I just read for the first time since the late 1970s Keynes’s essay How to Pay for the War, published in February 1940 on the basis of two Times articles of November 1939. (It’s included in my 1972 RES/Macmillan edition of Essays in Persuasion.)
My immediate interest was the part this essay played in the development of official national output figures in order to measure the economy’s productive capacity: Keynes’s frustration at needing to rely on the private estimates recently published by Colin Clark is evident.
However, I’m struck – awed – by the clarity of Keynes’s overview of the way the war economy needed to be managed. The ability to step back from small parts of a problem to see the whole is rare. In this case, it involved understanding that a different way of thinking was required, so greatly had the context changed. Keynes wrote:
“We have become so accustomed to the problem of unemployment and excess resources that it requires some elasticity of mind to adapt our behaviour to the problem of full employment and of resources which are no longer adequate to supply our needs.”
Elasticity of mind – a lovely phrase for a capacity so few of us have.
This question of changed context is surely relevant to today’s macro policy questions. It often seems to me that the dispute between different camps is a matter of disagreement about context. In other words, they disagree about the nature of the most pressing problem. I’ve always been very taken with the way Edmond Malinvaud set this out explicitly in The Theory of Unemployment Reconsidered, although I don’t think his specific ’70s framework fits the kind of open economy and financialised world we have now.