The true meaning of “In the long run we are all dead”

posted in: Economics | 31

Many commentators use John Maynard Keynes’ quotation “In the long run we are all dead” to suggest that Keynes, and by association those economists today who urge a moderation of government austerity policies, didn’t care about the future. The implication is that Keynes and Keynesian economists are recklessly short termist and would happily buy some temporary economic benefit at the price of ruinous long term debt increases and great damage to future generations.

The British professor of history Niall Ferguson made this implication explicit in an answer to a question at a recent conference in California. He went further and attributed Keynes’ supposed lack of interest in the future to the fact that he had no children, because he was gay. Ferguson has made an unreserved apology for his remarks. He acknowledged that Keynes (whose earlier gay life is not in dispute) was later married and his wife, the Russian ballerina Lydia Lopokova, suffered a miscarriage.

Ferguson is popular on the conference circuit because he makes controversial comments. With the academic credibility of a Harvard professorship this frankness gives him a ready and high paying audience. But his academic reputation lies in his distinguished work in financial history. He is not an economist and his emphatic forecasts about the inflationary consequences of high US federal debt and quantitative easing have been completely wrong.

But the more important point is that he, like so many others, clearly misunderstands the point that Keynes was making. Here is the context for Keynes’ quotation:

The 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 past the ocean is flat again.

Keynes wrote this in one of his earlier works, The Tract on Monetary Reform, in 1923. It should be clear that he is not arguing that we should recklessly enjoy the present and let the future go hang. He is exasperated with the view of mainstream economists that the economy is an equilibrium system which will eventually return to a point of balance, so long as the government doesn’t interfere and if we are only willing to wait. He later challenged that view in his most important work The General Theory of Employment, Interest and Money (1935). arguing that the economy can slip into a long term underemployment equilibrium from which only government policy can rescue it.

Unemployment is the great scourge of economic life. It is far more pervasive than the hyperinflation that Fergusson and others worry about. Hyperinflation is very rare and usually occurs following wars or other major dislocations. We know how it can be stopped e.g. Bolivia’s 1985 hyperinflation was stopped in ten days – this was one of the few 20th century hyperinflations not to be caused by war or revolution. It is a very damaging but rare disease.

Unemployment causes enormous harm to individuals and families, reduces long term potential output as people lose their skill and motivation and can last for many years. The appalling rates of unemployment in southern Europe are doing great damage right now, as well as storing up serious political problems for the future (once again I have to cite the fact that the Nazis achieved power in Germany on the back of mass unemployment, not inflation). It is in this sense that economists should not let themselves off the hook by saying that these countries will somehow eventually return to full employment if we are just patient. This is both immoral and incorrect.

Keynes wrote about the future of mankind and the possibilities that greater economic prosperity might bring. He cherished a high quality of life and wanted to preserve a capitalist system capable of delivering this against the danger of a collectivist tyranny. It is nonsense to imply that he had no conception of the value of the future. And those many economists today who argue that Europe is needlessly wasting human life and capabilities are not reckless about the future either. They have both economic theory and history on their side to argue that we should not let mass unemployment continue.

31 Responses

  1. Samir

    Simon – In addition to economic theory and history, there appears to be a growing body of data on recent events which supports your argument. For example, How Austerity Kills, DAVID STUCKLER and SANJAY BASU (

  2. Ruch

    The question of unemployement is perhaps not the main problem. Because of the technology evolution is is a mirage to have natural full employement. The real problem for a country is to get money. Then you can help people with subsidized jobs ….

  3. Nicoleta Acatrinei

    Thank you professor fo this “mise au point” so necessary. The case of Keynes is, unfortunately, not unique. As the “invisible man” of Adam Smith intstrumentalized so much, while the great thinker used it only ONCE. The same about the quote “the benevolence of the butcher” and his “interset ” see self-interest – these quotes are used, picked up from the others, but the writtings were these lines come from are not read, thus a wrong interpretation became a legend and everbody believe it true. Thank you professor to fix this misinterpration of Keynes. You would be better to write a book about all these kinds of misinterpretations in economics – there are plenty – I am interested by such a study.

    I like this word of J. K. Galbraith ” The conventional view serves us to protect from the painful job of thinking ” and this one of A. Huxley ” Most human beings have an absolute and infinite capacity for takings things for granted”. We, economists need to go back to classics to better understand our field and to have the courage to recognise our “bounded ratioanlity”.

