Simon Wren-Lewis: Afternoon Must-Read: Keynes and the Macmillan committee

Simon Wren-Lewis: Keynes and the Macmillan committee “When I was younger, I drew the wrong inference about the Great Depression…

…If only the General Theory had been written 10 years earlier, I reasoned, much of the agony of the Great Depression could have been avoided. Instead I should have focused on the gold standard… because of what it tells you about the influences on macroeconomic policy. Montagu Norman said to the committee ‘I have never been able to see myself why for the last few years it should have been impossible for industry, starting from within, to have readjusted its own position’. This was a few years after the General Strike of 1926! This was not someone lacking a coherent theory, but someone blind to the evidence and human nature, and enthralled to the ideology of the gold standard. No doubt being a central banker rather than a worker, or even an industrialist, helped this blindness. The lesson I should have drawn from the Great Depression is that a powerful ideology, in the hands of people remote from those adversely affected by it, can overcome common sense and evidence.