The heart of the Keynesian critique of 19th century neo-classical economics is this: the assumption that the natural state of an economy is to tend toward full employment of its resources is a weak assumption, that there can be very long periods of vast idle resources. A quick glance of economic history suggests that this is likely the case.
One does not need to accept the Keynesian prescription to find this concern legitimate. (In fact, the neo-classical reply is often, “OK, I accept your analysis of the problem, but your fix is not a fix, and rather makes the problem worse.”)
Of course, one can accept that such conditions of long-term underemployment can, and have, existed and that intervention can/could have made them better, without agreeing that all or most (or more than a very few) such cases exist. (Scott Sumner quips somewhere, when being accused of Keynesianism, that the Keynesian analysis is every once in a while correct … about twice every hundred years, something like a stopped clock.)
… points to be debated.
The claim that the free market is not perfect is a valid one. Entrepreneurs can be wrong, opportunities can be missed, etc. But between entrepreneurs and politicians/central bankers, the former are far more likely to be correct. What fans of Keynesian economics and central planning miss is that all investment opportunities are not interchangeable, i.e., capital is not homogenous. As Thomas Taylor explains, “capital goods are parts in an interlocking structure of individual plans.” Pieces of the puzzle cannot just be moved around by centralized authorities without creating distortions in that capital structure. This is why followers of Hayek and Mises do not talk about overinvestment, but about malinvestment.
Sometimes, as W. H. Hutt argued, resources are idle because their owners feel that the present opportunities are not valuable enough, and therefore they would prefer to wait and preserve the availability of those resources for future opportunities. Keynesian policy assumes that more is better, and ignores the fact that by using government or central bank policy to induce more present investment–investment that entrepreneurs had viewed as sub-optimal in the absence of the central plan–real resources that would have been kept available are now tied up in other employments. As described by Bastiat, the central planners see the new investment and feel proud of themselves; the opponents of central planning see the opportunities that were missed because finite resources were wasted in inferior uses.