U.S. Intellectual History Blog

Some Defunct Economist

“But apart from this contemporary mood, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”

This is the concluding paragraph of the final chapter of Keynes’s General Theory of Employment, Interest, and Money (1936). Angus Burgin has succinctly described this passage as “Keynes’s representation of the relationship between ideas and historical change” (Burgin, The Great Persuasion, 217). Burgin notes that Friedrich Hayek approvingly cited this passage when he “was preparing to found the Mount Pelerin Society.”  It seems that Hayek agreed with Keynes’s basic claim about the power and primacy of ideas as forces of change in human history. Indeed, Keynes’s “belief in the long-term political impact of economic ideas” was a conviction shared by both Hayek and Milton Friedman (Burgin 218).

In retrospect, Hayek and Friedman turned out to be right about the long-term political impact of their own economic ideas. It took a couple of generations — as they expected it would — but neoliberal economic theory has moved from the margins to the mainstream of American political discourse.

Of course, for me to say that “neoliberal economic theory has moved is to make an idea the subject of the sentence, to give agency to the ideas of Hayek and Friedman and their fellow travelers. Yet as Burgin’s work shows, those ideas did not just “move” or “gain in influence” by some sort of natural process. Instead, a group of (mostly) like-minded economists and social theorists tirelessly championed the idea of the market as the arbiter of all social values, building and sustaining an entire network of institutions and publications and think tanks dedicated to promoting and popularizing faith in the market as the cornerstone of public policy.

So perhaps it’s not so much that Hayek and Friedman – or, for that matter, Keynes – “turned out to be right” in their basic conviction that “the world is ruled by little else” than “the ideas of economists.” (What a comforting thought for economists, no?)  Perhaps it’s not the case that Hayek and Friedman embraced this idea because it was true. Instead, it may be the case that this idea was made true (in a Pragmatic sense, and a historic sense – and I guess those might be the same here) because Hayek and Friedman and others acted (and persisted in acting) on their belief in it.

Or am I making a distinction without a difference?

11 Thoughts on this Post

  1. Great questions, but let me pose one of my own: are politicians and other decision makers the product of the economic theories of their age, or are do the grab on to intellectual arguments just to justify their decisions? In my opinion the answer just doesn’t seem very clear. My understanding is that when Darwin wrote “On The Origin Of Species” he never intended it to be some sort of “scientific” justification for the social policies of Victorian Britain or Gilded Age America, but lots of people started claiming his writing justified just that. And it’s not as if Darwin had drown in the Pacific those same people wouldn’t have come up with some way to use “science” to prove that workhouses were a great idea.

    I think you can see a similar thing happening with austerity in more recent years. On one level politicians like David Cameron or Paul Ryan have tried to use deficit/debt hysteria to justify slashing the social safety net, but then again that’s sort of what they always believed. In other words “expansionary austerity” seems to be a whole body of knowledge cooked up to justify pre-existing political agendas. But at the same time people like Ed Miliband (who doesn’t strike me as being a neoliberal) also jumped on the austerity and deficit panic bandwagon, even if he wanted more tax hikes than spending cuts. And meanwhile Republicans running for president have throw the whole debt panic thing out the window and are calling for huge tax cuts for the rich. What happened to the deficit theories of yore?

    Long comment short: the relationship between economic ideas and policy makers seems to go both ways, and it’s not clear where one influence ends and another begins.

  2. L.D.

    In justifying (or creating) economic or social ideas, I might ask what conceptions of human nature the particular individual held to. Were they strongly invested in their idea’s predictive power involving humans and what they would or would not do given a set of circumstances?

    I also find that issues of embodiment are important for understanding the motivating factors involved with humans and why they choose/passively receive/construct (take your pick) what they see as the “right” way to run an economy.

    I would be curious to know what Hayek or Keynes thought or imagined while they were physically writing down their theories (almost impossible to discover, I confess). Did they shed tears thinking about the bulk of humanity, knowing that without the intervention of the Great Idea, posterity would degenerate into a wasteland (a little dramatic, maybe)? Were they, as they stooped over a desk and/or typewriter, vividly recalling a moment in which they were lying on death’s door, eating biscuits and water, vowing, if they received a chance for a better life, that these conditions “would never happen again!”? Sort of like a “not on my watch” moment. Something like this. . .


