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Keynesian Economics Is Wrong
Monday, December 15, 2008
This video was sent to me by the folks at the Center for Freedom and Prosperity Foundation - it's not a bad summary of the current system but offers no alternatives or suggestions for improvement.
Now that we are probably nearing the end of the Keynesian era, it's natural to wonder what comes next and how we get from here to there.
6 comments:
The END of the Keynesian era???
Not here on planet Earth. Hey, you should come down here and check it out sometime.
Applying 18th-century economic theory to 21st-century economies makes no more sense than applying 6th-century religion to the 21st century. "Keynesian economics" is wrong only when it's characterized by free-market magical thinkers.
"Keynesian economics" is not the same thing as Greenspanian "Moneterism", ie only interest rates matter, not fiscal policies.
Since Obama is going to be president, I see Post-Keynesianism coming into flavor. See Krugman, Roubini, and one of my favorites Steve Keen.
Hence the talk about debt-deflation, liquidity trap, and fiscal stimulus.
Monetarists and Austrians are both very similar because they both believe in little to no government intervention, the rationality of self correcting markets, and tendency towards equilibrium.
Where they differ is Monetarists believe in fiat currency (and the FED. This is the reason why Freidman is quoted as saying "We are all Keynesians now"). While Austrians believe in a gold backed system.
It may be that doing nothing and just reducing government will, in the long run, allow markets to "correct" and achieve better growth. BUT, in the meantime, if the suffering gets big enough, you will have a political explosion and demands for even worse intervention, or, God forbid, socialist revolution. It has happened before. The market system could commit political suicide if there is not some redistribution in hard times, albeit inefficient and unfair, it may be the most realistic way to muddle through. We made it out of the Depression without becoming communist or fascist.
"The END of the Keynesian era???"
You should come to Georgia and see these anti-tax, racist republicans trying to figure out how to borrow and prime the pump since their was lead to disaster.
It wasn't a year ago the republican governor was saying if it wasn't for the news other places Georgia wouldn't know they was bad economic news.
Now, the anti-tax, anti-government crowd has a deficit over 10%, the highest in the nation.
RN,
On planet earth it is clear the Keynesian interventions lengthen recessions, increase unemployment and create inflation.
It is the Keynesians, who insist on using every measure of proof except actual empirical evidence, who are living in an otherworldly realm.
That is because Keynesianism was never meant to actually be correct, but as an apologetic obesiance to the socialist movement. Now that socialism has been thoroughly discredited, perhaps we can stop pretending not to see empirical reality and throw Keynes in the trash bin where he belongs.
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