Claridge Hotel, Atlantic City, N.J. 28th June 1944
My dear Hayek,
The voyage has given me the chance to read your book properly. In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.
Turning to a few special points, I think you string the wrong note on Page 69 where you deprecate all the talk about plenty just around the corner. No doubt this is partly due to my having a different view to yours about the facts. But apart from this, would it not be more in line with your general argument to urge that the very fact of the economic problem being more on its way to solution that it was a generation ago is in itself a reason why we are better able to afford economic sacrifices, if indeed economic sacrifices are required, in order to secure non-economic advantages? It seems to me that it is in this particular matter above all that the Communist doctrine is so desperately out-of-date at least in its application to U.S.A. and Western Europe. They ask us to concentrate on economic conditions more exclusively than in any earlier period in the world’s history precisely at the moment when by their own showing technical achievement is making this sacrifice increasingly unnecessary. This preoccupation with the economic problem is brought to its most intense at a phase in our evolution when it is becoming ever less necessary.
The line of argument you yourself take depends on the very doubtful assumption that planning is not more efficient. Quite likely from the purely economic point of view it is efficient. That is why I say that is would be more in line with your general argument to point out that even if the extreme planners can claim their technique to be the more efficient, nevertheless technical advancement even in a less planned community is so considerable that we do not today require the superfluous sacrifice of liberties which they themselves would admit to have some value.
One point which perhaps you might have pressed further is the tendency today to disparage the profit motive while still depending on it and putting nothing in its place. The passage about this on page 97 is very good indeed; could not be better; but I should have liked to have seen this theme a little more expanded.
On the moral issue, I also find the last paragraph on Page 156 extraordinarily good and fundamental.
I come finally to what is really my only serious criticism of the book. You admit here and there that it is a question of knowing where to draw the line. YOu agree that the line has to be drawn somewhere, and that the logical extreme is not possible. 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.
I should therefore conclude your theme rather differently. I should say that what we want is not no planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly oriented in their own minds and hearts tho the moral position. This is infract already true of some of them. But the curse is that there is also an important section who could almost be said to want planning not in order to enjoy its fruits but because morally they hold ideas exactly the opposite of yours, and wish to serve not God but the devil. Reading the New Statesman & Nation one sometimes feels that those who write there, while they cannot safely oppose moderate planning, are really hoping in their hearts that it will not succeed; and so prejudice more violent action. They fear that if moderate measures are sufficiently successful, this will allow a reaction in what you think the right and they think in the wrong moral direction. Perhaps I do them an injustice; but perhaps I do not.
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 failure of the application of your philosophy in the U.S. in a fairly extreme form. Now what we need is restoration of right moral thinking - a return to proper moral values in our social philosophy. If only you could turn your crusade in that direction you would not look or feel quite so much like Don Quixote. I accuse you of perhaps confusing a little bit the moral and the material issues. Dangerous acts can be done safely in a community which thinks and feels rightly, which would be the way to hell if they were executed by those who think and feel wrongly.
Yours ever, /s/ Keynes
Prof. F.A. Hayek The Old Oast House, Malting Lane, Cambridge