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Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts Hardcover – September 16, 2009

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Editorial Reviews


"A splendid book!" --Patrick McIlheran (Milwaukee Journal Sentinel)

It appears a major part of Barack Obama and his administration's effort to promote his agenda is to create as much confusion as possible in the message. This is particularly true when you review his economic agenda.

* The problems that led to the financial meltdown of 2008 were rooted in too much debt. The solution, we are told, is more debt.

* If we are guilty of generations of wasted money on excessive spending and borrowing, let us pursue more of it as an answer to the problem.

* Are artificially low interest rates cheapening the value of money and creating instability? The simple response to that would be to lower the rates further.

* If the market is not confident because of volatile spending and monetary irresponsibility, create more of both.

* If a company is "too big to fail," force weakened businesses to merge making them large, weak, businesses.

This theme is pervasive throughout the Obama government. Economist Hunter Lewis points out in his book "Where Keynes Went Wrong" that the President's first budget, entitled "A New Era of Responsibility" (you have to love the irony) claims that it moves us "from an era of borrow and spend to one where we save and invest," but creates additions to the national debt of approximately $1 trillion a year.

This odd approach to government responsibility is seen in the healthcare debate in which we are told that, in order to reduce government spending we have to have more spending by government for health care. In the same vein we are told by government that we need to artificially increase demand through bailouts in order to boost the economy in general, but that same type of spending on health care will not lead to high prices. This ignores one of the basic tenants of economics that prices are predicated on demand. According to the left there are around 45 million people waiting for "free" health care. Conservative estimates put it at around 15 million. Either way, that will be a huge demand that will result in higher prices.

One does not need to be a conspiracy theorist to be alarmed by the rhetorical tools used by Obama and his staff to promote the President's agenda. The parallels to Orwell's 1984 are eerie, in which the people in that novel were told that "War is Peace," "Freedom is Slavery," "Ignorance is Strength." Unfortunately, our story is not fiction, but real and in this "newspeak" world we are told that debt equals fiscal responsibility. George Orwell's warnings have, sadly, fallen on deaf ears.

(c) Kevin Price --Renew America (Washington, DC), 09-22-2009, Obama's Orwellian Message by Kevin Price

Lewis (cofounder, Cambridge Assoc.; How Much Money Does an Economy Need?) sets out to refute Keynesian economics and show that it's what has brought the world to the present crisis. Through paraphrasing and verbatim quotations, he presents Keynes's economic arguments from his The General Theory and other writings and then offers counterarguments. Regarding Keynes's proposition that government needs to regulate fairness in the markets, Lewis asks how government officials influenced by politics can truly make things fairer. Lewis extends the debate to the current crisis and says that the low-interest-rate environment promulgated for years by governments was Keynesian and the very cause of the current credit crisis and recession. In the end, he dismisses Keynes as a promoter of false utopian theories. Lewis has done a service, even if in the negative, of concisely and critically summarizing Keynes's economic theories, and his book will make readers think. Lewis's...work is highly recommended to anyone seeking both to understand and to question Keynesian economics. --Reexaminging Keynes - 11/1/2009 - Library Journal By Lawrence Maxted, Gannon Univ. Lib., Erie, PA

The US government: making old mistakes new again

I recently received an advanced review copy of a compelling and important book entitled "Where Keynes Went Wrong," scheduled to be published on October 1, 2009 by Axios Press.... This particular book, by Hunter Lewis, is fantastic and is must reading for those who are concerned about the future of our country. It provides one of the most thorough critiques of John Maynard Keynes and, more importantly.... if nations applied the principles in Hunter's book, those nations would grow economically.

The timing for the book could not better. One year ago the US economy (and many economies around the world) began a terrible meltdown and responded with an approach very similar to what economist John Maynard Keynes promoted during the Great Depression. Lewis' compelling and powerful book eloquently argues that Keynes approach made that Depression far worse than it should have been and will have a similar impact on our economic situation today.

In the press release for the book we see that "When the world financial system began to fall in 2008, the US government reacted decisively with a stimulus package, bailouts, and printing, borrowing, and spending trillions of dollars. All of these interventions were taken from a playbook devised by the last century's most influential economist, John Maynard Keynes. But is Keynes right? The implications of this question are large and timely. If Keynes is wrong, then so are the economic policies of Barack Obama, George W. Bush, and virtually all governments today."