  4. Andrew Robertson

    Interesting blog. And right on target. Keynes was jousting against the arguments of equilibria arguments in economic thought. He’s making a prescient point about the limits of mathematics in modeling changing economic systems. How to model such system is still something, I think, that is not understood well.

    What strikes me as odd about this, is why didn’t Ferguson know this. He is after all more an economic historian than anything else.


    • Scott Walker

      More likely that Ferguson knows that but misrepresents it to further a particular line of argument.

  5. Michael Nikolaou

    “…forecasts about the inflationary consequences of high US federal debt and quantitative easing have been completely wrong.”

    “Completely wrong” may not be accurate.

    Inflation is indeed low for the CPI, the Consumer Price Index, because The Consumer has seen almost none of the money pumped into the economy, hence demand for goods and services by The Consumer has not increased, hence low CPI (coincidentally, $50-oil recently and $3-natural gas for years may have helped).

    However, there is inflation in the stock market (from around 7000 low to over 18000) and in real estate. The next bust in not unthinkable, I think.…/economy/income-inequality-obama/

    • Simon Taylor

      I use “inflation” in the sense that it is used generally in economics, to refer to a general increase in prices, as measured by the RPI, CPI, GDP deflator or other index. By that definition inflation and inflationary expectations have remained low and consistent or below the Fed’s target, as we would expect from the similar experience of Japanese quantitative easing. The same happened in the UK also, where inflation remained low (after a temporary rise following a fall in the pound sterling).

  6. R.Nanjappa

    This is to the point, and makes matters clear.Economics is the art of choice,and it is not easy,or pleasant. In Keynes’s day, the choice was between the deflation-unemployment syndrome of the Classical model,and the masterly inactivity it imposed, and the possibility of quicker recovery through interventionist policies.Keynes surely preferred a continuous mild boom, with its inflationary prospects to the spectre of unemployment. Now, both unemployment and inflation have their adverse effects, and it is like choosing between death by hanging and death by drowning. Economists have their fashions and fancies like every one else.Very few are really objective. The nature of technology today is such that we will have permanent underemployment . It is yet to be demonstrated that Keynesian solutions will work in the long run, without leading to stagflation, or without resulting in too much government.We have to move beyond money, interest, prices, wages to the nature of technology and its decisive role in the economy. Nor can we forget that most of international liquidity is today related to speculation, not genuine economic or trade activity. And both these are totally beyond the control of any authority. These are post-Keynesian developments.

  7. Simon Mouatt

    To my mind, Keynes was a pragmatist who reasoned beyond the specific economic processes to consider (holistically) the need for political, economic and social stability, and the consequences of their absence. The 1930s anglo saxon economy was not going to self-adjust (at least not quickly) and economic intervention was valid. Yet, there is a deeper point. The appearance of a short-term focus is a fallacy. The intention was to create stable expectations (of interest rates, for instance) that had a clear impact on the long-term. It is the failure of ISLM usage etc. to take account of expectations, during the so-called Keynesian era, that is one of the main gripes of the Keynes purists. In short, Keynes was thinking of the long-term too.

  8. Jeffrey B Miller

    What Keynes and most Progressive economists fail to grasp is how insidiously destructive wealth transfer is to the incentives, motivations, morals, and ethics of the society. Progressive taxes on the productive diminish their incentive to continue to be productive. Subsidies (wealth transfer) to the less productive rob them of incentive to learn to be more productive. When you reduce incentives on both sides of the equation, the entire society becomes less productive, economic growth declines in the face of rising social welfare costs, debt spirals out of control, and the “Ponzi scheme” social welfare programs become unsustainable. This is exacerbated by the introduction of birth control and abortion, which cut the birthrate by more than half at a time when more workers paying in were needed as more people were taking out of the system. The Progressive societies lack the productive human capital to sustain themselves.

  9. Jeffrey B Miller

    Capitalism is a more efficient means of wealth transfer, as it is a mutually agreed upon contract between and employer and an employee, in which the employer agrees to transfer wealth to the employee for his input, which contributes more to the productivity of the employers’ business than the cost of employing the employee, resulting in profits that replenish the capital consumed by the enterprise, and eventually economic growth, increasing the size of the economic pie.

