Gold Rush vs. Warfare: Keynes and the Economics of Digging Holes

Michele Bee (Universidade Federal de Minas Gerais) and Raphaël Fèvre (Université Côte d’Azur) in this paper on Keynes digging holes arguement:

This paper goals to completely exploit the heuristic virtues of Keynes’ well-known ‘previous bottles’ story, deploying a multi-layered argument and drawing out its broadest implications. We present that with this story Keynes was making a really severe level about anti-crisis insurance policies: the necessity for authorities to stimulate animal spirits by counting on folks’s pure impulse to motion.

Moderately than taking the place of entrepreneurs and paying folks to dig holes, Keynes appears to be arguing that public authorities ought to put entrepreneurs in a state of affairs the place they’re so enthusiastic that they go into debt to dig holes, similar to throughout a gold rush. On the similar time, it’s a query of restoring the banks’ willingness to lend for these over-optimistic initiatives in a interval of melancholy.

This text explores the situations that make public intervention as efficient as attainable via the passion and particular person initiative that may be generated by a synthetic gold rush. Such intervention due to this fact will be as minimal as attainable, with out having to resort to the alternative authoritarian answer of battle.

Because the gold rush builds cities and wars destroy them, Keynes spent appreciable vitality convincing his contemporaries that liberal-democratic nations must take the previous path in the event that they needed to keep away from the latter.