> economists are high priests of efficiency--they are
> concerned only with getting to the Pareto-optimal frontier, and leave
> questions of distribution to the political system. Economists advise
> people to rid themselves of all frictions and imperfections, and then
> let the political system redistribute income and wealth in order to
> maximize social welfare.
and
> Making everyone who wants to act like a sadist purchase the pain of
> others I wouldn't mind so much. Just think: people could earn a
> pretty could living by volunteering to be the audience for displays
> of conspicuous consumption. If everyone driving a BMW convertible,
> say, had to purchase from everyone else a license for the privilege
> of making their car seem drab and slow, we might have a pretty good
> world....
Keynes wasn't an "economist" in the contemporary sense. He didn't take the "economic approach" to understanding the role of sadism in economic life. One outcome was that he associated it with "inefficiency" (something he was able to do without falling into self-contradiction since, not being an economist, he didn't assume that behaviour was everywhere and always "rational" in the economist's or any other sense).
For instance, he associates the short-term pain for long-term gain approach to monetary policy with "sadistic puritanism". He claims it's underpinned by irrational unconscious phantasy as this is understood in psychoanalysis.
In the Treatise on Money he claims that:
"it is certain that the opinion [he has in mind particularly Hayek], which I have sometimes heard expressed, that the real wealth of the community increases faster, in spite of appearances to the contrary, during a depression than during a boom, must be erroneous. For it is a high rate of investment which must necessarily by definition be associated with a high rate of increment of accumulated wealth. Thus I am more disposed to sympathise with Mr D.H. Robertson, who thinks that much of the material progress of the nineteenth century might have been impossible without the artificial stimulus to capital accumulation afforded by the successive periods of boom, than with the puritans of finance - sometimes extreme individualists, who are able, perhaps, to placate in this way their their suppressed reactions against the distastefulness of capitalism - who draw a gloomy satisfaction from the speculative and business losses, the low prices, and the high real wages, accompanied, however, by unemployment, which characterize the typical depression. Nor is it a sufficient justification of the latter state of affairs, that, necessity being the mother of invention, there are certain economies and technical improvements which the business world will only make under the stimulus of distress; for there are other improvements which will only mature in an atmosphere of optimism and abundance."
Elsewhere (Collected Writings, vol. XIII, p. 238) he describes the mentality at issue as "sadistic puritanism" and claims it is best understood by psychoanalysis.
He was also of the view that the community as a whole would gain if sadism was sublimated and expressed as money-making and real capital accumulation rather than allowed more direct expression in blood feuds, blood sacrifices and ritual cannibalism. In the "economic approach" there's no disputing taste and "rational" persons will not create conditions in which a "free lunch" goes uneaten so the latter community must be judged ("foolish consistency" rules) just as "efficient" as the former.
"For my own part, I believe that there is social an psychological justification for significant inequalities of incomes and wealth, but not for such large disparities as exist to-day. There are valuable human activities which require the motive of money-making and the environment of private wealth-ownership for their full fruition. Moreover, dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self aggrandisement. it is better that a man should tyrannise over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative. But it is not necessary for the stimulation of these activities and the satisfaction of these proclivities that the game should be played for such high stakes as at present. Much lower stakes will serve the purpose equally well, as soon as the players are accustomed to them. The task of transmuting human nature must not be confused with the task of managing it. Though in the ideal commonwealth men may have been taught or inspired or bred to take no interest in the stakes, it may still be wise and prudent statesmanship to allow the game to be played, subject to the rules and limitations, so long as the average man, or even a significant section of the community, is in fact strongly addicted to the money-making passion." (General Theory, p. 374)
Ted
"The nineteenth century carried to extravagant lengths the criterion of what one can call for short the financial results, as a test of the advisability of any course of action sponsored by private or by collective action. ... There was nothing which it was not our duty to sacrifice to this Moloch and Mammon in one; for we faithfully believed that the worship of these monsters would overcome the evil of poverty and lead the next generation safely and comfortably, on the back of compound interest, into economic peace."