Keynes’s Ghost Continues to Haunt Economics

Posted by  $  richrobinson 5 years, 5 months ago to The Gulch: General
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A totally discredited theory that may be our downfall.
SOURCE URL: http://mises.org/daily/6577/Keyness-Ghost-Continues-to-Haunt-Economics


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  • Posted by LionelHutz 5 years, 5 months ago
    Keynesian economics boils down to: when you find yourself in a depression, if you can only get people to spend more money, that will get you out of the depression. To which the common man will say: DUH!
    If these people were on a sinking ship, they might as well declare "The problem here is the boat's internal air to water ratio is too low. If we can figure out a way to restore the previous ratio, the sinking should stop." They then advise the captain to deploy air compressors which blow air into the ship.
    Keynesian economics never asks the question "what is the root cause of this depression?". It is almost as if to them the root cause IS "people aren't spending money", which any intelligent bystander would rightly identify as a symptom, not the root cause.
    The problem: how does a government get people to spend money? They can create money. They can make it less expensive to borrow money. They can even mail people checks. But when people are uncertain about the future, or are in debt up to their eyeballs, that money just ends up in the mattress or is used to pay down debt which means no additional consumer spending. In response, the Keynesian proclaims their theory is sound, but we just aren't doing cash injections to a large enough degree. Inject MORE money. It's still not working. So now what's the latest development? Lo and behold, we are now in a situation where millions of Americans are going to have to spend more money, by law, on healthcare. In the past, the problem has been the government creates billions of dollars, which just went to Federal Reserve banks and sat there because nobody wanted it. Now they've figured out a way to create money and mail it to people in the form of tax rebates used to offset a more costly health insurance plan that they have been forced to buy. End result: the government has figured out a way to FORCE the spending of additional dollars in the economy. What a relief. The boat's surely going to stop sinking now, right?
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  • Posted by  $  minniepuck 5 years, 5 months ago
    this is a good article, thank you. a friend got a PhD in economics a few years ago. I asked if she followed the Austrian school of thought and she said, "of course not!" I couldn't understand it. they're graduating little Keynesians, but why? when I studied economics, part of the syllabus included economic history. I was sure anyone who had repeatedly seen the failures of the keynesian thought would say it's invalid, but alas... how do you change this?
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    • Posted by  $  5 years, 5 months ago
      I don't know Minnie. If you simply look at the facts it is clear that the Austrian school of economics is more effective. Keynesians are all about control which sounds like socialism...
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      • Posted by  $  minniepuck 5 years, 5 months ago
        I guess the rhetoric from the left is easier to sell. when things look gloomy, the left says, "WE will figure it out and make it better! give us more control and we'll fix your problems," vs the alternative which says, "the problem is our excessive involvement; we will now step out of the way and let YOU figure it out." on one hand, you're free from the government. on the other, you're free of having to even think about how to sustain yourself. which type of freedom do people prefer? it's a sales pitch and the right has done such a poor job of selling their candidates lately.

        this is simplistic, of course, I'm just trying to explain myself without writing an essay about this.
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        • Posted by LetsShrug 5 years, 5 months ago
          Getting the masses to understand or get on board with the idea that it's best to fend for yourself (freedom) than it is to have the gov holding your hand and calling the shot in your life (socialism) will be a difficult task. They won't watch pertinent movies or read history books (they aren't entertainment), so what options does that leave us with? Rap songs?
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        • Posted by  $  5 years, 5 months ago
          I had someone working for us once who told me she hated having to be an adult. She voted for Obama twice. Some people just want others to make their decisions for them.
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