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That word, folks, is FLEXIBILITY. Keynesian systems have it. Laissez-Faire does not.
Laissez-faire means the Government must back off the market and let it run itself. It is a purist system that allows for no deviations. Any form of regulation is considered socialism at best, and often, it is called Slavery, Collestivism or Statism. The problem is the free market is run by human beings and is therefore flawed; to deny this is to say that the free market is in fact divine and perfect. This cannot be; perfection is impossible. Entropy/decay is inevitable. Transparency is not possible in laissez-faire economics, because the wealthy will not allow it - which means that informed consent (a critical pillar of laissez-faire utopianism) is impossible. Also, corruption, fraud and predation (see: caveat emptor) are inevitable, and will become embedded into the system.
Keynesian-style graft is also inherent in laissez-faire systems, since wealthy business owners and top investors can pay off Government officials with campaign contributions (which cannot be banned under laissez-faire) to order law enforcement to look the other way no matter what these rich people do.
Under a laissez-faire system, rich corporations can violate any and every law possible, while indirectly pressuring juries with threats of plant closings, offshoring and mass layoffs, to yield a not guilty verdict, and if they're still convicted, they can close up shop and impoverish an entire city, or leave the country. At this point, law itself collapses. Sometimes utterly. Laissez-faire denies that negative unintended consequences can occur under its system, or it disregards them as "bad things happening to the weak": in essence, it falls back to the rule of the jungle, where the strong prey on the weak - thus, ironically, bringing into question, or even negating, the very reason for the concept of civilization.
At best, Laissez-faire is not flexible enough to account for these human failings. At worst, the system will get derailed by these failings: eventually starving people become terrorists, bandits, revolutionaries and so on. Laissez-faire is in essence, economic anarchy; anarchy is an unsuitable state for human society, and the reason why no nation (no, not even Hong Kong) has really tried laissez-faire (or pure Communism, for that matter), is 1) its ability to quickly degenerate into anarchy; and 2) the lack of flexibility and error control that laissez-faire economics presents in its pure form.
Keynesian systems are, on the other hand, equipped with a sort of economic error correction. Someone can step in and say something like hey, banks need an FDIC/NCUA (which governs my boss's business) to prevent massive runs on banks. Of course, this system is fraught with human failings and corruption and all of that, but as everyone has seen in the last year, we did have bank runs, and the FDIC/NCUA did prevent this from getting totally out of control. Government intervention did screw some things up with the stimulus plan, like its missteps in trying to save GM, but no one talks about the fact that this intervention also did stop a major business credit freeze that would have shut America down and sealed its coffin shut under a mile of economic cement. The unemployment insurance system, another act of Keynesian intervention and one of the solutions he explicitly advocated, is clearly miraculous. While some say that unemployment insurance encourages people to stay home, the truth is it requires people to look for work as a condition of further coverage - and Keynes wins this one again in 2009 - especially in a time where 6 people are applying for every job opening. Basic math: 6 people per job opening = 5 unemployed. The Keynesian system recognizes this truth and acts as error correction to resolve it, rather than denying or disregarding its existence, as would happen under a pure laissez-faire system.
The flaw with Keynesian system is sometimes the Government does not understand "this far, and no further". Because of this, there is great legitimacy behind laissez-faire adherents' complaints of excess Government largesse and those who leech off of it. Graft, corruption and other failings can turn Keynesian systems against itself; corporations can push for regulations that STIFLE competition and do not solve the problem that said regulation is supposed to cure. Keynesian systems, like laissez-faire systems, are susceptible to legions of unintended consequences; but Keynesian systems do not base themselves upon an assumption of perfection; Keynesian systems have the option to expire and let the market get back in relative control. However, quite often, those who execute Keynesian programs do not want to let them expire. Which can be a problem. In the end, Keynesian systems are also quite vulnerable to human failings.
Ultimately, though, the reason why all civilized nations enact Keynesian philosophies of Government intervention is because it is flexible. It is not perfect, but Keynesian philosophy justifies someone stepping in and saying "hey, this Government regulation or this market activity is insane, let's take corrective action".
Keynesian systems have a great knack for hitting millions of potholes and making a great many mistakes; but while Keynesian economics has many paths to failure, there is no path whatsoever for laissez-faire to succeed, aside from human perfection, which is impossible.
