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Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

May 2024

A reappraisal of Keynes’s “Economic possibilities for our grandchildren”

Summary written by: Justin Holt

In 1930, at the beginning of the Great Depression and half a decade before the publication of his ground-breaking General Theory of Employment, Interest, and Money, John Maynard Keynes wrote the optimistic essay “The economic possibilities for our grandchildren.” The period that Keynes was writing about is our own time. As Keynes knew, accurate predictions about the future are difficult, if not impossible. Nevertheless, Keynes predicted large increases of wealth (which may have appeared a remote possibility when the unemployment rate was 20 percent in the United Kingdom) and a 15-hour workweek. He was right about the large increases in wealth that have occurred, but there has still been no shift in people’s preferences towards increasing leisure and the 15-hour workweek.

In “Economic possibilities for our grandchildren—90 years later” (Levy Economics Institute, Working Paper 1038, January 2024), Jörg Bibow analyzes Keynes’s predictions and considers if Keynes’s theory of economic growth can provide us with insights into the economic futures of our own grandchildren. Bibow shows that Keynes’s theory of growth comprised the following elements: population size relative to available resources, avoidance of disruptions to capital deepening (such as war), use of scientific advances, and a stable rate of capital investment. In addition, Bibow notes that Keynes’s theory of economic growth has strong similarities to the Solow–Swan model developed in the 1950s.

Bibow documents that Keynes’s economic prediction of continued productivity increases has come to fruition in industrialized countries. Since 1930, these countries have increased their gross domestic product by 4 to 8 times. Keynes also argued that people’s preferences can be classified as satisfactions for basic needs or relative position. Keynes conjectured that one of the results of rising prosperity was that people may develop an increasing preference for leisure once their basic needs are met. That is, if people are not competing to improve their position relative to other people, a never-ending goal, then achieving basic needs will shift people’s preferences towards leisure.

But why has Keynes’s prediction of a 15-hour workweek not come to pass? Bibow raises six plausible explanations. First, people prefer more consumption over more leisure. Second, people’s hobbies today may be more expensive compared with the low-cost contemplation and conversation that Keynes envisioned. Third, relative social position, instead of basic needs, dominates people’s preferences. Fourth, work may be more enjoyable now than in the past. Fifth, entrepreneurship continues to develop desirable consumption goods. Sixth, people’s basic needs have not become fulfilled because of economic inequality.

In considering the economic possibilities of our own grandchildren, Bibow notes that any conjecture about future productivity increases should be considered as potential and not guaranteed. Bibow is concerned that further productivity increases may not occur since Keynes’s assumptions may not be met. Specifically, Bibow finds that the fulfillment of basic needs may not occur because of continuing population growth, ecological disruptions, the ongoing threat of war, and because new technologies might not be used to their full potential.

Nevertheless, Bibow concludes his paper with an observation that young people desire lives that are more akin to Keynes’s idea of leisure. If this is the case, then a developing preference for leisure over consumption may result in the 15-hour workweek, and so Keynes may yet be correct in his predictions.