Thursday, October 13, 2011

Obama’s Brain Trust is Brain Dead


Modern-Day Keynesians defame Keynes, ignore his teachings

The White House “economics” team and the Gargoyles on the Parapets of Liberalism like Paul Krugman have been beating the Keynesian drums for over two years now, screaming themselves red-faced for more stimulus every time the last one doesn't work. 

A fundamental tenet of Keynesianism is that government should not raise taxes in an economic downturn.  The illogical and intellectually incoherent left has now closed the circle of self-contradiction, demanding new taxes.

Does anyone really believes that removing $1.5 trillion from the economy will lower unemployment? Maynard Keynes certainly did not!

The Problem with Keynesianism is the Keynesians

Keynesians are wrong on just about everything, notes Daniel J. Mitchell, but Sir Maynard was not, and he was no communist demon.  He was a brilliant man who answered the great economic questions of his time.  He was not an advocate of an ever-expanding government, and he believed permanent debt was bad.  Indeed, his government stimulus theory is predicated upon governments running up surpluses in the good times so they can then use it much like states use their rainy day funds in the bad times:
Keynes, for instance, was an early proponent of the Laffer Curve, writing that, “Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget.”

Keynes also seemed to understand the importance of limiting the size of government. He wrote that, “25 percent taxation is about the limit of what is easily borne.” It’s not clear whether he was referring to marginal tax rates or the tax burden as a share of economic output, but in either case it obviously implies an upper limit to the size of government (especially since he did not believe in permanent deficits). (Mitchell)
Keynes on Hayek

Nicholas Wapshott writes that Keynes read Hayek's "The Road to Serfdom" while sailing across the Atlantic on the way to the Bretton Woods conference.  Here is what he had to say to Hayek...
“The voyage has given me the chance to read your book properly,” he wrote. “In my opinion it is a grand book. We all have the greatest reason to be grateful to you for saying so well what needs so much to be said. You will not expect me to accept quite all the economic dicta in it. But morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement.”(Keynes and Hayek:  The Great Debate)
Hayek agreed with some of Keynes' prescriptions in some narrow circumstances as well, hence his less than stellar reputation with Rothbardians and some Misesians.

So while we should continue to combat the tired and dangerous ideas of the neo-Keynesians, we should refrain from heaping obloquy upon their ideological father.  It's not Keynes' fault that his disciples have defamed his reputation.

* - For the rare cogent and non-stupid liberal article discussing how Keynes would solve today's problems, please see What Would Keynes Do?  It really is an excellent article.  H/T to our liberal interlocutor Ducky.

28 comments:

Anonymous said...

"... while we should continue to combat the tired and dangerous ideas of the neo-Keynesians, we should refrain from heaping obloquy up their ideological father. It's not Keynes' fault that his disciples have defamed his reputation".

It struck me full in the face, as I read that last sentence, that the same could -- and should -- be said of Our Lord and Savior, Jesus Christ.

So often popular perceptions -- carelessly formed in lazy minds -- do a great disservice to the subject on which they purport to focus. It's even worse when those hungry and greedy for power pervert and misrepresent the thinking of truly brilliant or well-known figures to promote a self-serving agenda.

It's too easy to think of men like Keynes -- and Karl Marx for that matter -- as villains determined to destroy a wonderful world, when in fact culpability may lie more in those "disciples" and "followers" who used what-were-intended-to-be beneficent, transformative ideas to serve a ruthless, narrowly focused quest to obtain dictatorial power.

Thanks for bringing a broader perspective and some much needed depth to the discussion, SilverFiddle. Nothing of any value could be gained from the militant insistence that there is only one side to the great issues of our time -- or those of any other.

Simplistic thinking is only for the simple-minded.

~ FreeThinke

Silverfiddle said...

FT: I was inspired by the old lefty formulation, "the problem with Christianity is the Christians," or how ever it goes...

Ducky's here said...

Does anyone really believes that removing $1.5 trillion from the economy will lower unemployment?

-------
In this case it will lower the deficit, unemployment will likely remain unchanged.

Silverfiddle said...