    I’m wondering if Keynes or Hayek considered food deprivation as a result of conditions experienced during hard times—such as the Great Depression—an “idea” that could somehow be explained from a physiological standpoint. I haven’t read much on both figures yet, so maybe I’m asking if they subscribed to a more benevolent form of behaviorism?


  3. L.D.,
    Apologies if this is too obvious a point (and for the length of the comment), but “neoliberal economic theory” did not triumph solely because Hayek, Friedman or anyone else “acted on their belief in it.” All the think tanks and networks and publications in the world likely would not have succeeded in pushing a certain set of economic ideas onto political and policy agendas had not the external circumstances, the conjuncture to use a fancy but possibly appropriate word, been favorable to those ideas’ propagation.

    As various people, including James Cronin whom I happened to hear give a talk a couple of months ago, have pointed out — and as Burgin may also point out (I don’t know b.c haven’t read him) — the stagflation of the 1970s, coupled with the oil shocks (which also occurred around the time of the end of fixed exchange rates, sometimes misleadingly referred to as the ‘collapse of Bretton Woods’), went a long way toward appearing to discredit the postwar growth model based on essentially Keynesian notions, and if that ‘model’ had not been discredited (or seemingly so), then Hayek, Friedman et al would not have had a vacuum, so to speak, to fill. (Excuse the metaphors.)

    To steal a phrase from someone else, ideas do not float freely, and their institutionalization in think tanks etc and appearance in political discourse is sometimes not so much cause as consequence of external events. Obviously there is an ‘internal’ story to be told in every case as well, and I assume that’s what Burgin and others (Mirowski, e.g.) have done w Mont Pelerin. But I think it would be a mistake to wonder about whether ideas have ‘agency’ or whether people acting on those ideas are the real ‘agents’ without concurrently acknowledging, or at least considering the possibility, that ‘agents’ (whether ideas or people) can ‘act’ until they’re blue in the face and unless conditions in the world are such as to make other people receptive to their message, they’re not going to gain a hearing or have an impact.

    There’s a famous passage in Max Weber where he says (I’m partly paraphrasing) that interests not ideas drive action, but ideas sometimes act as “switchmen” to determine the particular tracks along which action has been pushed by the dynamic of interest. Who throws what switches when and for which reasons, and why some switches get thrown at all and others don’t, are questions that, istm, usually can’t be answered by looking just at the ideas alone.

    I’m sure intellectual historians already know all this, but occasionally when reading this blog I get the feeling that maybe they need to be reminded of it now and again. If the reminder was unnecessary, or you think it’s not
    well-taken, feel free to say so. I won’t be offended.

    • p.s. The Weber quote is in the essay usu. translated as “The Social Psychology of the World Religions,” in Gerth & Mills, From Max Weber (or various other collections).

  4. Thanks all for the wonderful comments. In reverse order…

    Louis, I’m not at all offended by your comment; rather, I’m delighted by it.

    I’m afraid my post was a bit compressed and cryptic. (it’s about 500 words, which is surely one of the shortest I’ve written here. What can I say — I’m still trying to recover my equilibrium!) But I was hoping my *dubiety* about “idealist” explanations registered a little bit. This is something that I struggled with in my own recently-defended dissertation, and that I am tackling again in revisions to the MS: the (heuristic?) abstraction of ideas from material conditions/circumstances. During my defense, one of my examiners pointed out that my interpretation occasionally drifted into Marxian analysis. My honest response was that I didn’t mean to be Marxian; it was a total accident! (Felix culpa?) But now I am trying to figure out how/to what extent to do on purpose what I stumbled into by accident! Where/how does my idealism end and my materialism begin? (I don’t have an answer yet — but stay tuned!)

    Anyway, in terms of idealism/materialism, what strikes me about Keynes’s assertion (which was not just invoked by Hayek, but also, later, by Clark Kerr in re: the role of the university in public life) is the (heuristic?) distinction he made between “ideas” and “vested interests” — as if ideas are ever floating free of their attachments to real people with diverse agendas who are embedded in particular historical circumstances. Indeed, the notion that ideas can float free of particular historical circumstances is itself an idea embedded in a particular moment (or moments) in history. (I think you can hear echoes of one such moment in Keynes’s invocation of “madmen in authority” who “hear voices in the air.” Keynes’s “idealist” claim — timestamp: 1936 — makes a lot of sense in the same context as, say, the movement towards non-representational modernist art as described by Genter.)

