Customer Reviews

Failure of the New Economics: Analysis of the Keynesian Fallacies

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Hazlitt dissects Keynes' famous book line by line, clause by clause, occasionally word by word, and exposes every single writhing equivocation, fallacy, and idiocy. Keynes's child is held under a microscope and seen to be Gargantuan mass of [...].
Read this book prior to listening to any modern political speech, and be prepared to simultaneously laugh and cringe.

Hazlitt crushes Keynes' theory bij pinpointing the flaws in the basic premises of the GT. Nevertheless it doesn't take an intellectual to see that absurdities like consumption limits production are completely fallacious. Economics is about voluntary actions not about psychological constructs. In addition I dare to state that Keynes' socialist propaganda has ruined many countries and people, e.g. The Netherlands.

I personally prefer Murray Rothbard's critics of the GT (in man, Economy and State). I would also recommend Hoppe's 'Misesian case against Keynes' (1992), available for free [...]

I'd like to conclude with the words of Hoppe:
"Here we have Keynes, then: the twentieth century's most famous "economist." Out of false theories of employment, money, and interest, he has distilled a fantastically wrong theory of capitalism and of a socialist paradise erected out of paper money."

Hazlitt(H)attempts to critique the General Theory(GT;1936)by concentrating only on Keynes's literary exposition.H completely ignores the mathematical modeling carried out by Keynes in chapters 19 (and the appendix to chapter 19),20,and 21.These chapters explain the outline of Keynes's theory of effective demand presented to the readerby Keynes in chapters 2 and 3 of the GT.It is based on the D-Z model of expected results(expected profits and expected prices).H has a partial understanding only of the Y-Multiplier model of actual prices-profits contained in chapter 10.Two semesters of calculus are required to follow Keynes's exposition in chapters 19-21.One also needs to have read Part II,chapters 8-10,especially pp.86-102,of A C Pigou's 1933 book, The Theory of Unemployment,in order to understand the comparison-contrast that Keynes makes between his D-Z model and Pigou's model.H has absolutely no possibility of objectively critiquing the GT given his knowledge of sixth grade mathematics.The following is a summary of what H completely overlooks.The classical-neoclassical result that H seeks to defend is that w/p=mpl,where mpl is the aggregate marginal product of labor derived from an aggregated neoclassical production function and w/p is the real wage.This result means that no involuntary unemployment exists.Keynes generalized this optimality and equilibrium condition by showing that it is a special case of the following general optimality condition that is Keynes's general theory:w/p=mpl/(mpc+mpi),where mpc is the marginal propensity to spend on consumption goods,and mpi is the marginal propensity to spend on investment goods,which would be primarily capital goods and secondarily inventories or stocks of finished/unfinished unsold commodities.Only in the special case where mpc+mpi=1 will the Hazlitt result occur.If mpc+mpi<1,a set of multiple equilibria occurs.It will be impossible for labor to cut its money wage to reduce unemployment.In fact,the money wage must rise to maintain the equality.Involuntary unemployment will automatically exist if mpc+mpi<1.Hazlitt is completely lost when he attempts to cover the above chapters in his book.A much better book to read would be the recent book by the Austrian economist Roger Garrison.