I dashed off a letter in response to a rather odd article by Jeffrey Sachs in yesterday’s FT [£] (We must look beyond Keynes to fix our problems), which mixed a sensible call for increased investment with an assault on the Keynesian ideas which underpin it:
Every British Keynesian would agree with Jeffrey Sachs that the UK needs “increased infrastructure and educational investments” and that spending cuts should not be the main tool of deficit reduction.
But why does Professor Sachs insist on setting out his sensible stall in opposition to what he calls the “Keynesian model”?
Is it the odium theologicum of economics that makes natural allies attack each other?
Keynes said one very simple thing. An economy hit by a serious shock to demand may remain stuck in a low investment trap. In these circumstances, the government needs to boost investment spending. Why does Prof Sachs find this so shocking? It’s exactly what he says!