I’ve been reading a 1926 pamphlet by Keynes, [amazon_link id=”1607960869″ target=”_blank” ]The End of Laissez Faire[/amazon_link] (originally a Hogarth Press publication of a 1924 lecture). Its argument starts out sounding almost spookily similar to the present-day backlash against market forces in general and economists in particular.

“The idea of a divine harmony between private advantage and the public good is already apparent in [Archdeacon William] Paley. But it was the economists who gave the notion a good scientific basis. Suppose that by the working of natural laws individuals pursuing their own interests with enlightenment in condition of freedom always tend to promote the general interest at the same time! Our philosophical difficulties are resolved-at least for the practical man,”

thunders Keynes in the opening section. But he goes on to say, with extensive quotations from the historical literature, that in fact it was a bowdlerised version of economics being used in political arguments. Economists never really fell for their own simplifying assumptions.

The pamphlet ends by arguing that there are strong economic grounds for certain types of state intervention in the market (although not for ‘state socialism’):

“Many of the greatest economic evils of our time are the fruits of risk, uncertainty, and ignorance. It is because particular individuals, fortunate in situation or in abilities, are able to take advantage of uncertainty and ignorance, and also because for the same reason big business is often a lottery, that great inequalities of wealth come about; and these same factors are also the cause of the unemployment of labour, or the disappointment of reasonable business expectations, and of the impairment of efficiency and production. Yet the cure lies outside the operations of individuals; it may even be to the interest of individuals to aggravate the disease.”

I do hope that as we swim around the goldfish bowl of history again, we can get beyond the stale old state versus markets debate and recognize – as in this latter quotation – that the two go hand in hand in the face of collective action problems, externalities, uncertainty and the like.

[amazon_image id=”1607960869″ link=”true” target=”_blank” size=”medium” ]The End of Laissez-Faire: The Economic Consequences of the Peace[/amazon_image]