The End of Laissez-Faire—Again, and Other Illusions of the Reagan Years

In 1926, three years before the Great Crash and a decade before publication of his own grand synthesis, Keynes wrote a prescient essay titled The End of Laissez-Faire. “Some coordinated act of intelligent judgment is required,” he wrote, “as to the scale on which it is desirable that the community as a whole should save, the scale on which these savings should go abroad in the form of foreign investments, and whether the present organization of the investment market distributes savings along the most nationally productive channels. I do not think these matters should be left entirely to the chances of private judgment and private profits as they are at present.”

In the 1930s, the Keynesian lesson was learned at great cost. Capitalism came out of World War II persuaded that the system itself could not withstand the instabilities of pure laissez-faire. The Keynesian era enlisted the nation-state to make the “coordinated act of intelligent ju...