Friday, 10 October 2008

The Dismal Science of Imprudence

The flippant response of John Maynard Keynes to the criticism that his economic policies were guided by short-term considerations was to say that in the long run we are all dead. His response suits well the nihilistic-consumptive character of public government, which his economics was intended to serve: nothing matters but the present and the near-future. Since our governors are not owners of the government, but rather the short-term elected holders thereof, who will leave their depredations not to kin but to strangers and rivals, and since neither they nor their descendants will have to bear personal liability for debts incurred under their tenure, they have little incentive for moderation or for securing the long-term capital-value of the state which they govern. On the contrary, since their time-horizon is largely set by the next election, or perhaps — if they are unusually “far-sighted” — by the one after that, the great incentive is for the maximisation of present and near-future income through capital-consumption at the expense of long-term capital-values. [1]
[I]t is alarming to see that after we have once gone through the process of developing a systematic account of those forces which in the long run determine prices and production, we are now called upon to scrap it, in order to replace it by the short-sighted philosophy of the business man raised to the dignity of a science. . . . I fear that these believers in the principle of après nous le déluge may get what they have bargained for sooner than they wish. [2]
Where there is a great incentive to imprudence, there are clever men willing to make it a science.
[1] As explained by Hans-Hermann Hoppe, Democracy: The God that Failed (New Brunswick & London: Transaction Publishers, 2001).
[2] F.A. Hayek, “The Economics of Abundance”, in The Critics of Keynesian Economics, ed. H. Hazlitt (New York: The Foundation for Economic Education, 1995), p.130.


Anonymous said...

"in the long run we are all dead": and in some cases, sooner.

James Higham said...

Since when has short-termism not been the guiding principle, if not that of corner-cutting?