“The Bucks Stop Here”: Why Keynesian Economics Will Get Blamed for the Crash

by Gary North

For as long as the present economic system lumbers along, Keynesians will control the levers of power and influence. But when at last the system goes down in a heap, and central banks cannot restore the system, there will be a quest for answers.

Keynesians have the long-run disadvantage of being in control of the tax-funded educational system. They are in charge of the major economic institution of our day, the Federal Reserve System. They will get blamed. When people’s retirement plans are smashed, they are going to look for somebody to blame. That means Keynesians. The Keynesians will not be able to transfer this responsibility to somebody else. When you are in charge, the buck stops on your desk. In the case of Federal Reserve policy, it’s not just the buck that stops on your desk. It’s trillions of bucks.

Academic economists never want to take responsibility for the outcome of their recommended policies. They always try to blame somebody else for not having implemented what the recommended. But when you come to the 14 people who are on the Federal Open Market Committee, which sets policy for the Federal Reserve, there is no place to hide. The FOMC almost always is unanimous in its policy recommendations. There may be one dissenter, but that’s about it. So, there really is no place to hide. When the Federal Reserve finally is not in a position to restore economic growth by means of inflating the currency, Keynesians are going to get blamed.

When you live by the Federal Reserve, you die by the Federal Reserve.


I first began reading economics in 1958. Like so many of my contemporaries who began to study free market economics in that era, I was introduced to economics by The Freeman. The editor was a good writer, and he did not let bad writers’ articles into the magazine.

In 1960, I took my first course in college-level economics. The instructor seemed incompetent to me. In reviewing his economic textbook 55 years later, I am still convinced that he was indeed incompetent. He was never famous. He never got tenure. He disappeared into academic oblivion. He was a Keynesian.

I understood from my time in that class that academic economics is not based on any kind of logic that the average person can follow. This is one of the advantages that free market economists have. John Maynard Keynes could write cogent prose, but The General Theory (1936) is incoherent. Yet it gained an army of academic followers. It is the classic case of the emperor who had no clothes.

How did Keynes get his followers? Because he defended what the academic world wanted in 1936. It defended government intervention. Governments had been intervening for five years by the time the book was published. There was no academic defense of this intervention. Younger economists had become disillusioned with free market economics, because free market economists, with the exception of the Austrians, could not explain why the depression in 1936 was as bad as it was in 1931.

In other words, there was a loss of faith among younger economist regarding the academic establishment of 1936. The older academic economists in 1936 could not avoid this responsibility. The buck stopped there. They never recovered. By 1946, the year of Keynes’s death, among younger economists, Keynesianism was becoming dominant. With the publication of Samuelson’s textbook in 1948, it became dominant. By 1950, Keynesians dominated the economics profession, and the old-timers who may not have agreed were unable to follow the logic of Keynesianism. They were unable to do the mathematics that Samuelson was able to do. They looked like old fogies. They in fact were old fogies. They were not Austrian fogies. They could not defend their position.

Today, the Keynesians are in the position of the non-Austrian economists in 1930. Things look shaky, but not out of control. The Federal Reserve seems to be beyond criticism. Central banking runs the world, but the world is obviously in trouble.


Keynesians are not good writers. When it gets down to explaining economic cause-and-effect to the average person, the Keynesians helpless. The average person cannot follow Keynesian logic. There is a reason for this: there is no logic to it. The General Theory is illogical.

Most critics inside the academic establishment had been fearful of saying this directly. They may refer to the dense text of the book, but they do not come out and say that the book was completely illogical. That would mean that their colleagues are holding to a system that is, at bottom, illogical. This would be true, but would keep you from getting tenure.

Outside of the Keynesian academic establishment, there have been a few people who have said that Keynes’s book is incoherent, and there is no logic to his system. The best example is Henry Hazlitt, but he only said it in 1959, and almost nobody read the book: The Failure of the “New Economics.” The book is never footnoted by scholars. It is a fine book, but it was not written for an academic audience. It was not written in academic jargon. This is why it had zero influence in academia. It never had enough book sales within the conservative movement to gain a reputation.

By 1959, Keynesianism was dominant in academia. In fact, it had been dominant for at least a decade. Hazlitt was truly John the Baptist, crying in the wilderness. So, in the year of my high school graduation, there was virtually nothing available that anyone had heard of to refute Keynesian orthodoxy. It was like some freshman college student trying to find out what was wrong with Freud. Orthodoxy was entrenched in academia.

Nevertheless, the Keynesians’ dominance in academia does not make the system coherent. It only enables members of the academic establishment to lord it over outsiders and amateurs who did not pass the screening process that academia imposes on candidates for the classroom.

