Gold Rush vs. War: Keynes and the Economics of Digging Holes

39 Pages Posted: 31 Jan 2023

See all articles by Michele Bee

Michele Bee

Universidade Federal de Minas Gerais

Raphaël Fèvre

Université Côte d'Azur

Date Written: January 31, 2023


This paper aims to fully exploit the heuristic virtues of Keynes’ famous ‘old bottles’ story, deploying a multi-layered argument and drawing out its broadest implications. We show that with this story Keynes was making a very serious point about anti-crisis policies: the need for authorities to stimulate animal spirits by relying on people’s natural impulse to action. Rather than taking the place of entrepreneurs and paying people to dig holes, Keynes seems to be arguing that public authorities should put entrepreneurs in a situation where they are so enthusiastic that they go into debt to dig holes, just like during a gold rush. At the same time, it is a question of restoring the banks’ willingness to lend for these over-optimistic projects in a period of depression. This article explores the conditions that make public intervention as effective as possible through the enthusiasm and individual initiative that can be generated by an artificial gold rush. Such intervention therefore can be as minimal as possible, without having to resort to the opposite authoritarian solution of war. Since the gold rush builds cities and wars destroy them, Keynes spent considerable energy convincing his contemporaries that liberal-democratic countries would have to take the former path if they wanted to avoid the latter.

Keywords: Slump, Keynesian Multiplier, Animal Spirits, Artificial Gold-Rush, War

JEL Classification: B22, B31, E60, H12, H50

Suggested Citation

Bee, Michele and Fèvre, Raphaël, Gold Rush vs. War: Keynes and the Economics of Digging Holes (January 31, 2023). Available at SSRN: or

Michele Bee (Contact Author)

Universidade Federal de Minas Gerais ( email )


Raphaël Fèvre

Université Côte d'Azur ( email )


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