Ferguson’s Blooper on Keynes
The esteemed historian inadvertently gives the Left a cudgel against the “austerians.”

Niall Ferguson


James Pethokoukis

It was an unusually feisty weekend in corners of the blogosphere and Twitterverse where dwell economists and economic-policy wonks. But the surprising April jobs report wasn’t the hot topic. Instead, the kerfuffle’s source was the ill-advised dabbling in pop psychology by superstar historian and outspoken debt hawk Niall Ferguson. In a speech the other day before financial advisers in Carlsbad, Calif., Ferguson casually suggested that John Maynard Keynes’s advocacy of running big budget deficits during downturns evidenced complete disregard for the future. Another fusillade in the Great Austerity Debate.

Then Ferguson stepped further and speculated that Keynes’s supposed apathy may have derived in part from his being childless and gay. Ferguson’s off-the-cuff equation: Keynes’s “in the long-run we are all dead” truism combined with his having zero progeny to produce nonchalance about fueling consumption with massive debt. Or, as Saint Paul summed up such present-focused attitudes: “Let us eat and drink, for tomorrow we die.”

In one fell swoop, Ferguson managed to clumsily and unexpectedly — and unnecessarily — merge current policy debates about same-sex marriage and parenting with arguments over the proper level of fiscal austerity when economies stumble. Not an easy trick. Well done, Ferguson. If nothing else, we now know what it takes for an economic story to make the Gawker homepage: “Harvard Prof Slams Keynesian Economics Because Keynes Was Gay.” (The headline immediately above: “Check Out This Horrifying Brazilian Testicle Mascot.”)

Ferguson has since issued an “unqualified apology” on his personal blog stating that he actually does believe people without children care about the day after tomorrow. One logical way of gauging concern about the future is by looking at how much people save. People who deem everyday anecdotal evidence insufficient might take note that some scholarly work finds gay couples actually save more than their straight counterparts do. Links to this research, along with much invective, are undoubtedly now filling Ferguson’s in-box.

Ferguson also wrote that it is “false” to suggest that Keynes’s “approach to economic policy was inspired by any aspect of his personal life” — probably an insufficient clarification for rabid Keynesians looking to deliver a knockout blow to tightwad Austrian-minded “austerians.” This group was already jubilant after some economists found flaws in the famous Reinhart-Rogoff study connecting high debt levels with anemic economic growth. What a delicious turn of events for the Krugmaniacs on the left: They can now smear Keynesians critics as both sloppy researchers and homophobes, leaving a contentious and important debate further toxified.

Ferguson’s comments also lower the odds of having rational debate about two other critical issues. First, while the childless may indeed care about the future, their personal choice has a big impact on how prosperous that future may be. Declining birth rates globally pose huge challenges for government budgets, societal stability, and the pace of innovation.

Second: Is faster economic growth a desirable goal for advanced economies? On this issue, Ferguson’s comments contain a kernel of truth. Keynes didn’t like saving. Oh, he understood that economic growth requires capital accumulation. He just wished it wasn’t so. As biographer Robert Skidelsky has put it: “Keynes didn’t like postponement and always looking to the future as a moral and psychological quality. He admitted it was necessary, but he hoped that it would give way as quickly as one possibly could to enjoyment, and getting enjoyment from the present rather than always thinking about the future.”

The “economic problem” for Keynes, then, was to arrive ASAP at the day when society would finally contend with its “permanent problem”: figuring out how to use “freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.” The permanent problem is having permanent vacation.

For some liberals, America is already there, plenty rich enough that we need more focus on redistribution than environmentally harmful wealth creation. “Enough!” they cry. Rather than measure economies by gross domestic product, measure by gross domestic happiness or some such, they urge. What they and Keynes underestimated is that work is about more than consumption and acquisitiveness. A growing economy is also an economy that creates opportunities to pursue a passion and create a life of value through earned success. It’s a message that should have broad appeal — as long as the messenger doesn’t inadvertently step all over it.

— James Pethokoukis, a columnist, blogs for the American Enterprise Institute.