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A Holiday Gift

Arnold Kling – although no longer at the still-indispensable EconLog – has returned to regular blogging!  His recent post “The Keynesian Fixation” supplies ample evidence for why Arnold’s return to the blogosphere deserves enthusiastic applause.

Here are two important paragraphs from this post; after noting that Keynesian-type economic thinking causes one to mistake consequences for causes, Arnold explains that:

To a Keynesian, economic activity consists of spending. Spending causes jobs, and jobs cause spending. When you look at economic data, that is your focus. Is spending going up or down? If it goes up, then we will have more jobs and more spending. If it goes down, then we will have fewer jobs and less spending.

The alternative approach that I propose is to look at economic activity as the formation of patterns of sustainable specialization and trade (PSST). As entrepreneurs create businesses that exploit comparative advantage and specialization, jobs and spending increase. When existing patterns of trade become unsustainable, jobs and spending decrease. See this paper and this paper.