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Continual Erosion and the "General Equilibrium": Pedro Schwartz
4 paragraphs found.
 

The macro attack was led by John Maynard Keynes, after the Great Depression had thoroughly undermined confidence in the free market system. Indeed, a few years before he had proclaimed "The End of Laissez Faire" (1926) [emphasis modified]. As was to be expected, in his General Theory of Employment, Money, and Interest (1936) he would propose the theory that modern economies tended to find themselves in the doldrums of unemployment equilibrium, and that the remedy lay in the hands of governments, in their role as saviors of bourgeois civilization.

 

In 1926 Keynes wrote an essay tellingly titled "The End of Laissez-Faire". He there wanted to set aside 'the metaphysical principles' on which laissez- faire had been grounded.

It is not true that individuals possess a prescriptive 'natural liberty' in their economic activities. There is no 'compact' conferring perpetual rights on those who Have or those who Acquire. The world is not so governed from above that private and social interests always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the principles of economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately. (1926, pages 287-288)

 

Keynes, John Maynard (1926): "The End of Laissez Faire", in Essays in Persuasion, in The Collected Writings of John Maynard Keynes, vol. IX, pgs. 272-294. Macmillan.

 

Mill was inclined toward the use of legislation rather than administrative interventions to correct market failures. See the analysis of Mill's article on "Centralization" (1862) in Pedro Schwartz (1972), chapter 6, "Laissez Faire", pages 146-150.