Keynes's Grandchildren

Papers that changed how I see things: a series

We approach the end of the semester, and I have a tradition of including John Maynard Keynes’s 1930 essay “Economic Possibilities for our Grandchildren” in the last few weeks of the Arts Policy course syllabus. And so here we go again.

Keynes had been giving a version of this essay as a talk for a few years before it was published in his (short-lived) journal The Nation and Athenaeum, and was meant for a wide audience. It is an interesting essay for my students because they are his grandchildren; in the essay Keynes is looking one hundred years ahead.

It is best known for Keynes’s speculation that by this time our workweek could have shrunk on average to ten or fifteen hours per week, and even that might be more than needed for the economy to produce all that we need to live a good life. Could, not would: we need to remember he is talking about possibilities. So why didn’t it happen?

His predictions on income growth from accumulating technological advances were not far off the mark - the twentieth century really did see tremendous increases in labor productivity. Here’s a chart showing labor productivity since 1950, where it increases four-fold by 2015 (compensation does not - I’ll come back to that). Keynes thought productivity would rise between four-fold and eight-fold in the hundred years after 1930, and this was not a bad guess.

The point of the essay is the choice regarding what to do about this increased productivity. We can continue to work as always, settling for a forty-hour week for time eternal, or we could dial that back, and spend more time leading a good life, enjoying the intrinsic goods of the beauty of art and nature, the pursuit of knowledge, love and friendship, and doing our best to let these benefits be widespread. He says (and I quoted this earlier, in response to the daft notion that what this country really needs is for people to work further into their old age):

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 higher 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 semi-criminal, 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 or 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.

But it will not be easy:

Now it is true that the needs of human beings may seem to be insatiable. But they fall into two classes --those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs-a point may soon be reached, much sooner perhaps than we are all of us aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to non-economic purposes …

Yet there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society. To judge from the behaviour and the achievements of the wealthy classes to-day in any quarter of the world, the outlook is very depressing! For these are, so to speak, our advance guard-those who are spying out the promised land for the rest of us and pitching their camp there. For they have most of them failed disastrously, so it seems to me-those who have an independent income but no associations or duties or ties-to solve the problem which has been set them.

What went wrong? Producing enough goods and services to satisfy all of our ordinary needs is a goal achieved. In aggregate, the world economy is fantastically productive. Two things prevented us from reaching Keynesian utopia. Zachary Carter:

In his essay, Keynes distinguished between human needs essential to survival and semi-needs whose “satisfaction lifts us above, makes us feel superior to, our fellows. Needs of the second class, those which satisfy the desire for superiority, may indeed be insatiable.” This effort to keep up with the Joneses has no doubt played a role in lengthening the workweek. But the primary culprit is simple inequality. The tremendous expansion of output and productivity over the past ninety years has been harvested for the most part by a very small section of society. For everyone else, economic prospects are roughly where the were in the mid-1920s (although a decline in the overall workweek from 1930 to 1970 suggests very clearly that people are not really eager to work the hours they do) [I would note that this time period also saw falling income inequality throughout, a trend that reversed in the late 1970s and thereafter: MR]. As any working family can attest, they work because they have to.

A public school-teacher taking a waitressing job over the summer months to make ends meet is not in the grip of a “disgusting morbidity”, but is at the mercy of an economic system whose priorities are all off kilter.

But it is also true that the upper strata - let’s say households in the top quartile of annual income - are chasing accumulation of wealth, conspicuous consumption, and preservation of the family position in that quartile, that does represent something deeply amiss: larger houses, behemoth pickup trucks and SUV’s to take the kids to soccer practice and pick up a few groceries at Kroger, and what in some families is a pathological race to secure places for their children in the most-valued schools. And all accomplished through long hours of work, and a number of years of working life that suggests that many of them would simply not know what to do with themselves outside of the office. Brad DeLong:

… for all the economic progress that was achieved during the long twentieth century, its history teaches us that material wealth is of limited use in building utopia. It is an essential prerequisite but far from sufficient. And this is where Keynes’s comment about the most permanent problem being how “to live wisely and agreeably and well” comes in once again. His speech was an important moment because he so perfectly expressed what the essential difficulty has proved to be.

What do my students make of all this? I’m never really sure (no professor is, I reckon). I at least hope to open their minds to a possibility, a different way of thinking about what the economy, what work, is for. I don’t teach students with a lot of money in the bank; they all have jobs in mind after graduation with good reason - they have to. But if they occasionally remember down the road that people have thought about alternatives, that’s something good.