Vested interests

… 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.

John Maynard Keynes, 1935, The General Theory of Employment, Interest and Money, Chapter 24.

2 thoughts on “Vested interests”

  1. the irony!

    ” Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. ”

    and that scribbler was Keynes.

    Development economics needs to bury his ghost.

    Owen replies: Whoa! Steady on. Don’t you think that might be a bit of a generalisation? Who do you mean? (Presumably not me since you accused me of being a neoclassical economist the other day). Jagdish Bhagwati? Amartya Sen? Francois Bourgignon? Michael Kremer? Jeff Sachs? Bill Easterly? Dani Rodrik? Can’t see very many Keynesians there …

  2. The neoclassical synthesis: classical micro assumptions (those which we debated previously) combined with a Keynesian macroeconomics.

    There is no macroeconomics – not even RBC – that is not Keynesian in that it is because of him that we talk about how macro aggregate statistics impact each other.

    And yes, development economics is Keynesian – the World Bank and IMF were founded on these principles, and continue to (pretty much) view their purpose as initiating institutional change from on high.

    The best work in development economics has micro-foundations, is emergent, and places emphasis on the importance of institutions that are compatible with underlying culture. This is decidely un-Keynesian, and relatively new. But it’s the future, and not just “talking drivel” !!!

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