Keynes was not as wrong as he is often made out to be

In economic circles it is reasonably well-known that John Maynard Keynes, the great British economist, in a 1930 paper, Economic Possibilities for our Grandchildren made the forecast that in two generations, with advancing technology, people would be able to get by working only 15 hours a week.

This essay is often held up as an example of the arrogance of the public intellectual and their inaccuracy of predicting the future. And I agree that there is a strong track record of overly confident forecasts from people who are experts in a narrow field, failing to recognize that the factors affecting their field extend far beyond that with which they are familiar.

From Will Robots Steal Human Jobs? by David R. Henderson. Henderson points out that while Keynes was indeed incorrect, there is another way of interpreting his forecast that actually makes him prescient.

If we consider where he was forecasting the possible versus the actual, his forecast is much more accurate.

In 1930, British economist John Maynard Keynes, reflecting on the progress of technology, predicted that his generation’s grandchildren would have a 15-hour workweek. Assuming that a generation is 30 years, we should have had that 15-hour workweek in 1990. Did we? Not even close. Twenty-seven years after 1990, we still don’t. But why don’t we? Where did Keynes go wrong?

It wasn’t in his assumption about increasing productivity. Rather, Keynes was probably assuming that people would work enough to get the same standard of living they had in 1930. If that was his assumption, then he was quite accurate in predicting our productivity per hour. In the four score and seven years since Keynes made his prediction, our productivity has doubled and doubled again. We could easily have what we had then if we worked 15-hour weeks now.

MIT labor economist David Autor estimated that an average U.S. worker in 2015 could achieve his 1915 counterpart’s real income by “working about 17 weeks per year.” Seventeen weeks per year at 40 work hours per week is 680 hours per year. Spread over a 50-week work year, that’s 13.6 hours per week. And that overstates the workweek required for a 1930 standard of living for two reasons. First, the quality of almost everything we buy that is not produced by government has increased. Second, we can buy things that were simply unavailable then. Cell phones, anyone?

Why don’t we work 14-hour weeks? The answer, briefly, is that we want more. We are acquisitive people. Consider cars. Those few families that had cars in Keynes’s day usually had only one. Even 30 years later, when I was growing up, my father had one old Ford. And we were not poor: Dad’s income was probably just below the median income in Canada. Now, many families have two or three cars. We could do without televisions and smart phones, but we don’t want to. We could settle for being like most Brits or Americans in Keynes’s time, never traveling more than 200 miles from home. But we’ve heard about places called Las Vegas, Disneyland, and Florida—and, we want to go there. Also, antibiotics and other life-saving medicines come in awfully handy—but they cost money to get. The reality is that we want more and we will always want more.

So, if Keynes was forecasting that the same standard of living would be available to his grandchildren by working only 15 hours a week, he was correct. As Henderson points out though, our wants grow with our productivity and the 40 hour work week remains a mainstay.

This observation also answers the question frequently posed. Would you rather the simplicity and community of a hundred years ago or the productivity of today? Everyone could replicate 1917's standards of living if they wished to but vanishingly few choose to do so. Everyone wants the better life.

By the numbers, Keynes is more correct than he is usually given credit for. But from yet another perspective, he is as wrong as ever. Keynes was something of determinist. Without being a Marxist, he falls in that tradition which elevates expertise over the democratic voice, is convinced of the perfectibility of man (blank slatism), considers it appropriate that Plato's philosopher kings decide from the center on behalf of everyone else in the outer circle.

Keynes' paper anticipated the prospect that in the future man's nature would be modified such that people would be happy to work less for the same benefit.

There are changes in other spheres too which we must expect to come. When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. The love of money as a possession -as distinguished from the love of money as a means to the enjoyments and realities of life -will be recognised for what it is, a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.

I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.

We are virtually there. The percentage of the global population who live in absolute poverty keeps falling with globalization and technology and improved governance. Most the world has moved well beyond conditions of economic necessity.

But where Keynes and all totalitarians of the Platonic state have gone wrong is their consistent misestimation of man. Productivity allows people to work less than ever and instead of the Keynes' anticipated ideal, more people work more hours than ever. There appears to be no end to the appetites of man.

Given free people, Plato's utopia will have to wait.