Deirdre McCloskey reviews Skidelsky’s Money and Government in the Wall Street Journal:

Despite his gloominess and his charming faith in delicate management of the economy by the wise heads in Washington and Whitehall, Mr. Skidelsky is occasionally fair-minded. He admits late, for example, that “one disaster should not be the test of a system’s performance, any more than one aeroplane crash should discredit the theory of aerodynamics.” Yes. The temptation is to extrapolate from a short run to a long run, to think during the 1930s that capitalism was finished or during the 1990s that the “great moderation” was immune to idiotic housing policies, or to think after 2008 that the sky was falling.

The solution to such crises, says Mr. Skidelsky, is heavier regulation, right into full socialism. He quotes Keynes, who looked forward to “the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment.” It is not surprising, then, to find Keynes’s biographer approving of the economist Mariana Mazzucato’s bizarre case for an “entrepreneurial state.” Mr. Skidelsky notes the witticism about the choosing of losers, but retorts that “the question, of course, is not whether government always succeeds, but whether government failure is likely to be greater or lesser than the market failures it seeks to correct.”

Yes again. It is indeed the essential question. But Mr. Skidelsky claims on the basis of thin evidence all manner of terrible imperfections in the way a free economy works, while offering no quantitative evidence that governments are wise enough to fix the imperfection without adding worse ones. In a reversion to the faith of the 1950s, Mr. Skidelsky recommends “using the budget to revive growth.” This is the usual Keynesian magic, spending to get income, miraculously. Though Keynes was famously not concerned about the long run, prosperity in the long run is achieved by commercially tested betterment, not by shovel-ready projects of bridges to nowhere.

Mr. Skidelsky looks forward to “a permanent role for public investment to keep the economy at full employment,” and finds that government needs to provide transport, utilities, hospitals, schools, housing, “and elements of the moral, legal, and religious order.” State religion? Clothing police? Mr. Skidelsky would probably, like Mr. Krugman, wax angry if his vision is described as “socialist.” Still, angry, no; ashamed, yes. The proposal is indeed socialism all the way down.


There is a difference between regulations to support the competition of ideas, and regulations to mute this center function of capitalism.

Keynes suggested the use of government to make more efficient allocations of capital but was often critical of the incompetence of government officials.  He seems to unknowingly refute himself.  The weak accountability in government action is what distinguishes it from market solutions.  The worst solution is the pairing of select firms to partner with government actors.  When the results fail capitalism is faulted, bur corporatism is not capitalism.