Keynes In The Long Run Quotes

In the long run, we are all dead!

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.

In the long run we are all dead.

There are men regarded today as brilliant economists, who deprecate saving and recommend squandering on a national scale as the way of economic salvation; and when anyone points to what the consequences of these policies will be in the long run, they reply flippantly, as might the prodigal son of a warning father: "In the long run we are all dead." And such shallow wisecracks pass as devastating epigrams and the ripest wisdom.

Keynes knew perfectly well that fascist economic policy could never have succeeded in the long-run without war, occupation and exploitation.

It is true that Keynes’s ‘model’ was a short-run model, but that’s not because he was interested only in short-run stabilization. He wanted a full employment level of investment in the short-run, so as to get to the long-run quicker.

The individualist insists that drastic depressions are the result of credit inflation; (not excessive savings, as the Keynesians would have it) which at all times in history has been caused by direct government action or by government influence. As for aggravated unemployment, the individualist insists that it is exclusively the result of government intervention through inflation, wage rigidities, burdensome taxes, and restrictions on trade and production such as price controls and tariffs. The inflation that comes inevitably with government pump-priming soon catches up with the laborer, wipes away any real increase in his wages, discourages private investment, and sets off a new deflationary spiral which can in turn only be counteracted by more coercive and paternalistic government policies. And so it is that the "long run" is very soon a-coming, and the harmful effects of government intervention are far more durable than those that are sustained by encouraging the unhampered free market to work out its own destiny.

In a BBC broadcast in 1934, when he was a year away from finishing The General Theory, Keynes pinpointed the fundamental difference between an approach to the Depression based on frictions and imperfections and an approach based on more fundamental defects in the market system: 'On the one side were those who believe that the existing economics system is, in the long run, a self-adjusting system though with creaks and groans and jerks, and interrupted by time-lags, outside interference and mistakes ... The strength of the self-adjusting school depends on its having behind it almost the whole body of organized thinking and doctrine of the last hundred years. If the heretics on the other side of the gulf [among whom Keynes included himself] are to demolish the forces of nineteenth century orthodoxy ... they must attack them in their citadel.

Keynes had been appointed to the board of the National Mutual, one of the oldest institutions in the city, in 1919.107 He had served as chairman of the insurer, and helped manage its investment portfolio from 1921. That portfolio lost £641,000 ($61 million), an enormous sum of money in 1937. While Keynes was recuperating from a heart attack, F. N. Curzon, the acting chairman of the insurer called him to account for the loss.108 Curzon and the board criticized Keynes’s investment policy of remaining invested in his “pet” stocks during the decline.109 In a response to Curzon in March 1938, Keynes wrote:110 1. I do not believe that selling at very low prices is a remedy for having failed to sell at high ones. . . . As soon as prices had fallen below a reasonable estimate of intrinsic value and long-period probabilities, there was nothing more to be done. It was too late to remedy any defects in previous policy, and the right course was to stand pretty well where one was. 2. I feel no shame at being found owning a share when the bottom of the market comes. I do not think it is the business, far less the duty, for an institutional or any other serious investor to be constantly considering whether he should cut and run on a falling market, or to feel himself open to blame if shares depreciate on his hands. . . . An investor is aiming, or should be aiming, primarily at long-period results, and should be solely judged by these. . . . The idea that we should all be selling out to the other fellow and should all be finding ourselves with nothing but cash at the bottom of the market is not merely fantastic, but destructive of the whole system. 3. I do not feel that we have in fact done particularly badly. . . . If we deal in equities; it is inevitable that there should be large fluctuations.

After the war, when the problem of deficient effective demand seemed to have faded into the background, a fresh question came to the fore — long-run development. The change arose partly from the internal evolution of economics as an academic subject. The solution of one problem opens up the next; once Keynes’ short-period theory had been established, in which investment plays the key role, it was evidently necessary to discuss the consequences of the accumulation of capital that investment brings about. [p. 92]

The analysis of the /General Theory /shows that inflation is a real, not a monetary, phenomenon. It operates in two stages (once more giving a crudely simple account of an intricate process). An increase in effective demand meeting an inelastic supply of goods raises prices. When food is supplied by a peasant agriculture a rise of the prices of foodstuffs is a direct increase of money income to the sellers and increases their expenditure. The higher cost of living sets up a pressure to raise wage rates. So money incomes rise all round, prices are bid up all the higher and a vicious spiral sets in. The first stage — a rise of effective demand — can very easily be prevented by not having any development. But if there is to be development there must be a stage when investment increases relatively to consumption. There must be an increase in effective demand and a tendency towards inflation. The problem is how to keep it within bounds. Some schemes of investment that seem to be clearly indispensable to improvements in the long run, such as electrical installations, take a long time to yield any fruit and meanwhile the workers engaged on these have to be supplied. The secret of non-inflationary development is to allocate the right amount of quick-yielding, capital-saving investment to the consumption-good sector (especially agriculture) to generate a sufficient surplus to support the necessary large schemes. It is in this kind of analysis, rather than in the mystifications of “deficit finance,” that the clue to inflation is to be found. [pp. 110-11]