Laissez-faire means the Government must back off the market and let it run itself. It is a purist system that allows for no deviations. Any form of regulation is considered socialism at best, and often, it is called Slavery, Collestivism or Statism. The problem is the free market is run by human beings and is therefore flawed; to deny this is to say that the free market is in fact divine and perfect. This cannot be; perfection is impossible. Entropy/decay is inevitable. Transparency is not possible in laissez-faire economics, because the wealthy will not allow it - which means that informed consent (a critical pillar of laissez-faire utopianism) is impossible. Also, corruption, fraud and predation (see: caveat emptor) are inevitable, and will become embedded into the system.
Keynesian-style graft is also inherent in laissez-faire systems, since wealthy business owners and top investors can pay off Government officials with campaign contributions (which cannot be banned under laissez-faire) to order law enforcement to look the other way no matter what these rich people do.
Under a laissez-faire system, rich corporations can violate any and every law possible, while indirectly pressuring juries with threats of plant closings, offshoring and mass layoffs, to yield a not guilty verdict, and if they're still convicted, they can close up shop and impoverish an entire city, or leave the country. At this point, law itself collapses. Sometimes utterly. Laissez-faire denies that negative unintended consequences can occur under its system, or it disregards them as "bad things happening to the weak": in essence, it falls back to the rule of the jungle, where the strong prey on the weak - thus, ironically, bringing into question, or even negating, the very reason for the concept of civilization.
At best, Laissez-faire is not flexible enough to account for these human failings. At worst, the system will get derailed by these failings: eventually starving people become terrorists, bandits, revolutionaries and so on. Laissez-faire is in essence, economic anarchy; anarchy is an unsuitable state for human society, and the reason why no nation (no, not even Hong Kong) has really tried laissez-faire (or pure Communism, for that matter), is 1) its ability to quickly degenerate into anarchy; and 2) the lack of flexibility and error control that laissez-faire economics presents in its pure form.
Keynesian systems are, on the other hand, equipped with a sort of economic error correction. Someone can step in and say something like hey, banks need an FDIC/NCUA (which governs my boss's business) to prevent massive runs on banks. Of course, this system is fraught with human failings and corruption and all of that, but as everyone has seen in the last year, we did have bank runs, and the FDIC/NCUA did prevent this from getting totally out of control. Government intervention did screw some things up with the stimulus plan, like its missteps in trying to save GM, but no one talks about the fact that this intervention also did stop a major business credit freeze that would have shut America down and sealed its coffin shut under a mile of economic cement. The unemployment insurance system, another act of Keynesian intervention and one of the solutions he explicitly advocated, is clearly miraculous. While some say that unemployment insurance encourages people to stay home, the truth is it requires people to look for work as a condition of further coverage - and Keynes wins this one again in 2009 - especially in a time where 6 people are applying for every job opening. Basic math: 6 people per job opening = 5 unemployed. The Keynesian system recognizes this truth and acts as error correction to resolve it, rather than denying or disregarding its existence, as would happen under a pure laissez-faire system.
The flaw with Keynesian system is sometimes the Government does not understand "this far, and no further". Because of this, there is great legitimacy behind laissez-faire adherents' complaints of excess Government largesse and those who leech off of it. Graft, corruption and other failings can turn Keynesian systems against itself; corporations can push for regulations that STIFLE competition and do not solve the problem that said regulation is supposed to cure. Keynesian systems, like laissez-faire systems, are susceptible to legions of unintended consequences; but Keynesian systems do not base themselves upon an assumption of perfection; Keynesian systems have the option to expire and let the market get back in relative control. However, quite often, those who execute Keynesian programs do not want to let them expire. Which can be a problem. In the end, Keynesian systems are also quite vulnerable to human failings.
Ultimately, though, the reason why all civilized nations enact Keynesian philosophies of Government intervention is because it is flexible. It is not perfect, but Keynesian philosophy justifies someone stepping in and saying "hey, this Government regulation or this market activity is insane, let's take corrective action".
Keynesian systems have a great knack for hitting millions of potholes and making a great many mistakes; but while Keynesian economics has many paths to failure, there is no path whatsoever for laissez-faire to succeed, aside from human perfection, which is impossible.
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