The American Response to Keynes

Abstract

The acceptance of Keynes by America is commonly presented, at least by most economists who have described it, as the triumph of truth over error. The drama takes place on a high intellectual plane. It is between two rival concepts of the budget, the one asserting that the aim of fiscal policy should be to balance the budget, the other seeing it as the instrument for keeping the economy at full employment. Each concept is based on a different economic theory. The one sees the economy as self-restoring in the absence of interference, the other believes that it will remain stuck in depression unless continually pushed by the government. Over a 30-year period the second, or Keynesian, theory has gradually triumphed over the first. The completed process has been described as the Keynes—Kennedy Revolution, a coupling particularly dear to the heart of the American liberal economist. Although the economist likes to present the struggle between the two theories in intellectual terms, he emphaticaly denies that the two positions were of equal intellectual merit. Keynes had sufficiently exposed the intellectual errors of his opponents in his General Theory.