The Trickery Behind Keynes’s Flippant Remark about the “Long Run”

By: Jim Cox

“In the long run we are all dead.”

This famous retort of the most influential economist of the twentieth century, John Maynard Keynes, was meant as a rebuttal to the views of the classical or free market economists. The entire quote reads:

But the long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. [A Tract on Monetary Reform, p. 80]

Unfortunately, most rejoinders to this quote from Keynes have focused on the value of long-term thinking in economic analysis, when in fact; the issue is just as surely the nature of the analogy itself. And since most casual readers of Keynes’s quote will be taken with the clever and telling point regarding the thought of economists, it has persuasive power.

But if we are to stop would-be Keynesian propagandists from scoring points with the phrase we must reveal the sleight of hand concealed therein. The nature of this sleight of hand is to take an event occurring in nature, a storm, and treating a depression as if it, too, were an equally and randomly occurring event of nature.

So, while a storm may be a natural occurrence, this is not the case with an economic depression. A depression is caused by intervention into the economy in the form of monetary expansion — hence the boom preceding the bust. With this kept closely in mind we can rephrase Keynes’ quote using an act of human shortsightedness that will render Keynes’ cleverness the thinking of fools:

Economists set themselves too easy, too useless a task if in the case of an extensive drinking binge they can only tell us that once the alcohol’s effect is long past the drinker will feel better again.

It becomes very evident why Keynes chose his particular example for ridiculing long-run thinking economists. By rendering the depression as analogous to a storm at sea, Keynes has taken all focus off the act — artificially increasing the money supply and thus lowering interest rates so that malinvestments accumulate — leading up to the consequences of that act, and thus is relieved of any analysis of the activity which would result in an economic depression.

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