Most seductive in this transformation was the fact that Keynes seemed to combine the worst fear of unbridled capitalism (mass unemployment) with the source of the greatest resentment (the idle rich) into a coherent explanation for the troubles that plagued the US and the UK. Not only was this message seductive to politicians seeking both a scapegoat and a program for action, it was attractive to the young and brilliant economists who were entering into the economics profession during the 1930s and 1940s. They were given a purpose – economic science could be a tool of social control that when utilized appropriately could balance the economy, eliminate inefficiencies and curb injustice.
This is the world that F. A. Hayek and company challenged. It is the great “counter-revolution” in economic thought in the 20th century. Angus Burgin’s The Great Persuasion is the best social history yet written on this episode.
Yesterday’s post, on the seemingly unstoppable growth of federal transfer payments to state and local governments, ended on a question: what happens when both parties to the transaction, the states and the feds confront unsustainable commitments? The brilliant answer our federalism has produced: make yet more unsustainable commitments. Why? Read on to find out.
