Book Review: Where Keynes Went Wrong

Last Updated Sep 1, 2011 3:01 PM EDT

I recommend Hunter Lewis's book, Where Keynes Went Wrong as important reading for those interested in economic theory, the recent financial crisis and the policy actions taken to address the crisis by governments and Central Banks around the globe.

Lewis first lays out Keynes's theories and arguments by presenting what Keynes' really said in his own words. He then discusses the theories and rebuts them. And you don't need a degree in economics to understand it. The book is quite readable.

The book is an important one because most of the world is following economic policies based on Keynesian principles. And if Lewis is right, then the prescriptions are the wrong ones. In fact, Lewis makes the case that the very policies being prescribed are the ones that created the recent crisis in the first place and have never worked in the past. For example:
  • "The problems that led to the financial meltdown of 2008 were rooted in too much debt. The solution, we are told, is more debt."
  • "Are artificially low interest rates cheapening the value of money and creating instability? The simple response to that would be to lower the rates further."
  • "If the market is not confident because of volatile spending and monetary irresponsibility, create more of both."
  • "If a company is 'too big to fail,' force weakened businesses to merge making them large, weak, businesses."
While I don't think Lewis' work is as good as Economics in One Lesson by Henry Hazlitt (to whom Lewis dedicated his book), the book is recommended reading given the importance of the issues. While my own vote is with economists such as Ludwig von Mises and Frederich Hayek, Lewis presents sufficient evidence for you to decide whether Keynes lost his way or Lewis and Hazlitt have it wrong.

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    Larry Swedroe is director of research for The BAM Alliance. He has authored or co-authored 13 books, including his most recent, Think, Act, and Invest Like Warren Buffett. His opinions and comments expressed on this site are his own and may not accurately reflect those of the firm.

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