How would you solve the housing crisis, Mr Keynes?
He devised revolutionary prescriptions to save capitalism in crisis. We have tried an experiment to see what John Maynard Keynes would advise us to do today. Here are the late British economist’s replies in a fictitious interview about the housing market.
By Thomas Domjahn. This fictitious interview was created in collaboration with ChatGPT and Perplexity.
John Maynard Keynes, is the housing market just like any other market?
No, the housing market is a special kind of market. Housing is a basic need that everyone has, regardless of income or market conditions. Unlike consumer goods such as electronics, there are no real alternatives when housing becomes scarce or too expensive. This necessity often makes state intervention unavoidable.
The housing market in many Swiss cities is tight.
The state must act in such situations. It has to step in and boost housing construction through government investment. Funding is not a problem: the state can take on debt. Ultimately, this prevents a dramatic worsening of the housing crisis, which is better for society as a whole.
However, government intervention and regulation such as rent caps undermine incentives for landlords to offer accommodation at all. This causes a decline in supply, which further exacerbates the housing shortage.
Your concerns about rent caps are not entirely unfounded. However, this is not about permanently overriding the market but about targeted intervention in times of crisis. When rents in cities explode, this harms the entire economy because it drastically reduces purchasing power in other areas.
Is there a successful model that Switzerland could adopt?
Yes, some countries have shown that it is possible to organise the housing market fairly and efficiently. In Austria, social housing is highly developed and offers affordable accommodation for broad sections of the population. Social housing accounts for around 24 per cent of the total housing stock in Austria. In Vienna this proportion is especially high at around 60 per cent. In Germany and Switzerland this proportion is less than 5 per cent.
Where do you live?
Oh, I’m lucky enough to live in a very pleasant situation. Since 1925 I have resided in a charming house in Firle, a picturesque village in East Sussex in the south-east of England. If I lived in Switzerland, I would look for a flat near a lake or in a quiet neighbourhood. I prefer a balance between city living and seclusion.
The idea: The essence of Keynes’ theory
Keynesianism was founded by the British economist John Maynard Keynes (1883-1946). Its central idea was that the state should intervene in a market economy to counter the economic cycle in order to create stability. In times of recession, governments should boost demand through public spending and thus combat unemployment. Keynes argued that the state should actively dampen the economy during boom phases in order to prevent any overheating or inflationary trends.