    If you go down the list of the Forbes 400 Wealthiest Americans, put a face and a name on who the Top .1% are, and look at where their wealth is, you will find that it’s in the capital stock of most of the countries largest employers. As the stock market rose from the lows of 2009 to the high of 2015, the value of their stock rose with it, but that money didn’t go “into their pockets” because they didn’t sell their stock. They will be riding those stock prices back down as the stock market returns to normal relationships to book values and earnings. One wonders if anyone will sympathize there their loss of wealth, after demonizing them for the increase.

  10. Love Villamin

    I just want to ask what is the overall meaning of “In the long run we are all dead”?? Not just being a economist but to sum-up it all? THANKS

      • Jeremy Dyer

        It’s a throwaway remark, although a true one.

        In its original context, it’s used to promote a degree of government intervention in economic policy, as opposed to a laisser faire approach, as the latter would take too long to work and would cause unacceptable social and economic damage

  11. Martin Lack

    Hi, Simon. I am very grateful for the enlightenment as to the context of Keynes’ famous remark (i.e. most-recently found quoted by the character of Mark Staithes towards the end of Aldous Huxley’s ‘Eyeless in Gaza’).

    Having an MA in Environmental Politics, I suspect that those economists that prefer to take the long view might also be climate science deniers on a flight from the reality that perpetual quantitative growth in resource consumption and pollution cannot be sustained indefinitely on a finite planet with finite resources and, critically, with a finite capacity to recycle our pollutants in a timely fashion.

    • Simon Taylor

      I think that most economists fully accept the science of climate change and recent Nobel prize winner William Nordhaus has been working on this subject for decades. Anthropogenic climate change is readily identifiable to economists as an externality problem with public good features, which means it’s easy for us to see the problem (though not easy to get action to fix it). I don’t think there are many credible economists who deny climate change. I agree that infinite growth on a finite planet is impossible but there is no evidence that there is any inherent shortage of resources (there is a vast surplus of solar energy over our needs). GDP growth in rich countries now happens will little or no incremental energy use because of big increases in energy efficiency (and far more is possible). Growth of living standards can take the form of more leisure and more time spent on experiences that don’t need much or any energy. The world’s population is currently growing but in the very long term that growth will decelerate and then reverse (though by then climate change may be so severe that there is an enforced population fall). The economics of climate change are not too complicated in principle – tax carbon emissions and subsidise research and development. But the politics are much harder, precisely because very few politicians get chosen to look after future generations. Thanks for your comment.

      • Stefano

        Good point. But the so-called decoupling of GDP growth and energy consumption we observe in some rich countries is mainly due to the fact that production moved to other developing countries, and emissions are no longer accounted as national.
        Trade-related emissions should be included in the standard accounting, but nobody wants that as it would show that consumerism is the problem.

        • Simon Taylor

          I agree that it makes no sense to limit emissions caused by production alone, ignoring those caused by consumption of imported goods. But there is also a fall in the energy intensity of production because advanced economies are mostly services, which use relatively little energy. So there is hope for a more energy-efficient, service based economy. But we still have to decarbonise everything else.

  12. Tamas Revesz

    Indeed, accidentally increased unemployment (like in the current coronavirus crisis) is not to be tolerated. However, economists say that unemployment has a natural level due to time of learning new skills and finding a new job. But this has to be dealt with targeted government programs and not by distorting the whole economy starting from the interest rates, money supply, creating infation, bubbles in the stock market, commodity markets and housing market. Indeed, in the recession the government has less funds to finance such programs. But in the heydays of the economy they should have put aside sufficient funds to be used in the bad years. This already had been taught by the Bible (in the story of Joseph and the pharaoh) and yet the populist governments have not learnt this.
    Note, that Hitler came to power after the recovery already had started and his predecessors public works program, etc. had started to bear fruit. Actually he had not become more popular before he became chancellor, but had lost many voters and only the left-panicked right-wing parties and leading industrialists decided to bring him to supposedly limited power. Then he brutally and systematically bludgeoned and smashed the whole society but his own party. He reduced the official unemployment by forcing out the Jews, left-sympathisers, mothers out of the workplaces, put them and the ‘lumpen’ elements (i.e the unemployed) into concentration camps and conscripted the young people into the army. The huge rearmament program also created more jobs but the state debt increased so much that there remained only one option to manage it: to conquer other countries and rob them (too). See more in Evans, etc.
    If the Germans and this populist idol could not find a better economic strategy, how can we expect that his miserable epigons/imitators could perform better?

