Born Again Keynesians

Posner has an interesting post on his blog criticizing born-again Keynesians, like Paul Krugman for ignoring their Keynes. The point is that uncertainty causes businessmen to hoard, which reduces investment and prevents recovery. His point is that the Obama health care plan, which Krugman, endorses, will create more uncertainty.

Posner quotes Keynes:

Keynes warned President Roosevelt in an open letter of December 31, 1933, about trying to combine far-reaching reform with recovery from an economic depression. He wote that

even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to put other motives in their place...And it will confuse the thought and aim of yourself and your administration by giving you too much to think about all at once.

The passage that I have italicized deserves particular emphasis (though Keynes's warning that "it will confuse the thought and aim of yourself and your administration by giving you too much to think about all at once" is equally timely) because of the strange turn that the debate over health reform has taken in recent days.

Posner, if you read his book on Failure of Capitalism, is more of Keynesian than most liberal Keynesians.