@ Ducky: In this case it will lower the deficit, unemployment will likely remain unchanged.

You've failed to make the connection between taking money from people and lowering the deficit???

98ZJUSMC said...

The illogical and intellectually incoherent left has now closed the circle of self-contradiction, demanding new taxes.



*head - deask* *head - desk*

Exactly, SF. Case in point: #OCCUPY...WHATAREWEOCCUPYINGTODAY?


It would seem they are chasing themselves in circles to justify....I'm not even sure what they are trying to justify.

So ridiculous.

My best guess is "instant gratification economics". I'm sure it will succeed real well. /sarc

98ZJUSMC said...

In this case it will lower the deficit, unemployment will likely remain unchanged.

How does.....

Never mind.

98ZJUSMC said...

So while we should continue to combat the tired and dangerous ideas of the neo-Keynesians, we should refrain from heaping obloquy up their ideological father. It's not Keynes' fault that his disciples have defamed his reputation.

Agreed. However, heaping complicated economic theory on the infantile left is like putting a frag in the hands of a child and pulling the pin as you walk away.

Like the child, the left has no idea what to do with it; other than cause the inevitable destruction to self and surroundings.

Anonymous said...

Devotees who misunderstand Keynes
With spending won't hold in the reins.
To the concept of thrift
They've given short shrift,
So our wealth slipped down into the drains.


~ FreeThinke

Jersey McJones said...

Silver, why do you insist on perpetuating the lie that 'raising taxes removes money from the economy?' What, do you think the government is not also a part of the economy? Where do you think the money goes? What a silly and irrational way of thinking.

JMJ

Anonymous said...

..."heaping complicated economic theory on the infantile left is like putting a frag in the hands of a child ..."

Yes, indeed. It comes under the heading "A Little Knowledge Is A Dangerous Thing."

~ FreeThinke

Silverfiddle said...

Jersey: Yeah, the government puts some of it back, but it does so inefficiently, like handing it to money wasters like Solyndra or bailing out irresponsible wall street gamblers.

conservativesonfire said...

Keynes may have been a brilliant theoretical economist but he sure doesn't seem to have had much understanding of human nature. I'm not sure that he was correct that tinkering with the free market system by governments could under some conditions have beneficial results. Let's for the sake of argument say he was correct. The problem is that governments will seldom know when the conditions are right to tinker, by how much to tinker and, when to stop tinkering. Compound that with the tendency to abuse credit and leave the debt to future generations to figure out how to pay and we see why we are in the mess that we have today. Thank you Mr. Keynes.

Anonymous said...

Hey, Jersey,

Weren't you the guy who insisted corporations are not people a day or two ago? I disagreed with you, but everyone else did not. Score one for you -- maybe.

But if a corporation is not "people," then a government is most certainlynot "people" either.


There is a fundamental difference between government bureaucracies and corporate structures, however.

It boils down to this tried-and-trite-but-true truism:

INDUSTRY MAKES

GOVERNMENT TAKES


Not only that. GOVERNMENT is by its very nature a MONOPOLY.

Business, Industry, Corporations -- however you want to label it -- produces goods and services -- some essential like fuel and food -- many trivial and useless like costume jewelry, souvenirs for the tourist trade, junk food, Halloween costumes, pornography, et al.

Then there are "Big Ticket" luxury items like private yachts, private jets, sports cars, McMansions, "4-Star Restaurants" that serve hundred-dollar hot dogs, spas and hot tubs, in-home "theaters," swimming pools, exercise machines like Bow-Flex, Harley Davidson motorcycles, "Restaurant-Grade" home appliances, granite countertops, custom-fitted closets, precious stones set in gold, platinum, or silver, Baccarat Crystal chandeliers, Waterford Crystal stemware, and Sherle Wagner bathroom sinks, etc.

No matter what you may think of the goods produced and those status-seeking consumers who feel they must have them the point is LOTS of people are gainfully employed in producing, shipping, displaying and selling them.