    • Simon Taylor

      Economists generally believe that if unemployment is a result of a lack of aggregate demand then a combination of monetary policy (lower interest rates) and fiscal policy (more public spending or lower taxes or both) can help. If there are spare resources then this should not be inflationary, and by increasing GDP it may lead to a lower level of government debt to GDP than if the government takes no action. Governments and central banks don’t need to set aside funds for this, they can create money (central banks) and borrow (governments). This is entirely proper and sensible if there are unemployed resources, which are both an economic and a social waste. It is true that governments should try to run smaller deficits or even run surpluses when the economy is at full employment, which would mean that government debt would be falling as a share of GDP. Managing the level of debt to GDP is a long term goal for an advanced economy like the UK or US. Trying to reduce deficits and the level of debt to GDP too quickly can lead to a perverse result of the opposite actually happening. This is widely accepted in standard macroeconomics now but was not in the 1930s.

  13. TMLutas

    Austerity, in these big government days, is of at least two types. The kind of austerity that Keynes referred to was monetary austerity. There is another kind. That is regulatory austerity. If you cannot start your business because you are crowded out of the loan market because interest rates have been put through the roof or you cannot start your business because the regulatory authority blocks you, the result is the same, underemployment.

    We have trillions of dollars in unlent funds sitting at the Fed as excess reserves. Perhaps it is time to legalize more business models.

    • Simon Taylor

      Austerity, in the UK at least, means a reduction in government spending. The word’s historic root is the period after the Second World War, when the UK was essentially broke and many goods were in short supply. Excessive regulation that prevents businesses starting up is a problem best identified as such, rather than calling it austerity. Central bank reserves are assets of commercial banks. They cannot be “lent” to bank customers. There is no link between the level of central bank reserves and willingness or ability of banks to make loans. Banks lend when they think it is profitable to do so, automatically creating the money to do so (simultaneously creating a loan and a deposit). In most countries, reserves are adjusted by the central bank to accommodate such lending, subject to maintaining the short term interest rate at the target rate.

  14. Suddy

    Clear explanation on the quotation (which is what brought me here). Thank you for writing this!

  15. The_Angry_Economist

    lookz like that high debt and inflation numbers are starting to manifest

  16. William Moore

    Of course in the long run we’re all dead; we’re mortal. The real question relates to what will we do to move forward to benefit the species Our politics aren’t an asset, they are a liability irrespective of whether they are classified as democratic or not. Neither Adam Smith nor Karl Marx were political; their treatises simply described approaches to move the species forward into the future.

    Neither political parties pretending governance is about winning some version of the red, blue or green NBA championship nor 537 elected officials who would be fired were they employees because they fail to do their jobs move the species forward. Sadly the same comedy plays out in virtually every locale on the planet. Corporations, religions, political parties, not for profit organizations, all eventually succumb to believing their organization’s life is what they are about and not the purpose for which they were created; that by hook or by crook they will not prove to be mortal even if that means they must do things that are illegal, immoral or fattening!

    It’s time for economists to move their thinking into Reality Land where the rights and privileges crowd expect and will get the big purple dinosaurs they crave and the responsibilities and obligations crowd will fade into the sunset. But of course, in the long run we’re all dead, and we must respect that we change our perceptions of relevancy in the process!

  17. Finally

    The person who wrote the article is finally proven wrong, so historically wrong and Niall was right, so right…:

    “He is not an economist and his emphatic forecasts about the inflationary consequences of high US federal debt and quantitative easing have been completely wrong”

    • Griffo

      Yeah, I got a good laugh out of that too. My understanding of what happened there was that as large parts of the QE from the GFC went to bail out banks and people who already had money, it didn’t lead to massive increases in spending – it just lead to massive increases in asset prices. However, the increase in the money supply associated with Covid went more to the middle class who then used the extra money to, well, buy stuff. Who’d of thunk it?

      Anyway, I did come here for the quote about ‘in the long run, we’re all dead’, so it’s good to know that the guy who created much of what we call modern Economic theory wasn’t as crazy as I thought he was!

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