Keynes endorses another key principle of Burke’s: that the happiness or utility which governments should aim to maximize is short run not long run. This is a consequence of accepting the Moore-Burke criterion of ‘moral risk’ – ‘Burke ever held, and held rightly, that it can seldom be right… to sacrifice a present benefit for a doubtful advantage in the future.’ The concept of moral risk was a guiding principle in Keynes’s own statesmanship. It inoculated him equally against Communism and the sacrificial thinking implicit in much of orthodox economics.

He argued, in the spirit of Mill, that ‘whatever the immediate consequences of a new truth may be, there is a high probability that truth will in the long run lead to better results than falsehood’. This was very much in line with his attack on Moore’s argument for following generally accepted rules rather than using individual judgement. However, he conceded that the ‘modern prejudice in favour of truth [may be] founded on somewhat insufficient bases’.

Long run is a misleading guide to current affairs. In the long run we are all dead.

In the long run we are all dead

The problem, of course, is that most people live in the short run, and that, as economist John Maynard Keynes once cautioned, “In the long run, we’re all dead.

In the long term,” wrote the English economist John Maynard Keynes, “we are all dead.” The Scottish Enlightenment learned a different lesson from the changes brought by union with England. Its greatest thinkers, such as Adam Smith and David Hume, understood that change constantly involves trade-offs, and that short-term costs are often compensated by long-term benefits. “Over time,” “on balance,” “on the whole”—these are favorite sentiments, if not expressions, of the eighteenth-century enlightened Scot. More than any other, they capture the complex nature of modern society. And the proof came with the Act of Union. Here was a treaty, a legislative act inspired not by some great political vision or careful calculation of the needs of the future, or even by patriotism. Most if not all of those who signed it were thinking about urgent and immediate circumstances; they were in fact thinking largely about themselves, often in the most venal terms. Yet this act—which in the short term destroyed an independent kingdom, created huge political uncertainties both north and south, and sent Scotland’s economy into a tailspin—turned out, in the long term, to be the making of modern Scotland Nor did Scots have to wait that long. Already by the 1720s, as the smoke and tumult of the Fifteen was clearing, there were signs of momentous changes in the economy. Grain exports more than doubled, as Scottish agriculture recovered from the horrors of the Lean Years and learned to become more commercial in its outlook. Lowland farmers would be faced now not with starvation, but with falling prices due to grain surpluses. Glasgow merchants entered the Atlantic trade with English colonies in America, which had always been closed to them before. By 1725 they were taking more than 15 percent of the tobacco trade. Inside of two decades, they would be running it. A wide range of goods, not just tobacco but also molasses, sugar, cotton, and tea, flooded into Scotland. Finished goods, particularly linen textiles and cotton products, began to flood out, despite the excise tax. William Mackintosh of Borlum saw even in 1729 that Scotland’s landed gentry were living better than they ever had, “more handsomely now in dress, table, and house furniture.” Glasgow, the first hub of Scotland’s transatlantic trade, would soon be joined by Ayr, Greenock, Paisley, Aberdeen, and Edinburgh. By the 1730s the Scottish economy had turned the corner. By 1755 the value of Scottish exports had more than doubled. And it was due almost entirely to the effect of overseas trade, “the golden ball” as Andrew Fletcher had contemptuously called it, which the Union of 1707 had opened.

The slogan that ‘in the long run we are all dead’ is also a characteristic manifestation of an unwillingness to recognise that morals are concerned with effects in the long run – effects beyond our possible perception – and of a tendency to spurn the learnt discipline of the long view. Keynes also argued against the moral tradition of the ‘virtue of saving’, refusing, along with thousands of crank economists, to admit that a reduction of the demand for consumers’ goods is generally required to make an increase of the production of capital goods (i.e., investment) possible. And this in turn led him to devote his formidable intellectual powers to develop his ‘general’ theory of economics – to which we owe the unique world-wide inflation of the third quarter of our century and the inevitable consequence of severe unemployment that has followed it (Hayek, 1972/1978).

Benjamin Graham said, “The purpose of the margin of safety is to render the forecast unnecessary.” The more flexibility you have, the less you need to know what happens next. And never forget John Maynard Keynes: “In the long run we’re all dead.

The purpose of the margin of safety is to render the forecast unnecessary.” The more flexibility you have, the less you need to know what happens next. And never forget John Maynard Keynes: “In the long run we’re all dead.

In it he shifted from classical orthodoxy by denying the short-term efficacy of the quantity theory of money, while accepting its truth ‘in the long run in which 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.’15