I don't know much about economics, but I do know that a politburo full of eggheads can crash the economic ship just like us
simpletons in the free market can. Only the egghead crashes are much
more spectacular.
Economics is the dismal science, so I hope this post is not too dismal.
Ducky asked me about liquidity traps in one of his posts last week, and this this the response. It's Keynes versus the Misesian free marketeers. I've included lots of links for those who want to explore these pressing but timeless issues further.
Keynesianism is a cold, mechanistic theory sprung from an era when strongman dictatorships were admired for making the trains run on time
Economics is the dismal science, so I hope this post is not too dismal.
Ducky asked me about liquidity traps in one of his posts last week, and this this the response. It's Keynes versus the Misesian free marketeers. I've included lots of links for those who want to explore these pressing but timeless issues further.
Keynesianism is a cold, mechanistic theory sprung from an era when strongman dictatorships were admired for making the trains run on time
"[T]he Krugman/Keynesian viewpoint is based on an extremely mechanistic interpretation of human action. People within a market setting do not purchase goods they believe will meet their individual needs; no, they spend, as though the spending itself is the ultimate end of an economy." (The Deepening Depression)
To the Keynesian statists, we are merely cogs in the machine
Paul Krugman and the rest of the big government, spend spend spend, more stimulus crowd are Keynesians. They believe that if government just spends enough, it can stimulate a down economy. They also believe in the fiction, the fatal conceit, that government central planners can flatten the hills and fill in the valleys of the free market economy.
Paul Krugman and the rest of the big government, spend spend spend, more stimulus crowd are Keynesians. They believe that if government just spends enough, it can stimulate a down economy. They also believe in the fiction, the fatal conceit, that government central planners can flatten the hills and fill in the valleys of the free market economy.
What modern-day Keynesians tend to forget is that Keynes’s recommendation for governments to spend more in times of economic crises was predicated on the assumption that government would bank up cash during the good times. As we are all now painfully aware, that didn’t happen. They Keynesians were wrong, again, and the Austrian School has been vindicated, again.
After all, this Keynesian nonsense has had many trial runs, and it has failed every single time. And there are specific reasons: government spending drains reserve capital, nationalizations prop up inefficiencies, and money creation distorts reality and forestalls recovery.
It doesn't take a fortune-teller to discern that this hokum will not work to accomplish its stated aims. All it does is prop up the state and its friends at our expense. (Jeffrey Tucker - The Austrians were Right)
Governments worldwide spent like there was no tomorrow during the good times, so there is no reserve to draw from. Keynesian stimulus must be funded by putting ourselves further in hock to Communist China. Do any of you know anyone who has borrowed his way to prosperity?
Liquidity Traps and Other Keynesian Fictions
When Keynesian schemes collapse, as is happening now on a global scale, statists like Krugman resort to that shiniest of glittery baubles, the liquidity trap.
Liquidity Traps and Other Keynesian Fictions
When Keynesian schemes collapse, as is happening now on a global scale, statists like Krugman resort to that shiniest of glittery baubles, the liquidity trap.
Liquidity Trap: A theoretical fiction created to explain away the failures of Keynesianism. The point at which you cannot induce people to borrow and spend, even if you give money away.
The only reason they get by with such nonsense is because the average citizen has little understanding of economics. There's a lot of "Pay no attention to that man behind the curtain!" in central-planned statist macroeconomics.
Swedish economist Richard Johnsson writes a short but dense riposte to this nonsense, The Liquidity Trap Myth.
William Anderson provides a less-scholarly, more layman-friendly explanation in his short article, The Deepening Depression
The only reason they get by with such nonsense is because the average citizen has little understanding of economics. There's a lot of "Pay no attention to that man behind the curtain!" in central-planned statist macroeconomics.
Swedish economist Richard Johnsson writes a short but dense riposte to this nonsense, The Liquidity Trap Myth.
William Anderson provides a less-scholarly, more layman-friendly explanation in his short article, The Deepening Depression
Contra Krugman: The Austrian School
Murray Rothbard delivered many a withering critique of Keynesianism. Here are two good ones. I have to point out that his critique of Reaganomics was principally due to the fact that Milton Friedman's supply-side theories were founded in Keynesianism, government manipulation of people and markets.
Supply Side is Suspect as Well
Finally, Richard Ebeling delivers a critique of Supply Side economics. He also explains why the Laffer Curve may be a wonderful visual aid used to explain a general concept, but it is not a viable mathematical model.
Supply Side economics is based upon Keynesian principles, and therefore Austrians see it as just another means for statists to chain We The People to the mill wheel of government, albeit in a perhaps more efficient fashion.
I know this may be confusing to those who haven't delved into the dismal science, but it's important to understand it, because this is what future arguments will be revolving around as the slow-motion global economic collapse continues.
See also: Reason – How Long Will it Take for Keynesianism to Die?
Finally, Richard Ebeling delivers a critique of Supply Side economics. He also explains why the Laffer Curve may be a wonderful visual aid used to explain a general concept, but it is not a viable mathematical model.
Supply Side economics is based upon Keynesian principles, and therefore Austrians see it as just another means for statists to chain We The People to the mill wheel of government, albeit in a perhaps more efficient fashion.
I know this may be confusing to those who haven't delved into the dismal science, but it's important to understand it, because this is what future arguments will be revolving around as the slow-motion global economic collapse continues.
See also: Reason – How Long Will it Take for Keynesianism to Die?
