Keynes, the Brilliant Generalizer of Half-Truths, Is Confused about Short-Term Speculation on the Stock Market

Once again Keynes, the brilliant generalizer of half-truths, has succumbed to the temptation of expressing a paradox at the cost of stating untrue facts and of giving dangerous advice.

Keynes’ reasoning confuses two different things: short-term investment or speculation in investments planned for the long run, and short-term investment or speculation in investments planned for the short run. It is simply not true that an investor, or even a speculator, is not interested in the long-term prospects of, say, a new plant to be installed. On the contrary, any calculation of earnings submitted to investors is based on very long-term estimates indeed. The fact that the more distant future cannot be assessed so clearly never leads to its being neglected. It only results in the attempt to reduce risks by providing for rapid amortization. However much anyone may invest for capital appreciation, he still invests with a view to the long-term earnings. Capital appreciation can ultimately be realized only by sale to an investor who, in his turn, buys the security for the sake of its long-term return.

—L. Albert Hahn, Common Sense Economics (New York: Abelard-Schumann, 1956), 208.