    What’s interesting about the response of Hayek and (indirectly, perhaps) Friedman is that they endeavored, over several decades, to cultivate a sort of home-grown vested interest group to champion a particular set of ideas. Yes, I think you’re absolutely right about the necessary conditions that precede/accompany an epistemic shift. Still, when circumstances/conditions resulted in a profound loss of confidence in Keynesian economics, there was another contender ready to fill the gap. The fact that neoliberal economic theory was positioned to take the helm from discredited Keynesianism was not simply an accident, though, but was — as Burgin shows so well — the result of a lot of spadework and strategic maneuvering by those who championed that model/frame. (I am somehow, perversely, reminded of the old commercials featuring Orson Welles: “We will sell no wine before its time.”)


    Mark, thanks so much for your question. I don’t quite know how to answer you in re: Keynes and Hayek on embodiment. However, I do think that you are in some ways restating the problem (or the promise?) inherent in looking at these defunct economists: the concrete historical circumstances surrounding (giving rise to? inspiring? enabling? or — watch out! — causing?) the emergence of particular “abstract” ideas.

    In that connection, both Keynes and Hayek had some then-current concrete historical circumstances in mind — as I gestured toward above in re: Keynes’s phrasing, and as Burgin makes plain in his discussion of Hayek, one worry/fear (besides immediate want) was to offer an alternative to totalitarianism. For Hayek, Keynesian economics, with its outsized role for government, opened the door to totalitarianism via a “collectivist” control/command of individuals’ freedom to allocate their labor/resources however they wished in a market ideally free of government interference/control. I think a *crude* Marxian analysis would suggest that this formulation of Hayek represents either some sort of false consciousness or some sort of obfuscation of “real” interests/aims — but Burgin certainly doesn’t suggest that, and I wouldn’t either.

    More generally, the problem of embodiment — the relationship of ideas to flesh-and-blood (or material) life — is never far from my thoughts (or my sensibilities, I guess) and remains a crucial conundrum for my work in revision. I’m disinclined — still! — to separate the history of ideas from the history of books. Marxian or not, I gotta make sense of things in a way that makes sense to me. More on this later…


    Lyndale, thanks so much for your comment/question. Do politicians seize on ideas they don’t really “believe in” (or perhaps even fully understand) as an expedient way to “cover” for the crude machinations of their power-mongering? No doubt. But what gives some ideas legitimating power over others? An idea that has no currency would provide no cover. And the austerity policies being pushed today as the bitter pill that will solve economic crises in Greece, the EU, elsewhere are only “respectable” because of the ideational/ideological groundwork laid by the Mont Pelerin movement and its apologists. If Paul Ryan has “always believed” that the social safety net should be dismantled, that belief can be seen as the (hoped for?) result of all the hard work that Milton Friedman and others did in championing arguments against government expenditures for social welfare, long before Ryan et al came on the scene.

    Again, thanks to all for the thoughtful readings. Sorry the post left so much un/under-discussed — I’m still trying to get back in my groove. No better remedy than a dialogue with our marvelous commentariat!

  5. now I am trying to figure out how/to what extent to do on purpose what I stumbled into by accident! Where/how does my idealism end and my materialism begin? (I don’t have an answer yet — but stay tuned!)

    Very glad to hear you’re grappling with this whole issue, L.D. (And I remember those Orson Welles wine commercials, though I haven’t thought about them in — well, I’ll be vague and just say decades.)

  6. Gah! Sorry, Varad, didn’t mean to ignore your comment.

    Yeah, I was planning on participating in “Star Wars” week, but I just couldn’t make it work — fighting the Force instead of feeling it, I guess. I did go see the new movie though — first time I’ve been to the theater in I don’t know when. No spoilers, of course — but there was a plot twist I sure as hell didn’t care for, but I’ll save that for my own blog.

    • Don’t emotionally punish yourself for producing only 500 words, and you shouldn’t overly praise yourself for meeting your personal Grafton Line.

      As for the plot twist you didn’t care for, I understand. I also was disappointed that Jar Jar Binks wasn’t featured more. 😉 I guess they are saving him for the later movies.

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