People WANT these things, and are willing to part with vast sums of money to possess them. With any luck the producers, distributors and salespeople involved get amply rewarded for their efforts. Stockholders receive good dividends and appreciated value in their stocks, and the buyers feel great satisfaction and derive all sorts of benefits from their purchases.

What could possibly be wrong with that?

Now government on the other hand produces nothing but an incessant and ever increasing demand for more and more "blood money" from the productive and personally prosperous sector to fund an ever increasing number of "social programs" "pork barrel projects," and "studies" of dubious value that always seem to be managed with a degree of wasteful inefficiency and insouciance that would not -- and could not -- be tolerated in the productive sector.

With the exception of providing our Defense, the FBI, Customs, Immigration, the building and maintenance of Federal prisons, Interstate highways, bridges, tunnels, sewers and waste disposal, printing currency, administering the Bureau of Weights and Measures, and possibly Food Inspection, there is no earthly reason we should have to bear the ever more crippling burden of funding the monstrously out-of-control, increasingly-despotic Federal government.

~ FreeThinke

Silverfiddle said...

@ CoF: Keynes may have been a brilliant theoretical economist but he sure doesn't seem to have had much understanding of human nature.

Indeed. That is what distinguishes the Austrian School. It recognizes that human nature plays a key role, and no group of people, no matter how smart, can read all the signals and pull all the right levers.

Jersey McJones said...

Government does not just "take," FT. That is a silly and simplistic way of looking at things.

And yes, Silver, you can always point to inefficiencies in the gov't, but having worked in both the private and public sectors, and having been around a bit in my life, I can without any doubt whatsoever that the private is NOT any more or less efficient than the public! It's a LIE.

Take Medicare. Medicare is FAR more efficient than private insurance! Take the military. The military is FAR more efficient than private military contractors. It goes on and on. This silly myth that the gov't is always wasteful and inefficient is just juvenile.

JMJ

Z said...

"I can without any doubt whatsoever that the private is NOT any more or less efficient than the public!"

Are you kidding? Medicare is far more efficient than private insurance? Man, you haven't fought with Medicare like my friends have, I guess. And I don't believe for a second that private military contractors are all less efficient than our military!

Gov't is not "ALWAYS" wasteful and inefficient, but what was the number of employees the gov't was able to live without when it was going to be shut down a few months ago? Was it 600,000? I forget what they called them now, but it was basically "not necessary employees"..what the heck is that term?
You ever visited a DMV or US Postal Office to name a few? See them all scurrying around being productive? Ya, right :-)

Anonymous said...

ANOTHER PIECE OF THE PUZZLE SHOWING WHY AND HOW WE GOT WHERE WE ARE:

Charles August Lindbergh, Swedish immigrant, father of the famous aviator and member of the U.S. House of Representatives in 1913 when the Federal Reserve was created said:


"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson] signs this bill the invisible government by the Monetary Power will be legalized... The worst legislative crime of the ages is perpetrated by this banking and currency bill."...

"To cause high prices, all the Federal Reserve Board will do will be to lower the rediscount rate ... producing an expansion of credit and a rising stock market; then when ... businessmen are adjusted to these conditions, it can check ... prosperity in mid career by arbitrarily raising the rate of interest. It can cause the pendulum of a rising and falling market to swing gently back and forth by slight changes in the discount rate, or cause violent fluctuations by a greater rate variation and in either case it will possess inside information as to financial conditions and advance knowledge of the coming change, either up or down. ...

"This is the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed.”
 ...



"The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money. They know in advance when to create panics to their advantage. They also know when to stop panic. Inflation and deflation work equally well for them when they control finance.” ...

~ Representative Charles August Lindbergh, 1913



Woodrow Wilson said later after seeing the light:

"We have restricted credit, we have restricted opportunity, we have controlled development, and we have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world — no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men."



~ Submitted by FreeThinke

Anonymous said...

"There are a thousand hacking at the branches of evil to one who is striking at the root."

~ Henry David Thoreau (1817-1862)

If we continue to quibble and quarrel over present realities without realizing they are the end products of grand schemes, utopian visions and megalomaniacal impulses set in motion a century ago, we have no chance of killing off the deadly weed now choking the health, strength and vitality out of earthly life life for the benefit of a small group of wickedly selfish individuals. Those characters have managed to set us at each other's throats while they go merrily on their way wreaking havoc worldwide.

