United Liberty
For the Love of Keynes
Wed, 11/26/2008 - 11:37am | posted by Matt Wittlief
As Henry Paulson recently stated, an economic crisis of this magnitude only comes around once or twice a century. I’m not exactly sure what the basis for such an argument might be other than looking at a sample size of… about one century. Whether there is merit in this assumption or not, we certainly are facing an economic crisis. In times like these, our government leaders look to policy experts and lessons of history - and possibly listen to them more than usual. This doesn’t mean they stop looking to lobbyists and the next election.
As economists and public policy analysts hold opinions across the entire spectrum of ideas on how to solve our current crisis, history is pointing to one place: the Great Depression. Today’s environment is more complex and has different origins and circumstances, but it is an easy target for media-tainment. This leads so many to point to the policies of British economist, John Maynard Keynes, who is widely respected as the father of macroeconomics and the man who knew how to prevent and/or fix the Great Depression.
Keynes was a brilliant man by all accounts. Like many brilliant men, he figured that he and other brilliant men could manipulate the economy via “limited” central planning for the benefit of all. While Keynesian theories have some merit, he misses the point with flawed assumptions. The government intervention advocated by Keynes assumes that the collective good can be objectively measured and that the central planners will not be motivated by personal interest.
Keynesian economics becomes more dangerous as it becomes the favorite theory for politicians. It gives the government an excuse, in the name of economic theory, to spend money. This, of course, makes the lobbyists happy too. It all inevitably leads to what we are seeing today: bailouts for those who can make the best arguments, increased central planning, and so much debt that currency debasement is the only logical outcome. This cocktail is the recipe for socialism and will be the end of our political system one day.
Keynes’ most value contribution to economics is his theory of demand for money, which is absolutely spot on. In some ways, Keynesian and Austrian economics have similar insights. Each school was inspired partly by the work of Swedish economist Knut Wicksell, and each school places a focus on the demand side. However, Keynes’ reckless disregard for the long-term consequences of debt accumulation render his policy recommendations useless.
I think both of you were absent the day they taught Keynesian Economics in school. It is with constant disbelief when I read or listen to economists or would-be economists give their critical analysis of Keynesian. Most don’t understand it and because of that quickly disregard it as “reckless” and “useless”. If you want to understand how Keynesian Economics could solve the economic crisis of the United States then I would like to suggest a new book that is about to be released titled, “A Plan For America” by author, E. J. Miller Ph.D. This book is inherent of Keynesian’s theory and proves that it can create a successful model the great economist promised some eighty years ago.
There’s no plan to solve America’s economic problems and imbalances in Washington D.C. but there will be! And it will be the model that comes from this book. Look for it in the next couple of weeks.
E Plurieus Unum
Was the book written before, after or during the mortgage market set fire?
“Timid men prefer the calm of despotism to the tempestuous sea of liberty.” - Thomas Jefferson
Well, I’ll look for the book. That said, I think you may be missing my point. I’m not suggesting that Keynesian theory is bad in of itself. I’m suggesting that those who try to play God with the economy will fail due to imperfect forecasting, the inability to objectively define the qualitative good, and, most importantly, corruption amongst the elite. Thus, any form of central planning will lead to failure.
Keynes looks alot like my uncle.
“Timid men prefer the calm of despotism to the tempestuous sea of liberty.” - Thomas Jefferson
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