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John Papola and Macro Santa

Posted By Russ Roberts On December 22, 2011 @ 3:22 pm In Stimulus | Comments Disabled

John Papola does a superb job [1] skewering Keynesianism:

The year is nearly over. The holidays have arrived. The news media is stirring with visions of holiday consumer spending sugar plums, terrifying debt crisis, and depression. ‘Tis the season for John Maynard Keynes [2]! That’s right, there’s no better time to reflect on the maestro of modern macro and more importantly his many modern followers. Each year the public enjoys a sleigh full of Keynesianism shoved down our collective chimneys by a media obsessed with Christmas consumer spending because “we have a consumer economy”, or so we’re told. Nothing gets that so-called “marginal propensity to consume” into high gear like the holidays!

Indeed, Lord Keynes is our modern Macro Santa.

Like Santa’s busy elves, today’s Keynesian economists believe that when we’re in an economic rut, government spending transforms into a magical debt-financed multiplier sack, able to create a limitless bounty of goodies. Meanwhile, they warn that our current woes are because the “austerity” Grinch has stolen Christmas! The only way for us to get the recovery bell to ring is to close our eyes and believe in the magic of Macro Santa.

After three years of studying the magical sleigh’s flight path, I thought I’d wrap up the year with a one-stop-shopping review of Keynsianism. Now grab your hot chocolate, ready your bookmarks and settle down for a very long winter’s story about Macro Santa and his mischievous elves.

Read the whole thing.

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[1] does a superb job: http://www.forbes.com/sites/beltway/2011/12/22/macro-santa-and-the-austerity-grinch/

[2] John Maynard Keynes: http://delong.typepad.com/sdj/2011/12/its-maynard-keyness-world.html

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