Sorry folks – haven’t posted in a while. Been busy reading and working on some other stuff.

One of the areas I’ve been brushing up on has been Keynesian economic theory. No, not the “neoclassical synthesis” of the Paul Samuelson variety. I mean what did John Maynard Keynes actually say about economics/economic theory etc.

As those who already know Keynes’ work well, they would be familiar with the importance of uncertainty in his theories. For Keynes, who earlier in his career had written extensively on probability, this previous intellectual exploration helped to inform his signature economic theories. Unlike classical/neoclassical/new classical theory and its belief in some (or many) certainties, Keynes used uncertainty as a building block for his economic theories. Despite being a fiscal conservative (yes it is true), Keynes still called for stimulation of demand by government and a host of other policies (e.g., low interest rates, elaborate arrangements to deter balance of payments crises) precisely due to uncertainty.

Which brings me to industrial policy. While mainstream economists hold their noses at industrial policy, relegating it to address “market failures” or “infant industry” situations, is uncertainty not an important justification for industrial policy? Given that no one can predict the future, how do we know for certain that the economy will provide good-paying jobs for the residents of a jurisdiction? In the current context of AI, and the quasi-religious belief that long-term net job gains will offset any perceived short-term technology-induced unemployment, would a sounder (and more conservative!) policy not be to say, “Hey – we don’t know what will happen; let’s use industrial policy as insurance”?

Certainly, this is not a revelation. Obviously, the post-war approach to growth and the variant of Keynesianism that was used (that seemed to deviate substantially from what Keynes actually wrote) also used these kinds of ideas to encourage different types of industries and activities. Even still, in the post-IRA world that we live in, where the intellectual justifications for industrial policy seem to be more anti-neoliberalism than “pro-something,” I think this is an important point. Far too often, mainstream economic thinking projects a kind of certainty that relegates intervention in the economy as unnecessary. But if we use uncertainty as an essential aspect of contemporary capitalism, it does further strengthen the case for industrial policy. At least it does for me!