The General Theory, Ch. 3, Section III

I have argued that Keynesianism is essentially folk economics. Paul H. Rubin observes that, "Folk economics is the intuitive economics of untrained persons." With this definition, met me revise my position on Keynes' economics. Keynesianism is not folk economics per se -- rather, it supports folk economics as legitimate. We see this when Keynes's primary argument against "Ricardo's doctrine that it was impossible for effective demand to be deficient" (The General Theory, 32) is that "it reached conclusions quite different from what the ordinary uninstructed person would expect" (32-3).

His next argument against it is pure scientism. He argues that it fails in its "purposes of scientific prediction" (33), but this assumes that economic theory can be used to make successful scientific predictions -- that the economy is in any way predictable. Thus, he makes the mistake of thinking that the economy is comparable to physics rather than one of the more complex sciences, like biology or ecology -- both of which are simpler than an economy, but are at least complex systems whose future states one is incapable of predicting. So there is also a fundamental flaw in Keynes's understanding of the nature of the economy -- which cannot but lead to other errors. You cannot reach right conclusions from false premises.

Whether or not one can criticize Ricardo's theory, neither of these arguments are either logically or scientifically valid arguments against it.

The only thing to be recommended in this section is his statement that one should try to understand how a given economy actually works rather than focusing on how it should. But even here I would only half-recommend it, as one should not only try to understand how this or that particular economy works (which can result in historicism, or a rejection of normative economics and economic theory) -- one should also understand how an economy ought to work. That way, one can recognize how and why things are going wrong in the economy, and make recommendations to fix things correctly. Otherwise, you are just putting patches on the problem and not treating the underlying cause. When you are sick, you don't want your doctor to tell you that we need to understand how the diseased organ is actually working rather than how it ought to work. You'd better hope he can do both.