The first problem is that Keynesian prescriptions are filtered through a political process being driven by many competing agendas, of which balanced economic growth is only one. The second problem is that both Keynesian economics and the political process are almost entirely focused on short-run demand-side concerns while largely ignoring the long-run importance of economic productivity. The result is a political dynamic that has increasingly turned Keynesian economics into a prescription for fiscal irresponsibility that undermines economic growth without promoting economic stability.
(The only change I would make to the above paragraph is to remove the word “increasingly.” Keynesianism has from its conception been a prescription for fiscal irresponsibility. That the body-politic is perhaps becoming more and more addicted to the poisonous elixir doesn’t mean that the elixir was less toxic or less hallucinogenic in the past than it is today.)
Speaking of the errors of Keynes and his followers, today’s Wall Street Journal has a lovely essay by Abheek Bhattacharya on Zhang Weiying, a Chinese Hayekian. Here’s a slice:
Mr. Zhang’s academic colleagues were all praise for the “China Model,” but in 2009 he was giving speeches entitled “Bury Keynesianism.” Then a top administrator at Peking University, where he now teaches economics, he argued that since the financial crisis was caused by easy money, it couldn’t be solved by the same. “The current economy is like a drug addict, and the prescription from the doctor is morphine, so the final result will be much worse,” he said.
And here’s the beautiful closing paragraph:
“We human beings always seek happiness,” says Mr. Zhang. “Now there are two ways. You make yourself happy by making other people unhappy—I call that the logic of robbery. The other way, you make yourself happy by making other people happy—that’s the logic of the market. Which way do you prefer?”
… on which see also Sheldon Richman.
The great Jim DeLong writes a letter to the editor of a newspaper in Montana, pasted below in full:
To the Editor,
Judith Gregory wants to know who I am. That is easily answered: I live primarily in Washington, but since 1995 I have regularly spent time in Red Lodge, and I hope to spend more in the future. Recently, I wrote a book on current politics, and complete information about me is on the book’s website, www.specialintereststate.org.
Who I am is actually irrelevant, though. Ad hominem attacks are entertaining, but what counts is the quality of the arguments presented, and Ms Gregory’s are mostly vague, empty Progressive talking points.
She says Montanans want “a government that is responsive to their needs, within the means of a responsible budget”. Who could disagree? But what are “needs”, and what is “responsible”, and how are these determined? Progressives believe farmers should send money to ranchers who send money to small businesses who send money to families, all under the benevolent guidance of government administrators. (She leaves out mining, forest products, and manufacturing, all of which should be major sources of wealth in MT. These are not favored by Progressives.)
Unfortunately, we cannot all of us subsidize all of us. But the premise of the Progressives is to pretend that this perpetual motion machine is indeed possible, with money borrowed from China or created out of air by the Federal Reserve.
We must put our faith in our civilization, and in our producers, including workers, not in government officials. The job of government is to set up the institutional mechanisms – courts, law and order, property rights and contracts, and necessary infrastructure — that enable businesses and workers to invest and labor. Government can provide safety nets for the unfortunate, but that should be a limited group. And it will be, because people are eager to earn, unless the government so damages the productive economy that it greatly increases dependency.
Ms Gregory closes with a list of causes to which Beck will give money. But the voters of Carbon County do not need a roster of deserving recipients of government charity. They need a set of realistic proposals as to how to allow the economy of Carbon County and MT to thrive so that these groups do not need subsidies. If 19,000 children in MT lack health insurance, the solution is not to subsidize them while ignoring or destroying the industries that could employ their parents.
This is not a “Trickle Down Economy”, as Ms Gregory calls it, in a tired old Left buzzword. It is economics, period. And it is much superior to her vision of “trickle-down government”, in which the political class takes control over all the resources and then decides who is worthy to receive them. Trickle-down government results in huge inefficiency and abuse. Worse, fostering increased dependency becomes a major source of political power, so the political class has an incentive to undermine the productive economy so as to increase the value of its control over money and favors.
James V. DeLong
Red Lodge & Washington, DC