"Close your eyes now and hold hands," the medium said. The lights went out, and I could see nothing but the faces of my fellow economists illuminated by the flickering candle in the center of the table.
It was my first seance, and I felt uneasy. So did the other economists around the table. Communicating with the dead is not the sort of thing economists are accustomed to. Though we love the abstruse, we shun the occult. But since the unthinkable had happened that day (a national unemployment rate of 10.1 percent had been announced), we felt in need of guidance from a higher authority.
Miss Twickham, the portly English dowager who was running the show, took her seat at the table and began to chant strange and meaningless words. "Unkempt laugher. Gilded mundle. Double-digit toil and trouble." For a second, I thought she said "Steady growth of M1B." I was probably hallucinating.
Just then the table began to shake violently, causing three Laffer curves and some hard money to thud to the floor. A cold breeze blew in the window. Miss Twickham began to speak.
"Are there any Keynesians in the room?" she asked. "A voice from the dead wants to speak to a Keynesian economist."
I was scared. But as I looked around the table the conclusion was inescapable: I was the only Keynesian in the place (except, perhaps, for Miss Twickham). "Yes," I said timidly. "I'm still a Keynesian." The others looked at me with disdain.
"I have made contact with Lord Keynes," Miss Twickham exclaimed excitedly. "He says something made him turn over in his grave this morning, and he wants to know what."
Just then a booming, but highly cultured, British voice was heard. "What disturbed me from my sleep?" he demanded.
As a good Keynesian, I knew right away what was troubling him. "The unemployment rate topped 10 percent last month," I responded.
"What?" the disembodied voice of Keynes yelled. "What year is this? 1939?"
"No sir, it's 1982," I answered.
"But how could this happen in 1982?" he asked in amazement. "I thought I banished double-digit unemployment from the Earth before I died. Doesn't anyone read the 'General Theory' any more?"
I explained to my fellow economists that Keynes was referring here to his masterful 1936 book in which he explained how monetary and fiscal policy could be used to fight unemployment. Miss Twickham nodded approvingly.
"Well, sir," I said sadly. "I'm afraid they don't. In fact, some of this country's leading politicians and economists have declared your ideas outmoded and even . . . " Here I hesitated.
"Yes?" Keynes inquired, sounding very much like a Cambridge don ready to pounce on his pupil's impertinent answer.
"Well, dangerous, sir."
"Dangerous!" he bellowed. "Outmoded?" And stop calling me sir. My friends always called me Maynard, though it seems I have few left. Tell me, how did such a thing ever happen? How did unemployment reach 10 percent?"
I looked around the table and saw nothing but fingers pointing in every direction (except for Miss Twickham's, which were busy knitting). I breathed deeply and responded.
"Well, Maynard, it was mainly because the Federal Reserve got carried away in its anti-inflationary zeal. Egged on by an administration that claimed it could spur economic growth by tax incentives, the Fed concentrated single-mindedly on fighting inflation. It kept credit very tight for a long time and refused to let up even when the automobile and building industries yelled 'Uncle.' When some of us warned they were going too far, they responded that Keynesian policies had gotten us into this mess."
There was a long silence, and everybody around the table began to fidget. Finally, Keynes spoke.
"Well, I never trusted central bankers anyway. But what about the elected officials? Surely your president and Congress don't relish such high unemployment. How did they let such a thing happen?"
"I know you'll find this hard to believe, Maynard,"I said. "But the president and much of the Congress encouraged the tight-money policy. In fact, lately they have been raising taxes and searching desperately for ways to cut expenditures. They seem more concerned with the deficit than with the unemployment rate."
"Wait a second," he interjected. "I explained years ago why deficits were appropriate during recessions and why efforts to close them courted disaster. I know I never convinced Hoover, but I thought Roosevelt understood. Don't your current political leaders and their economic advisers advocate public spending and tax cuts to get out of recessions?"
"They advocate tax cuts, alright," I answered. "But if I told you their reason, you would turn over in your grave again. As to public spending, they scoff at the idea. In fact, they claim that further deficit spending would deepen the recession."
"How in the world could that happen?" Keynes inquired. He had died before the New Math was taught in the schools.
"Well, it's a bit hard to explain," I said, "since the reasoning isn't very sound. Some claim that higher deficits 'crowd out' private borrowers by forcing interest rates up."
"Keynesians have always known that," he objected. "But how can anyone possible worry about such a thing when there is so much slack in the economy?"
"Beats me," I said. "Frankly, I think it's terribly muddled thinking. Many of us have been saying for a long time that we should change the policy mix toward a tighter fiscal policy and a looser monetary policy. But some people hear only the first half of the message. They think that closing the budget deficit will help even if monetary policy does not change. It's crazy."
"Well," said Keynes wearily. "I think I've heard enough. This is all very disappointing. When I died in 1946, I thought no industrial nation would ever again suffer from double-digit unemployment. Now I hear that the unemployment rate in America is over 10 percent and politicians are doing nothing to cure it. It's very disconcerting. I hope that the next time somebody conjures me up, it will be in England, where people have more sense."
Miss Twickham looked up in surprise, obviously thinking of Mrs. Thatcher. But it was so close to Keynes 100th birthday that I didn't have the heart to tell him.