... Did Keynes have proof for his theories? Lewis argues that the answer is absolutely not. In fact, the author noted in an interview that "Overall, the most surprising thing is the lack of evidence, much less proof for anything he says. It is just a series of brilliant hunches. But there is really nothing to back up the hunches. In the whole of the General Theory, Keynes most important book, there are only two pages devoted to actual evidence...."

[Keynes' book is] full of paradoxes that tend to only confuse and not bolster his arguments. The following are a few examples from Lewis...: * "If too much bad debt is the problem, for example during the Crash of 2008, the solution is to add more debt." * "An economy depends on the confidence of the players. If confidence has been shaken by too much bad debt, restore confidence by adding more." * "If low interest rates held down long have caused trouble, lower them further and hold them down longer." * "If the public seems to be opposing the idea of borrowing and spending more, their elected representatives in government can do it for them."

...Lewis does an excellent job of providing a window of our own possible future based on the policies of Obama. What we can expect is long-term pain.

This book is extremely readable and could create a huge following. With it coming out just before the holiday season, I believe this could be the idea gift for the person looking for answers to today's biggest problems. --Kevin Price, August 31, 2009

This important book fills a gap in the literature. It is an Austrian critique of Keynes that is concise and accessible to the general reader.

Keynes is a famously difficult writer to understand. While his ideas have achieved tremendous influence, most people have been exposed to them only by reading macroeconomics textbooks. Lewis writes, "Because few people have read Keynes, it is easy to be confused about what he said" (p. 7). Another source of confusion is that:

Keynes himself is often obscure, even at first glance self-contradictory. In some cases, Keynes was not actually contradicting himself. Often he was simply being sloppy, although sometimes he seems to be intentionally opaque. Opacity has its uses in politics, especially when there is a logical difficulty to obscure or evade.

Lewis goes directly to the source in order to gain a clear understanding of this difficult original material. In part 2 of the book, he presents Keynes's views in a series of short quotes and excerpts from his works (mainly The General Theory). Lewis presents the original words with a minimum of analysis and interpretation.

In part 3, Lewis attacks Keynes from several directions: in some cases, showing that what Keynes said makes no sense or contradicts itself; in other cases, citing empirical studies that have produced results contrary to Keynes; and finally, developing alternative theories that make more sense. The alternative theories are thoroughly Austrian and Lewis clearly has a deep understanding of the Austrian teachings on production, money, banking, and the business cycle.

Lewis's book contains so many gems that it would be impossible to give due credit to the author without writing a review twice as long as the book itself. The book is highly readable. Lewis is an excellent writer, and I often found myself rereading particular passages.

I came away with an appreciation of the great mystery of Keynes: how did his ideas come to have the profound influence that they do now? The ideas in The General Theory form the foundation of modern macroeconomics, which itself guides the central banking and monetary policy in every country. Keynesianism, if not Keynes, is deeply embedded in academic economics, government, and the public consciousness.

It is difficult not to think that there must be something really deep and profound there. Could several generations of professional economists have been so wrong as to adopt an intellectual pile of rubbish as the basis for making decisions having impacts of trillions of dollars?

And this is the book's most important contribution: it demystifies Keynes. Lewis cites a story from one of Keynes's books in which:

British Prime Minister Lloyd George "bamboozled" US President Woodrow Wilson ... [then] found that "it was harder to de-bamboozle [Wilson] than it had been to bamboozle him." This describes our predicament today. Keynes has bamboozled us and it is very difficult to de-bamboozle ourselves. (p 304)

This book makes a significant contribution to that task. --What Keynes Said, and Meant by Robert Blumen | Posted in Mises Daily on 9/29/2009

From the Publisher

Among Top Seven Books Recommended Year End by Barron's Economic Editor.

