It was human nature not economics that foxed Keynes
"In the long-run we are all dead," Keynes famously wrote. I rate that claim true, but it actually has little to do with Keynes' views on the subject.
Keynes was criticising his colleagues in the economics profession who minimised the importance of deep recessions - and what governments could do to prevent and shorten them - by promising that wounded economies, if given sufficient time, would eventually return to health.
"Economists set themselves too easy, too useless a task if, in tempestuous seasons, they can only tell us that when the storm is long past the ocean is flat again," he said.
However, Keynes was deeply interested in the future - even the part that would happen after he was dead. In 1930, he wrote a slim tract titled Economic Possibilities for our Grandchildren. What he got wrong is interesting; what he got right is remarkable.
Consider the context: the industrial revolution, and the millennia of economic stagnation that preceded it, was a relatively recent memory. The new economy, in which technological innovation raised living standards with remarkable regularity, was trapped in the throes of the Great Depression.
Then along came Keynes, promising that "the standard of life in progressive countries 100 years hence will be between four and eight times as high as it is today".
He was right. Between 1930 and 2011, real per capita gross domestic product in the United States (the size of the economy after adjusting for inflation and dividing by the population) rose sixfold.
"Would any economist today, even with the benefit of training in frontier growth theory, try to make serious economic projections 100 years out?" University of California, Los Angeles economist Lee Ohanian asked in Revisiting Keynes.
"Very unlikely, but Keynes did, and did so remarkably well - in all honesty, much too well - given the available theory and the existing economic conditions when he was writing."
Keynes said that if this came to pass, humanity would have solved, or be quite near to solving, "the economic problem" that had bedevilled every previous generation: we would have enough - perhaps not as much as we wanted to have, or as much as we could have, but enough to survive.
Keynes recognised this was a reality for which society was ill-prepared. "We have been expressly evolved by nature, with all our impulses and deepest instincts, for the purpose of solving the economic problem," he wrote. "If the economic problem is solved, mankind will be deprived of its traditional purpose."
The question Keynes set out to solve was how mankind would adapt to a world of abundance. "He saw two options," Nobel prize winning economist Joseph Stiglitz says. "One was that we could consume ever more goods or we could enjoy more leisure."
By and large, we have chosen door No. 1.
This would have devastated him. He hoped that in a post-scarcity world "the love of money as a possession - as distinguished from the love of money as a means to the enjoyments and realities of life - will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease".
In this, he was insufficiently committed to his own analysis. He hoped that solving the economic problem would return us to our true nature and man would "once more value ends above means and prefer the good to the useful".
But he had it right the first time. Man's true nature evolved around the economic problem and, with the economic problem solved, it has simply applied itself to a simulacrum of the economic problem.
In the US, the economic problem that organises many of our lives is not that we don't have enough; it's that we don't have quite as much as those who have more. That's an economic problem that, almost by definition, can never be solved. It is an economic problem that assures we will never lose our purpose.
It is also an economic problem most of us choose for ourselves, but not all of us. A recent article in a US newspaper told the story of Mister Money Moustache, who retired at 30 and lives happily with his wife and child and devotes himself to his family and leisure. He considers today's middle-class life "an exploding volcano of wastefulness" and lives on $US25,000 a year. His life is proof that Keynes was right about what we could do. His rarity is proof that he was wrong about what we would do.
Frequently Asked Questions about this Article…
In his 1930 essay Economic Possibilities for our Grandchildren, Keynes predicted that the standard of living in progressive countries could be four to eight times higher in 100 years. The article notes he was largely right: real per‑capita GDP in the United States rose about sixfold between 1930 and 2011, so his long‑run growth forecast proved remarkably accurate.
Keynes used that line to criticise economists who downplayed the importance of deep recessions by saying economies would eventually recover given enough time. He argued that policy makers should act to prevent and shorten painful downturns rather than just point to a distant recovery—an argument about the practical role of government in stabilising the economy.
Keynes argued that technological progress could solve scarcity, leaving society with a choice: consume ever more goods or enjoy more leisure. Nobel laureate Joseph Stiglitz is quoted saying those were Keynes’ two options, and the article observes that by and large society chose more consumption rather than increased leisure.
The article explains Keynes thought humans evolved to solve scarcity and that, if scarcity were solved, we might shift values away from owning money toward enjoying life. Instead, human nature has repurposed the pursuit of wealth: people now compete for relative advantage (having less than those with more), so the drive to accumulate persists even when basic needs are met.
The article points out that in places like the US the central economic problem is often relative wealth—not absolute scarcity—and that this problem is essentially unsolvable. For everyday investors, that highlights a social reality behind consumption patterns and market demand: people’s choices are influenced not only by material abundance but also by comparisons with others.
Yes— the article cites the story of Mister Money Moustache, who retired at 30, lives on US$25,000 a year and focuses on family and leisure. His lifestyle shows Keynes’ vision of choosing leisure is possible, but the article also notes his rarity demonstrates Keynes was wrong about what most people would choose.
The article cites UCLA economist Lee Ohanian, who questioned whether modern economists would confidently project 100 years ahead, and Nobel laureate Joseph Stiglitz, who summarised Keynes’ two options for a post‑scarcity world (more consumption or more leisure).
The article’s main takeaways are that (1) long‑run economic growth can be substantial—Keynes’ century‑ahead forecast was surprisingly accurate for the US—yet (2) human nature and social incentives matter a lot: people still tend to favour consumption and relative wealth. For investors, that combination—structural long‑term growth plus persistent behavioural drivers—helps explain why markets and consumption patterns evolve the way they do.
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