Here’s a letter that I sent to the Wall Street Journal:
Robert Reich asserts that it is “facile” to object to the Keynesian insistence that high unemployment requires stimulus spending (“The Necessity of Obamanomics,” Feb. 5).
Today’s troubles have indeed stimulated a resurgence of Keynesian economics. But contrary to Mr. Reich’s implication, Keynesian analysis is no scientific verity on par with, say, the laws of thermodynamics. Many prominent economists, several with Nobel prizes, question the method and assumptions – and, hence, the prescriptions – of Keynesianism.
Some of these economists emphasize that every dollar that government spends is a dollar taken from someone who had plans for that dollar, and so it’s unlikely that government spending raises overall demand. Others of these economists emphasize that, if private-sector spending is too low, the problem is not “animal spirits” so much as it is taxes and regulations (both actual and threatened) and excessive government spending itself that make consumers and investors leery of the future. Yet others of these economists focus on the market’s ability to restore itself to health once it rids itself of inappropriate investments.
Non-Keynesian economists might be mistaken. But the plausibility of their arguments and the prominence of many in their ranks mean that Mr. Reich’s summary dismissal of them is, well, facile.
Sincerely,
Donald J. Boudreaux