The Keynesians have always made a point never to mention Austrian economics. This was true in the late 1940’s. It was true in my days in the 1960’s. It is also true today. Keynesians do not introduce students to the most consistently anti-Keynesian materials. In the classroom, students might get a cursory reference to Marx, but nobody ever makes students study Marx’s theory of surplus value, and certainly nobody is ever asked to read Baohm-Bawerk’s refutation. In the early 1960’s, almost nobody in the classroom ever mentioned Milton Friedman. Today, I suspect that Friedman and the monetarists do get some attention, but the Keynesians control the departments, and therefore they control the selection of the textbook for the undergraduate course in economics.

They control the certification process. Monetarists can get through, as long as their mathematics is good enough. Keynesians use mathematics to screen candidates for the M.A.. Mathematics inherently is not applicable to economic theory, for the assumption that makes math applicable is market equilibrium: human omniscience. Only the Austrians maintain that mathematics is inherently inconsistent with economics. They defend this as an issue of epistemology, but no other school of opinion believes this.

This is why there was no way to get from The Freeman in 1958 to a Ph.D. There still isn’t. The academic guild screens out most people who believe in the unhampered free market. But in doing this, they also screen out people who can communicate well. This is the Achilles heel of academic economics today.


The students who get through the screening process have been forced to go through Keynesian economics and high-level mathematical training, neither of which leads to anything resembling the ability to communicate in English to an audience outside the academic guild.

In other words, these people talk only to each other. Most professors in every field are tempted to enter into the world of jargon. They get tenure in a research university only by being able to communicate in this jargon. They have to get articles published in journals that are edited by specialists in the guild’s jargon. At no stage of the academic process above the master’s degree is there any attempt to communicate the truth of the guild to the public. Actually, there is almost no training in communications at all, at any level, but certainly above the freshman level. The materials introduced thereafter are designed to screen out people who can communicate to the general public.

From the point of view of communicating to the general public, Keynesianism is at a distinct disadvantage. Keynesians espouse slogans. They tell us their goals. They insist that the government is capable of achieving these goals. But, as we look around ourselves, we see signs that the government is faltering.

Back in the early 1970’s, I met a very bright young man who was about 19 years old. He had become enamored with the free market by reading The Freeman. I was then on the staff of the Foundation for Economic Education, which published The Freeman.

He told me that he had gone through an intellectual crisis. He had begun to doubt Austrian economics. He was told in college about the Keynesian system. So, he decided he would test the two theories of economics. He sat down to read Hayek’s Road to Serfdom. Then he read Keynes’s General Theory. He said that this exercise had cured him of Keynesianism.

I think it would cure anybody who can think straight. Anyone who sits down to read Rothbard’s Man, Economy, and State, and then reads the latest addition of Samuelson’s economics textbook, is likely to come to the conclusion that he is not going to commit his life to defending Keynesianism.

When you cannot communicate the logic of your position to an intelligent decision maker, and the key institution that you have defended has failed to deliver the goods, you are in trouble. So is the ideology you defend.

The academic economists can get away with this, because funding is provided by taxpayers. Taxpayers have no say in any of this. The guild exists because of tax-funded education. This is true in every field. But in some fields, it is expected that you have the ability to communicate to the general public. The field of history is one of these. There are academic journals, and the journals are filled with narrowly focused articles. But historians are expected to be able to communicate the broad sweep of history to freshman students, which means that they have to be able to stand in front of a group and discuss historical cause-and-effect.


Today, unlike 1958, there is a huge body of supporting material, both academic and popular. This material is available free of charge on the website of the Mises Institute. This is why I am optimistic about the long run future of economic discussion. Austrians are trained to discuss. Keynesians are not.

The Austrian School has a tremendous advantage over Keynesians. In fact, it has an advantage over virtually all other schools of opinion. The Austrians can communicate in simple terminology the basic truths of their position. The graduate school level of communication is still accessible by people who read The Freeman, as long as they read carefully. The topics of the graduate school are probably not interesting to people who can read The Freeman, but if they ever do get interested, they have access to this body of material.

The Ludwig von Mises Institute is proving this on a regular basis. It has a lot of Internet traffic. It has more traffic by far than the website of the American Economics Association. The reason for this is obvious: the authors write in order to be understood. They want intelligent laymen to be able to follow their arguments.

There will come a time when it will pay to be able to communicate. In a time of economic crisis, which is surely coming, the economist who can communicate the logic of his position, and then persuade people to take action in terms of this position, is going to have an advantage over any economist who does not have this ability. It is a matter of both logic and rhetoric. The Keynesians are short on both.

Source: “The Bucks Stop Here”: Keynesian Economics Will Get Blamed for the Crash