The End of (Economic) History?

Daily News Egypt
6 Min Read

Some academic works, for reasons that are at least partly obscure, leave a persistent trace in intellectual history. Such is the case with John Maynard Keynes’s paper “Economic Possibilities for our Grandchildren. The importance of Keynes’s paper consisted not so much in how he answered the questions he posed, but in the nature of the questions themselves. Could the very functioning of the capitalist system bring an end to the problem of scarcity – and hence to capitalism itself? What might people’s lives in such an era reasonably be expected to look like? Keynes began to examine these questions with the calculus of compound interest and its spectacular outcome when applied to long periods. At a 2 percent rate of growth, any figure, including GDP, will increase 7.5-fold in a century. So, would the problem of scarcity – which underlies all economics – be resolved by such an increase? For Keynes, the answer was a straightforward yes, because such an increase would allow the satiation of what he calls “absolute needs. True, Keynes was well aware that relative needs – “keeping up with the Joneses – will never be satiated, but he thought that these needs would become of second-order importance, so remote from the search for the good life that seeking to satisfy them would be recognized as a form of neurosis. According to Keynes, we would instead progressively learn how “to devote our further energies to non-economic purpose. But here arithmetic ends and the complexity of human nature begins. How are we to define “absolute needs ? Are they independent of time and place? Were they the same at the beginning of the 20th century as they are now? This is where Keynes’s thesis runs into trouble. As soon as we abandon the fiction that economic agents are Robinson Crusoes, absolute needs turn out to be indistinguishable from relative needs, because the goods that satisfy our needs change. For example, life expectancy has increased over time thanks to the progress of medicine and hygiene and to the increased quality and diversity of goods (for example, safer food). The demand for better goods (and services) to meet our needs seems to be boundless, driving science and innovation. Keynes may have relied so heavily on such a simplistic characterization of human needs to make his point “that the economic problem is not . the permanent problem of the human race. While this view may be exaggerated, for believers in economic and social progress, it is not entirely wrong. At the very least, scarcity need not be a question of life and death. All that is required is an increase in the standard of living and social cohesion – the refusal to endanger the lives of the poorest through a lack of redistribution. Nevertheless, scarcity would remain, because there is no such a thing as a stationary state in which all needs are satisfied and mankind ceases to hope for a better future. But Keynes’s emphatic tone suggests that he believed in his own taxonomy of needs. What he found most detestable was capitalism as an end in itself. Capitalism is an efficient means, but pure communism is the only moral end of any economic system. At that point, “[t]he love of money as a possession . will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. For Keynes, only those who will be able to sublimate their non-satisfied relative needs into a higher ideal would find their way in the new paradise. “We shall honor those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin. Keynes seemed to be extolling a kind of elite communism. Of course, in a world of abundance, one may hope that the class of elites will become ever larger. But, while every economist should try to answer the question of the ends of the economic system and of its possible end, Keynes’s understanding of human needs embodied a highly idiosyncratic combination of arrogance and naïveté. It is not surprising that it didn’t survive.

Jean-Paul Fitoussiis Professor of economics at Sciences-po and President of OFCE (Sciences-po Center for Economic Research, Paris). This article is published by Daily News Egypt in collaboration with Project Syndicate/Observatoire Francais des Conjonctures Economiques,

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