Kyenes's 'means to prosperity'

In 1933, Keynes published a pamphlet titled 'the means to prosperity' which proposed that

1) the problem facing the world was one of not distribution but coordination. Yet when relative prices change, there are distributional effects if enough of income goes to or arises from a particular market (e.g. wages for workers, real interest rate for thos eliving off savings, oil for those who own oil wells etc.). Consumers who spend a big proportion of their income on a particular item- e.g. potatoes or rice for subsistence farmers)- sufffer a loss in 'real income' when the price of that staple rises. 

Changing the price vector is contentious. Moreover it may have perverse effects. Fix the price of bread too low and there is no bread in the market. The rich eat meat instead. The poor starve. 

What isn't contentious is improving coordination. People do that all the time. They don't need some stupid Professor to tell them how to do mutually beneficial deals.

2) No 'concurrency problem' arose- i.e. there was some 'natural' way of deciding in what order things should be done even if this had distributional consequences. Sadly, what is contentious is the order in which things are done. Everyone thinks they should get priority or else they expect some reward for delaying their gratification. 

3) Keynes was also saying that Structural unemployment associated with falling or stagnant productivity didn't really matter. Something could be done for workers in 'Sunset industries' without harming 'Sunrise industries' by taxing them too the hilt. 

THE NATURE OF THE PROBLEM

If our poverty were due to famine or earthquake or war

some poverty around the world- e.g. in China where Civil Wars raged- was attributable to such things. Britain wasn't poor because it had won the war, avoided a prolonged General Strike, and could import as much food as it liked from its huge Empire.

—if we lacked material things and the resources to produce them, we could not expect to find the Means to Prosperity except in hard work, abstinence, and invention.

People did lack material things. The 'resources to produce them' were too expensive for them to be profitably produced. One reason for this was that rents needed to fall in real terms. But a lot of the capital stock needed to be sold for scrap. There had to be a shake out in many different industries.  

In fact, our predicament is notoriously of another kind. It comes from some failure in the immaterial devices of the mind,

people had different views about what was right and what was expedient. It is difficult to coordinate the actions of people who want different things and who hold radically different beliefs about how the world works.  

in the working of the motives which should lead to the decisions and acts of will, necessary to put in movement the resources and technical means we already have.

Suppose there were a 'revelation principle' such that everybody would truthfully reveal to a central planner exactly on what terms they would be willing to buy and sell commodities and consume and pay-for public goods, then there might be an incentive compatible 'mechanism' to optimally coordinate actions. Sadly, there is a problem of impredicativity- our preference depends on the preferences of others. More sadly, we don't know the truth about ourselves for a very good reason- viz. to baffle a predator or parasite our 'source code' is hidden even from ourselves. Moreover, there are concurrency, complexity, computability and categoricity problems which make the problem intractable. 

It is as though two motor-drivers, meeting in the middle of a highway, were unable to pass one another because neither knows the rule of the road.

Easily solved if one is willing to give way.  

Their own muscles are no use; a motor engineer cannot help them; a better road would not serve. Nothing is required and nothing will avail, except a little, a very little, clear thinking.

No. Clear thinking won't help. One has to give way to the other. A sacrifice has to be made.  

So, too, our problem is not a human problem of muscles and endurance.

Nor, for Old Etonians like Keynes & Strachey, was their problem sutpidity and ignorance. This is because if you are an Economist, talking bollocks is what gets you paid, son.  

It is not an engineering problem or an agricultural problem. It is not even a business problem, if we mean by business those calculations and dispositions and organising acts by which individual entrepreneurs can better themselves. Nor is it a banking problem, if we mean by banking those principles and methods of shrewd judgement by which lasting connections are fostered and unfortunate commitments avoided. On the contrary, it is, in the strictest sense, an economic problem, or, to express it better,[Pg 6] as suggesting a blend of economic theory with the art of statesmanship, a problem of Political Economy.

It was a coordination problem of a type familiar to oligopolists, bankers, etc. If everybody raises price or expands output at the same time, chances are they will all do okay. If one expands and the others don't, it may go bankrupt.  

I call attention to the nature of the problem, because it points us to the nature of the remedy.

If we all point our arses in a particular direction and fart simultaneously, we will be able to reverse the direction of rotation of the earth. As the first Superman film showed, this will cause time to go backward. In this way we can defeat Lex Luthor and save Lois Lane.  

It is appropriate to the case that the remedy should be found in something which can fairly be called a device.

