But the Conquered, or their Children, have no Court, no Arbitrator on Earth to appeal to. Then they may appeal, as Jephtha did, to Heaven, and repeat their Appeal, till they have recovered the native Right of their Ancestors, which was to have such a Legislative over them, as the Majority should approve, and freely acquiesce in.
-John Locke

Friday, August 12, 2011

Down With Keynesian Thought

Paul Roderick Gregory has written a wonderful article over at Forbes.com.  It's called "Tea Party Understands Economics Better than Obama or Bill Maher."  It is a great starting point for what I believe to be the most important corner that needs to be turned in understanding economics: debunking Keynes.

The appeal of Keynesian economics is its simple logic. If government spending for goods and services is part of GDP, then any increase in government spending must raise GDP.
As President Obama explained in a town hall meeting on Feb. 8, 2009:
“Republicans say this is not a stimulus bill but a spending bill. What do you think a stimulus is? That’s the whole point.” (Laughter from the crowd).
Keynesian economics is easy, even for stupid people. More thought and analysis are required to understand why it has not worked as it is supposed to. Keynesian skeptics must show that increases in government spending cause other components of GDP, such as consumption, investment, or exports, to fall. Such countervailing forces require more nuanced and sophisticated thought. They are not for the mentally lazy or those seeking simple answers.
Liberal commentators and comedians appear to accept Keynesian economics as such an evident truth that non-believers must be stupid. Keynesian economics has become a liberal dogma, not subject to challenge by reasonable people.
Consider comedian Bill Maher’s quip to a former Obama advisor on Aug. 6, 2011:
“Keynesian economists and climate scientists both know real things, but the stupid people who don’t know things get an equal vote. Isn’t that frustrating?” (Laughter from the audience.)
Liberals target the Tea Party as their favorite nominee for the “stupidity” prize. Tea Party members are not only dunces. They are irresponsible hostage takers who do not care if they bring the country down with them.
Here is a shocker for Obama, Maher and Tea-Party haters: Since the Nobel Prize in economics was established, seven Nobel Prizes have been awarded to economists who cast serious doubt on Keynesian economics. Not one Nobel Prize has been awarded to an economist who advanced the Keynesian agenda. New York Times liberal columnist, Paul Krugman, won his Nobel Prize for trade theory, not for macroeconomics.
Perhaps the president simply does not want to hear from those who disagree with the course he has chosen. It could be that the president’s goal is not recovery and economic growth but growing the size and scope of government to achieve his goal of a redistributive state.

Sadly, Gregory's last paragraph is what I consider to be the truth.

1 comment:

  1. Gregory's column is fantasy. Consumers are not spending because they don't have money, not because they are concerned about deficits. Businesses aren't spending because consumers aren't buying. Rational people are not basing their investment decisions on the difference between a 36% vs. 39& marginal tax rate. Things certainly are more complicated than just have the government spend money and everything will work out, but the idea that we should reduce taxes and spending to get of of the current recession will simply not work.