~ FreeThinke

Silverfiddle said...

Jersey: You are wrong on all counts. I already knocked down your bs about medicare being more efficient. It's a statistical damn lie.

You're wrong on the rest as well.

Someone spending their own money will always be more cautious than a person spending someone elses money. That's fundamental human nature.

Again, Solyndra is a prime example. They couldn't attract private sector money, so they went to Uncle Stupid.

bunkerville said...

Thanks for your post that sheds a different light on Keynes. Good comments as well

Bd said...

Silverfiddle: Oh man, the old Soylndra soapbox. You fail to mention that that other 39 solar companies the Government invested in WERE SUCESSFUL! Should we follow the GOP mantra and give up on solar energy and just concede to the Chinese who took it from us? Do you hate America that much?

Silverfiddle said...

Bd: You mean like Evergreen and Spectrawatt, who are also going bankrupt? Or the "green" battery companies Obama wasted our money on who went bankrupt?

Obama is King Midas in Reverse. Everything he touches turns to crap

http://thinkprogress.org/green/2011/09/01/309825/solar-manufacturer-that-received-government-aid-files-for-bankruptcy/

I've warned you already about crapping up this forum with lying leftist propaganda.

Here's the truth about how Obama has wasted our money on crony crapitalist ventures

http://thegwpf.org/the-climate-record/3979-the-empty-promise-of-green-jobs.html

Silverfiddle said...

And another thing. I think it's a great thing that the Chinese government is spending its own money in order to give us cheap solar panels. Thank you China for the discount!

Only a Marxist statist would think it was a good idea for us to get in a spending war with them over this.

You are a typical liberal. Given enough of other people's money, you can solve any problem

Finntann said...

Jersey, by your illogic we could set the tax rate at 100% and everything would be fine.

Our government is a monument to inefficiency.

The question isn't whether or not the government can spend money. We already know they can spend like a drunken sailor. The question is whether or not the money can be spent better elsewhere.

Look at it from this standpoint:

Say there is an industry with 100 competing firms.

They are profitable and employ 100,000 people.

Say we have a choice of leaving the industry as it is under current business rules and tax structures.

Goverment can impose a special industry tax of say 10% and raise 100 Billion dollars.

Now... who will do better with that money? The government or 100 businesses?

And... if the government imposes that tax what are the consequences on production, employment, etc. ?

Cheers!

Silverfiddle said...

Jersey: Take Medicare. Medicare is FAR more efficient than private insurance! Take the military. The military is FAR more efficient than private military contractors. It goes on and on. This silly myth that the gov't is always wasteful and inefficient is just juvenile.

Wrong! Here's the disinfectant against the progressive propaganda that infests this thread:

http://www.qando.net/?p=3362

http://www.realclearpolitics.com/articles/2009/06/27/the_adminstrative_cost_benefit_myth_97193.html

http://rossputin.com/blog/index.php/taking-apart-the-medicare-efficiency-myt

Folks, fighting the liberal lies is easy. Just deploy the facts.

No Jersey, the military is not more efficient than contractors. That's why DoD is contracting out so much.

The silly myth is that you know what you're talking about. You should stick to what you know and refrain from bloviating on those topics you know nothing about.

Karen Howes said...

Jersey, wrong-- the private sector is always more efficient with money than government.

The concept is simple: when you raise taxes on people, they are poorer. They have less money to spend.

Always On Watch said...

Karen said: The concept is simple: when you raise taxes on people, they are poorer. They have less money to spend.

Duh!

There comes a point that taxes are oppressive -- and destroy expendable income. Many of us have reached or will reach that point IF one looks at the entire household budget, even a frugal one: house payment, health insurance (not union, not government), utilities, etc.

MK said...

"It's not Keynes' fault that his disciples have defamed his reputation."

True, it's not his fault if leftist crapbags insist on dragging him along with them on their various paths of stupidity and destruction.