Among Top Five Finance and Economics Books 2009 Recommended by 800-CEO-Read


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Product Details

  • Hardcover: 384 pages
  • Publisher: Axios Press; First Edition edition (September 16, 2009)
  • Language: English
  • ISBN-10: 1604190175
  • ISBN-13: 978-1604190175
  • Product Dimensions: 6.6 x 1.2 x 9.4 inches
  • Shipping Weight: 1.5 pounds
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (54 customer reviews)
  • Amazon Best Sellers Rank: #1,407,059 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover
I don't believe that any of the people who have thus far written negative reviews for this book have actually read the book; I very much enjoyed it. "Where Keynes Went Wrong may be thought of as the book that [Henry] Hazlitt [Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics] initially planned to write, or at least something along similar lines. It does not follow Keynes page by page, but rather concentrates on a few key topics. It is meant to be understandable by almost anyone, whether or not a student of economics." The text in reference is John Maynard Keynes - The General Theory of Employment, Interest and Money. And while the great majority of Keynes quotes come from General Theory, Lewis also draws from contemporary news articles, correspondence's and acquaintances recollections.

I suppose the greatest compliment I can pay to this book is this: the title is very accurate. Hunter Lewis performs a great service for the general reader by explaining exactly why there are flaws in Keynes logic, where the flaws are specifically in his work and what the practical flaws are in Keynesian economics. In doing so, Lewis draws much support from preeminent economists Ludwig von Mises - Human Action: A Treatise on Economics and F. A. Hayek -
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Format: Hardcover
The first section What Keynes Really Said consists of short excerpts from Keynes' own books, mostly The General Theory. Lewis sets out to provide the reader with a fair and unbiased understanding of Keynes' views. Going back to the source is a worthwhile endeavor because most people know what they know through a macro textbook using a second or third-generation graphical synthesis of Keynes' idea, or through media buzzwords such as "stimulus" and "consumer confidence".

The second section, Why Keynes Was Wrong mirrors the structure of the first section. In the table of contents, the two sections are lined up in vertical columns. For example, a section in the first part called Spend More, Save Less, and Grow Wealthy is lined up against a section in the second part called Spend More, Save Less, and Grow Poorer.

There are several main themes in book. One is that most of Keynes key doctrines are paradoxical. The most well-known example is the paradox of thrift: saving is good for the individual but if everyone tries to save, then it drives the economy downwards into a bust. Another example is "unemployment equilibrium". In each case, Lewis provides simple, logical arguments against Keynes's paradoxes. The book could be characterized as a defense of common sense against obscurantism and muddle-headedness.

Keynes' reliance on paradox brings to mind what philosopher Michael Levin calls "the skim milk fallacy", which he describes as follows: "According to this paradigm, science always shows that things are the reverse of how they seem. Deep scrutiny of virtually any phenomenon will reveal that everyday convictions about it are wrong.
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Format: Hardcover
While I am myself a Democrat, and I gather that some reviewers thought the book bashed Obama and the Democrats,I thought Lewis's point is that government economic policies are generally based on Keynesianism, regardless of the party in power. In any case, for me the real value in this book is that Lewis uses Keynes's own words to show what Keynesian economics was really all about, in a way that is so much more readable than Keynes himself.
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Lewis' work is easy to read and follow. Well organized into "five parts" (actually a Part Six is called "Envoi") which are aligned in the Contents section which shows visually how Lewis has arranged the chapters between Parts Two and Three; the sections of his work where Lewis contrasts what Keynes said and where he is off. The Endnotes section is also important to understanding Lewis' points since this is where he goes into more detail of certain topics (indicated by superscript letters). Reading these endnotes as they occur brings further insight into Lewis' narrative.

Most works take up one side or the other on economic philosophy. There is more written about Keynes or interpretations of Keynes. There are fewer books about what alternatives may be available to these policies. This is one of the few books, if any, written that compares point by point the differences between what Keynes wrote and counterpoints to his thoughts. As with Marx, who left an explanation of how socialism would work to those who followed, Keynes left much of just how his theories would work to those who followed. Even Keynes himself wasn't a complete Keynesian (as we know it today)! With this in mind, those who interpreted Keynes acting under what they thought where his percepts may not have produced the results Keynes would have desired.

What we do need to understand are the points and counterpoints of the arguments, made by the press, media, and some government officials. This is a good book to read.
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