Papers belonging to John Maynard Keynes were discovered in the archives of King's College Cambridge last year. Since then academics have been studying the manuscripts dated between 1940 and 1946.
Keynes was engaged in war work throughout that period and published nothing on economic theory, although he had stated that he intended to write a revised edition of the 'General Theory' in 1938 and had told Hayek that he could 'easily deal with' those such as Joan Robinson who were using his ideas for their own purposes. Keynes died in 1946 before the revised edition had been submitted and many of the papers are his revised draft of that book.
To the distress of many Keynesians, recently crawled out from under their stones, Keynes revises his view of the economy and states that demand management techniques only have a role in the very short term.
One section states; "In periods of severe restriction of aggregate demand, such as in the period of the recent depression, {1929 - 33} then it is the role of responsible government to abandon the pursuit of a balanced budget and boost national output through deficit finance."
He continues later; "Many have taken my meaning to be that government should seek to manage the level of national output through persistant budget deficits. This would lead to unsustainable debt and ignores the crucial importance of increasing productive capacity. Generally government should seek to balance their budgets to allow the industrial sector to create the wealth necessary for growth and improved living standards."
Professor Bob Williams of the WBO commented "Keynes was clearly preparing to put the world straight on a massive mis-interpretation of his work. He makes it clear that demand management is an emergency measure only and that classical, or monetarist views were those that should be used in normal times."
Professor Lord Robert Skidelsky, Keynes' biographer is quoted in The Sunday Times as saying; "I was wrong. I am devistated. These papers make it clear that Keynes never changed his views from 'The Treatese on Money' in 1930 but saw the Great Depression as a special case. I don't know what I will do now."
Well I always said Keynesians were wrong!
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