> Now another Englishman, John Maynard Keynes, has been pulled on the
> stage. Keynes taught that spending, especially spending by
> consumers, is the way out of a slowdown. From last summer's small
> stimulus checks to the infrastructure projects under consideration
> by President-elect Barack Obama and congressional Democrats, almost
> everything the government has done or wants to do is justified by
> Keynes.
Keynes claimed the psychopathological mentality whose dominance he took to be "the essential characteristic of capitalism" ("the dependence upon an intense appeal to the money-making and money-loving instincts of individuals as the main motive force of the economic machine") also dominated thinking about economic theory and policy.
He adopted a psychoanalytic understanding of these "instincts". They were sublimations of the sexual and death instincts.
In a review of H.G. Wells's The World of William Clissoold, he explicitly identifies "the money-making and money-making instincts" with the sublimation of "libido".
“Why do practical men find it more amusing to make money than to join the open conspiracy? I suggest that it is much the same reason as that which makes them find it more amusing to play bridge on Sundays than to go to church. They lack altogether the kind of motive, the possession of which, if they had it, could be expressed by saying that they had a creed. They have no creed, these potential open conspirators, no creed whatever. That is why, unless they have the luck to be scientists or artists, they fall back on the grand substitute motive, the perfect ersatz, the anodyne for those who, in fact, want nothing at all—money. Clissold charges the enthusiasts of labour that they have ‘feelings in the place of ideas’. But he does not deny that they have feelings. Has not, perhaps, poor Mr Cook something which Clissold lacks? Clissold and his brother Dickon, the advertising expert, flutter about the world seeking for something to which they can attach their abundant libido. But they have not found it. They would so like to be apostles, but they cannot. They remain business men.” (Keynes, Collected Writings, vol. X, pp. 319-20)
In the General Theory, he implicitly points to sublimation of the death instinct as the second source.
“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.” (vol. VII, p. 374)
He invokes these sources to explain Hayek's "Bedlamite" (Hayek's conclusions here being "an extraordinary example of how, starting with a mistake, a remorseless logician can end up in Bedlam") theory of and policy prescription for such depressions. They are expressions of "sadistic puritanism".
Thus, in the Treatise on Money, he describes those, such as Hayek, who argue that "that the real wealth of the community increases faster, in spite of appearances to the contrary, during a depression than during a boom" as "puritans of finance – sometimes extreme individualists".
The explanation in terms of psychopathology is that they are those "who are able, perhaps, to placate in this way their suppressed reactions against the distastefulness of capitalism - who draw a gloomy satisfaction from the speculative and business losses, the low prices, and high real wages, accompanied, however, by unemployment, which characterise the typical depression." (vol. V, p. 246)
He repeats this elsewhere:
"it seems an extraordinary imbecility that this wonderful outburst of productive energy [1925-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much over-expansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory of the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a ‘prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again." (vol. XIII, p, 349)
In the original galleys of a reply to Dennis Robertson's Economic Journal review of the Treatise, Keynes explicitly associates this psychological explanation with psychoanalysis. In the last paragraph of his review, Robertson had expressed some sympathy with the puritans of finance and suggested their policy of increasing interest rates to end a boom was not "a relic of sadistic barbarism”. Keynes replies:
"Mr Robertson's last paragraph of all – yes! a mere relic of Sadistic – well, not so much barbarism as puritanism. But at this point psycho-analysis must take charge and economic analysis withdraw discreetly." (vol. XIII, p. 238)
As the ideas of Amity Shlaes appear to demonstrate, this analysis remains relevant.
Ted