The book provides compelling examples that are difficult to refute and suggests there is a clear problem with how things are being done through rules established by the liberalism of the 60s and 70s. The clearest examples are the easiest targets for change. What of regulations and rules that don’t have the same ease of critique? A policymaker (or policy-unmaker) will not be able to quickly scrutinize regulations that should be either kept or removed.

For all of us, we’d have to ask:

• Who will measure what is a successful outcome? And at what cost?
• And to whom will it cost?
• Will these measures of success be determined by the communities they are intended to serve? Will there be unintented consequences?

So let’s do a simple exercise on America’s morals: what should be classified as affordable? What’s inherent in this modifier is that it implies a market-based enterprise approach instead of a government’s approach to solving things.

• Roads? Or Affordable Roads?
  • Liberal Consensus in the 1950s led to the National Highway Act of 1956. We’re happy to pay taxes for decent roads and we really don’t have “affordable roads” with tolls. Our morals and reality is simply roads.
• Healthcare? Or Affordable Healthcare?
  • That’s a loaded one! I think in America we might say we long for “affordable healthcare” but in fact what is really meant is healthcare. No one should have to financially suffer for medical needs is a moral statement I think most will agree with. Morally I think we long for healthcare like our roads but our reality is the world of unaffordable healthcare. I would go so far as to say we should have morals on how we do this and not just the outcomes of healthcare - make healthcare universal and do away with “affordability”.
• Housing? Or Affordable Housing?
  • Here be dragons! In America, housing is not just housing but looked upon as an investment. There are desires to have more housing with the various YIMBY movements, there are desires to solve homelessness, there are desires to make housing constructing cheaper and quicker. But the market-based enterprise framework we’re operating in has inherent limitations to address the very issue of “Affordable Housing”. We’ve all but done away with social housing with the 1998 Faircloth Amendment, and there hasn’t been any serious effort to change this to allow for more public housing. Yet the government is probably the only entity that could reasonably achieve the ideals of affordable housing through just “housing”. We certainly don’t look at housing like we do our roads.

Drawing the Line Through Misdirection

What Abundance is doing is implying that it can draw a line somewhere. It tries to be clever by reframing the debate with a common-sense-sounding outcomes-based approach, but this still represents an inherent line being drawn. The line it wants to draw is probably somewhere closer to where Hayek would have drawn it in 1944, and it certainly and explicitly wants to pave the middle way (also known as the third way)—the neoliberal way.

Keynes’ exchange with Hayek remains a prophetic warning for our contemporary discussions about abundance and government’s role in creating it. When Keynes read The Road to Serfdom, he agreed with much of Hayek’s moral and philosophical framework, but disagreed sharply on practical matters. Keynes believed that “limited planning need not require the superfluous sacrifice of liberties,” and that planning could be compatible with freedom if guided by shared moral principles.

Most crucially, Keynes concluded his letter with a warning that resonates strongly with today’s abundance debate:

What we need therefore, in my opinion, is not a change in our economic programmes, which would only lead in practice to disillusion with the results of your philosophy; but perhaps even the contrary, namely, an enlargement of them. Your greatest danger ahead is the probable practical failure of the application of your philosophy in the United States.

We would do well to heed this warning and accept John’s view here with regard to abundance. And if anything, those who want abundance should look at the world-class institution that practices it: the Chinese government. A communist government! But that would not sell books in America.

We took the Delorean to 1944. Now let’s take Ms. Frizzle’s magic school bus to 2030. Click here for part 2.