For Keynes, money was a 'subtle device' for linking the present to the future.  

Yet there are many who are suspicious of devices,

gimmicks? 

and instinctively doubt their efficacy. There are still people who believe that the way out can only be found by hard work, endurance, frugality, improved business methods, more cautious banking, and, above all, the avoidance of devices.

These things would still be required. But one thing more was needful. A collective determination to talk the right, rather than the wrong sort, of bollocks. 

But the lorries of these people will never, I fear, get by.

Because lorry-drivers didn't go to Eton. Thus they don't understand that one or other must give way. Either, the thing is covered in the Highway Code or they toss a coin or have a pissing contest. 

They may stay up all night, engage more sober chauffeurs, install new engines, and widen the road; yet they will never get by, unless they stop to think and work out with the driver opposite a small device by which each moves simultaneously a little to his left.

What Keynes says about 'lorries' is also true of people. If you go to the City of London, you will find Bankers standing motionless on the street. This is because they don't understand that if they both move a little to their left, they will be able to pass each other by.  

It is the existing situation which we should find paradoxical.

If we were mad.  

There is nothing paradoxical in the suggestion that some immaterial adjustment—some change, so to speak, “on paper”—should be capable of working wonders.

It is magical thinking.  

The paradox is to be found in 250,000 building operatives out of work, when more houses are our greatest material need.

Why did Keynes want yet more houses? His material needs were easily met by waiters and tailors and rent-boys.  

It is the man who tells us that there is no means, consistent with sound finance and political wisdom, of getting the one to work at the other, whose judgement we should instinctively doubt.

More particularly if he shows us his dick. Otherwise, the fact is, we don't meet a lot of blokes who talk to us about 'sound finance'. We do meet guys who say they will lower our taxes or raise our benefits if we vote for them. The problem is that there's some stupid shit they feel it is very important for them to do before they get round to keeping their promises.  

The calculations which we ought to suspect are those of the statesman, who, being already burdened with the support of the unemployed, tells us that it would involve him in heavy liabilities, present and to come, which the country cannot afford, if he were to set the men to build the houses; and the sanity to be questioned is his, who thinks it more economical and better calculated to increase the national wealth to maintain unemployed shipbuilders, than to spend a fraction of what their maintenance is costing him, in setting them to build one of the greatest works of man.

Keynes didn't know that the cost of a ship or a house includes raw materials and expensive equipment. He probably thought builders shit out bricks.  

When, on the contrary, I show, a little elaborately, as in the ensuing chapter, that to create wealth

by getting builders to shit out bricks & then use those bricks to build houses which can float on air (to save on having to pay for building plots) 

will increase the national income and that a large proportion of any increase in the national income will accrue to an Exchequer, amongst whose largest outgoings is the payment of incomes to those who are unemployed and whose receipts are a proportion of the incomes of those who are occupied, I hope the reader will feel, whether or not he thinks himself competent to criticise the argument in detail,

Did you know that if you buy a Time share, not only will you get free holidays, you will also receive rent for all the weeks when you aren't on holiday? This basically means that you double your income! What's more, if you take a Time share on your Time share, you can quadruple your money! No wonder the Government wants to ban what they call 'fraudulent' Timeshare sales. Don't they understand that if everybody's Income quadruples, so will the Government's tax revenue! 

that the answer is just what he would expect,—that it agrees with the instinctive promptings of his commonsense.

You'd have to be an idiot to pass up this amazing opportunity! Also I have some magic beans you will want to exchange your cow for. 

Nor should the argument seem strange that taxation may be so high as to defeat its object,

because of the disincentive effect? 

and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the Budget. For to take the opposite view to-day is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more;—and who, when at last his account is balanced

by the forced sale of his inventory 

with nought on both sides,

No. There is likely to be a loss. 

is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.

The manufacturer knows his business well enough. If the current price doesn't cover your marginal cost you may as well see if demand is inelastic. If it isn't, you go bankrupt a bit more quickly- which may be a blessing in disguise.  

Economists pretend that there was a 'device' to fix the Depression which would have no distributional or other socially divisive or politically problematic consequences. But, it was obvious, there was no such magical remedy. 

It is a different matter that Accountancy practices in the Treasury & Reserve Bank needed to change just as they needed to change in the private sector. Better book-keeping is a 'means to prosperity'. Writing books can make you a bit of money but won't have any magical effect on the economy.