Quote of the Week: John Maynard Keynes on the Long Run

In the long run we are all dead.

Although some people have interepreted this statement as Keynes displaying a callous disregard for the long term consequences of his proposed policies, that’s not quite accurate. Here is the same quote with a little bit more context:

But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.

Keynes uses this rhetorical flourish to criticise economists who only focus on the long run equilibrium and ignore short term effects. This is an entirely reasonable critique. Given that modern economies are in a constant state of flux, it is imperative that economic models have something to say about the process of how an economy adapts to new conditions.

As for the broader question of short term versus long term thinking, Keynes’ famous sentence offers an important antidote to the naive, but relatively widespread, presumption that short term thinking is automatically impulsive and rash and long term thinking prudent and wise. While I do think that excessively short time horizons tend to be more of a problem in today’s society (and many Keynesian economists are guilty of this) than excessively long ones, the opposite danger also needs to be taken seriously.

Perhaps the best contemporary example of excessive long term thinking are environmentalists who spend far too much time worrying about how human actions today might impact the planet hundreds or even thousands of years from now. Using a model which tries to predict the economic effect of climate change two hundred years into the future to try to guide today’s public policy is nothing short of madness. The year 2217 is likely to be at least as different from today as the year 1817 is from the present. Just imagine what fantastic nonsense the monarchs of post-Napoleonic Europe would have concocted if they had tried to predict and solve the problems which would face the world over the next two centuries. If you counter that we are wiser and much more knowledgeable and technologically advanced today, you are missing the point. To the people of the 23rd century, we will likely appear as ignorant and primitive as 19th century people appear to us.

Insofar as a an argument for stopping or mitigating climate change – or any other environmental concern – makes sense, it has to be based on the impacts over the next few decades. Anything that goes beyond that is too speculative. It would be sheer foolishness to sacrifice considerable amounts of present wealth to try to solve something which may not even be a serious problem in the distant future.

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