A Keynesian Christmas Miracle: Stones into Bread

by Mario Rizzo

Some mainstream opponents of Austrian economics have complained over the years that Austrian economics is a “religion.” I have no doubt that in the hands of some it is so. I shall leave it to others to explore this. However, in this post I want to give the reader a taste of the secular religiosity of Keynes’s 1940s followers.

 After reading this, the reader should consider to what extent the intolerance to non-Keynesian ideas shown today by not-a-few journalists and economists wearing journalist hats is in the religious tradition of these early “Keynesians.”  I simply post some excerpts from an article by Ludwig von Mises, addressed to the general public, called “Stones into Bread: The Keynesian Miracle” originally published sixty years ago in 1948. It was reprinted in a volume called Planning for Freedom.  

John Maynard Keynes, late economic adviser to the British Government, is the new prophet of inflationism. The “Keynesian Revolution” consisted in the fact that he openly espoused the doctrines of Silvio Gesell. As the foremost of the British Gesellians, Lord Keynes adopted also the peculiar messianic jargon of inflationist literature and introduced it into official documents. Credit expansion, says the Paper of the British Experts of April 8, 1943, performs the “miracle . . . of turning a stone into bread.” The author of this document was, of course, Keynes. Great Britain has indeed traveled a long way to this statement from Hume’s and Mill’s views on miracles. …………..


Professor Seymour E. Harris has just published a stout volume of collected essays by various academic and bureaucratic authors dealing with Keynes’ doctrines as developed in his General Theory of Employment, Interest and Money, published in 1936. The title of the volume is The New Economics, Keynes’ Influence on Theory and Public Policy (Alfred A. Knopf, New York, 1947). …………… 

The editor seems to be unable to conceive that any honest and uncorrupted man could disagree with Keynes. As he sees it, opposition to Keynes comes from “the vested interests of scholars in the older theory” and “the preponderant influence of press, radio, finance and subsidized research.” In his eyes, non-Keynesians are just a bunch of bribed sycophants, unworthy of attention. Professor Harris thus adopts the methods of the Marxians and the Nazis, who preferred to smear their critics and to question their motives instead of refuting their theses. ……………..

A few of the contributions are written in dignified language and are reserved, even critical, in their appraisal of Keynes’ achievements. Others are simply dithyrambic outbursts. Thus Professor Paul E. Samuelson tells us: “To have been born as an economist before 1936 was a boon—yes. But not to have been born too long before!” And he proceeds to quote Wordsworth:

“Bliss was it in that dawn to be alive,
But to be young was very heaven!”

Descending from the lofty heights of Parnassus into the prosaic valleys of quantitative science. Professor Samuelson provides us with exact information about the susceptibility of economists to the Keynesian gospel of 1936. Those under the age of 35 fully grasped its meaning after some time; those beyond 50 turned out to be quite immune, while economists in-between were divided. After thus serving us a warmed-over version of Mussolini’s giovanezza theme, he offers more of the outworn slogans of fascism, e.g., the “wave of the future.” ………….

But the Keynesian miracle fails to materialize; the stones do not turn into bread. The panegyrics of the learned authors who cooperated in the production of the present volume merely confirm the editor’s introductory statement that “Keynes could awaken in his disciples an almost religious fervor for his economics, which could be affectively harnessed for the dissemination of the new economics.” And Professor Harris goes on to say, “Keynes indeed had the Revelation.”  



Please read the whole article. The reader can decide for himself whether Mises might have been guilty of some oversimplifications (the article was for the general public, however). In any event, I don’t detect any religiosity in Mises’s article.

29 thoughts on “A Keynesian Christmas Miracle: Stones into Bread

  1. Mario:

    Frequently during the 1920s and 1930s, Keynes would write (usually for the popular press) about the current economic situations and use language that certainly seemed like moraliizing attacks on the market economy and the capitalist system.

    Indeed, some of his rhetoric bordered on attitudes that can only be called “anti-economic” in which he condemned the idea that incomes should be dependent on the uncontrolled and ethically irrational forces of market competition.

    Mises and Hayek never argued in the same way. For them, the market was a set of social institutions that had evolved out of the emerging spontaneous order.

    To function properly prices and wages had to be flexible enough to adapt to changing market circumstances, without which coordination and balance could not be established.

    Political interventions were like “sand in the machine” that retarded or prevented the necessary corrections in the relative price structure and the proper allocations of resources in the face of post-boom discoveries of malinvestments and misallocations, and distorted price relationships.

    Mises’s and Hayek’s “sin” was to point out that the government emperor had no clothes to solve the “economic problem” without acceptance of the inescapable logic of the market process.

    Richard Ebeling

  2. The most interesting part about that wonderful Mises piece is his reference to Carlyle and Ruskin as the source of much mischief in the history of classical liberalism. Sandy Peart and David Levy had to rediscover that point 50 years later…

  3. At the risk of sounding very elitists I think that non-social scientists (I am a BA in econ working on a Phd) don’t understand the huge methodological gap between Austrian and just about all other social sciences, except perhaps really out there post modern social theory.
    Austrians reject statistics and data. Hayek was kind of an exception in his early career but Austrian advocate a non-scientific approach based upon making deductions from self-evident axioms.
    I think that out in the blogosphere a lot of people like Mises, Hayek et al. because it matches their politics or provides their previously held beliefs with some intellectual support. There’s nothing wrong with that per se. But you have to look at the methodology.
    If you show a die hard Austrian a thousand empirical studies that do not corroborate one of their deductions it doesn’t matter because they reject empiricism. Calling Austrian Economics a religion might go a little to far, but I think its basically a type of prescientific social theory, sort of like Marxism. Hard-core classical Marxists take everything grampa Karl said as true and Austrians commit the same type of error.
    I just think the world doesn’t need more thinking like this. Yes, paradigms should be challenged but making deductions from axioms is not a good methodology. Heck, its not even a methodology! Sorry Austrians.

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