Not that I am really a very good Keynesian

Folks should understand that Keynes was an elite Brit who had no trouble thinking that bankers should run the world and would do it well if they only listened to him.  Late in life, Keynes would get religion and his ideas would actually reflect the content first put forth by folks like the Greenback Party and the other organizations that came into being as a response to the "Crime of 1873."  With my progressive midwestern roots, I grew up believing that Keynes was the best one could expect from a British banker's representative.  He was better than nothing but pretty weak tea compared to what our grandfathers had attempted.  To get a feel for where my people were coming from, you might want to read Thorstein Veblen's review of Keynes The Economic Consequences of the Peace.

Why Do Conservatives Loathe Keynes?

By: masaccio Sunday August 1, 2010 10:30 am 

One reason conservatives loathe Keynes is his view of financial markets:

The social object of skilled investment should be to defeat the dark forces of time and ignorance which envelop our future. The actual, private object of the most skilled investment today is to “beat the gun”, as the Americans so well express it, to outwit the crowd, and to pass the bad, or depreciating, half-crown to the other fellow.*

Keynes thinks that the real value of an asset is based solely on the stream of income it will produce, and that the social purpose of investing is to determine that stream as accurately as possible. He then explains that the financial markets don’t do that at all. Among the reasons he gives are the following:

1. There are a lot of ignorant amateurs in the market, who lack the time and skill necessary to value securities.

2. The normal fluctuations in the day-to-day profitability of businesses play too great a role in the estimates of value by casual investors.

3. If conventional valuations are based on crowd psychology, they are subject to greater fluctuations than the opinions of professional investors. Volatility creates greater risks for professionals.

4. Professional investors cannot exploit the incorrect long-term valuation of the crowd, because crowds can be stupid longer than professionals can stay solvent.

5. Professional investors are in large part dependent on the willingness of banks to lend them money, which means that their ability to do their socially useful thing is dependent on the views of people who don’t know anything about what the professionals are doing. more