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Washington Could Use Less Keynes and More Hayek
The Wall Street Journal ^ | Dick Armey

Posted on 02/04/2009 9:49:29 PM PST by Eric Blair 2084

"In the long run, we are all dead," John Maynard Keynes once quipped. An influential British economist, Keynes used the line to dodge the problematic long-term implications of his policy proposals. His analysis of the Great Depression redefined economics in the 1930s and asserted that increased government spending during a downturn could revive the economy.

President Barack Obama and congressional Democrats (very few of whom likely have read Keynes's 1936 book "The General Theory of Employment, Interest and Money") have dug up the dead economist's convenient justification for deficit spending in defense of their bloated stimulus legislation. But none ask the most important question: Was Keynes right?

According to Nobel economist Friedrich Hayek, a contemporary of Keynes and perhaps his greatest critic, Keynes "was guided by one central idea . . . that general employment was always positively correlated with the aggregate demand for consumer goods." Keynes argued that government should intervene in the economy to maintain aggregate demand and full employment, with the goal of smoothing out business cycles. During recessions, he asserted, government should borrow money and spend it.

Keynes's thinking was a decisive departure from classical economics, because arbitrary "macro" constructs like aggregate demand had no basis in the microeconomic science of human action. As Hayek observed, "some of the most orthodox disciples of Keynes appear consistently to have thrown overboard all the traditional theory of price determination and of distribution, all that used to be the backbone of economic theory, and in consequence, in my opinion, to have ceased to understand any economics."

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Government
KEYWORDS: bailout; economy; hayek; keynes; stimulus
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If anybody here has ever heard of Keynes, Hayek, Galbraith, or my idol Milton Friedman you are a step ahead of the game.

Frankly, economics is not an exact science. It's a social science. All silly opinions are welcome.

They are on Capital Hill and the White House.

1 posted on 02/04/2009 9:49:29 PM PST by Eric Blair 2084
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To: Eric Blair 2084
Washington Could Use Less Keynes and More Hayek

I concur.

2 posted on 02/04/2009 9:52:23 PM PST by dfwgator (1996 2006 2008 - Good Things Come in Threes)
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To: dfwgator
My thoughts exactly!


3 posted on 02/04/2009 9:54:16 PM PST by freedumb2003 (Communism comes to America: 1/20/2009. Keep your powder dry, folks.)
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To: Eric Blair 2084

You’d have to admit that to most Dems the phrase “Keynesian multiplier” means “government spending is inherently beneficial.” That isn’t even what Keynes meant by it. And no, I don’t honestly think Nancy Pelosi has read a word of him, or Hayek, or von Mises. She’s holding out for the Classics Comics version.


4 posted on 02/04/2009 9:54:28 PM PST by Billthedrill
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To: Eric Blair 2084

The Problem about Keynes “anti-cyclic” theories is, that most gouvernments are doing well in spending the money during a recession ( As required by the theory ), but fail to save the money in the good times with economic growth ( Also required by the theory ).


5 posted on 02/04/2009 9:55:46 PM PST by buzzer
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To: dfwgator
> Good Things Come in Threes (your tagline)

actually, in this circumstance, I'm okay with good things coming in TWOs!

6 posted on 02/04/2009 9:56:04 PM PST by dayglored (Listen, strange women lying in ponds distributing swords is no basis for a system of government!)
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To: Eric Blair 2084

Hmm...judging from the thread you also should have quoted that Nobel Prize-winning economist Manfred von Zeta-Jones. ;-)


7 posted on 02/04/2009 10:00:03 PM PST by Billthedrill
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To: Eric Blair 2084
"asserted that increased government spending during a downturn could revive the economy"

Yeah, that worked so well for FDR from 1932 to 1940. An 8 year recession. Wouldn't want a good crisis to go to waste!

8 posted on 02/04/2009 10:06:31 PM PST by Uncle Miltie (Congress declares a National Dividend in the amount of $9,000 per taxpayer instead of Porkulus.)
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To: Eric Blair 2084
"If anybody here has ever heard of Keynes, Hayek, Galbraith, or my idol Milton Friedman you are a step ahead of the game."

I represent that remark.

"Free to Choose"
"The Road to Serfdom"

Keynes is dead. Keynsianism is dead. Zombies roam the land.

9 posted on 02/04/2009 10:08:07 PM PST by Uncle Miltie (Congress declares a National Dividend in the amount of $9,000 per taxpayer instead of Porkulus.)
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To: dfwgator

Much more interesting than Keynesian multipliers.


10 posted on 02/04/2009 10:08:26 PM PST by Eric Blair 2084 (Alcohol, Tobacco and Firearms shouldn't be a federal agency...it should be a convenience store.)
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To: dfwgator

You beat me to it. Great minds think alike!


11 posted on 02/04/2009 10:08:58 PM PST by jeffc (They're coming to take me away! Ha-ha, hey-hey, ho-ho!)
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To: Uncle Miltie

Click on the link from the WSJ and go down to related articles on the web and click on that NPR of all places link. Great piece about how Keynes was a contradictory loon, and the comments after the article are even better.

I should have posted that.


12 posted on 02/04/2009 10:11:24 PM PST by Eric Blair 2084 (Alcohol, Tobacco and Firearms shouldn't be a federal agency...it should be a convenience store.)
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To: Eric Blair 2084; Uncle Miltie
A really good little video clip debunking Keynesian economics for the scam that it is:

Keynesian Economics Is Wrong: Bigger Gov't Is Not Stimulus

13 posted on 02/04/2009 10:15:09 PM PST by TChris (So many useful idiots...)
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To: Eric Blair 2084

Frankly, economics is not an exact science. It’s a social science.


So true...and a great observation. Some unfortunately take everything on word of what certain economist say.


14 posted on 02/04/2009 10:19:00 PM PST by UCFRoadWarrior (The Threat To Our Soverignty Is Rampant Economic Anti-Americanism)
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To: dfwgator

Selma Hayek, the best thing to come out of Mexico since the Taco.


15 posted on 02/04/2009 10:19:19 PM PST by MadMax, the Grinning Reaper
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To: Uncle Miltie
Keynes is dead. Keynsianism is dead.

I bet he's laughing in is grave, right about now.

16 posted on 02/04/2009 10:24:59 PM PST by period end of story (Give me a firm spot, and I will move the world.)
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To: Uncle Miltie

Zombies roam the land?

Did you ever watch the South Park episode “Night of the Living Homeless?”


17 posted on 02/04/2009 10:30:42 PM PST by Eric Blair 2084 (Alcohol, Tobacco and Firearms shouldn't be a federal agency...it should be a convenience store.)
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To: freedumb2003

nufsed


18 posted on 02/04/2009 10:33:51 PM PST by nufsed
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To: Eric Blair 2084

My view is that, at the margin, money is better spent in the private sector than in the public sector. Money spent in the private sector improves our standard of living. Money spent in the public sector often has the opposite effect. We should privatize a great many things. Short of that, we should reduce taxes and reduce government spending so that resources are shifted from public to private hands. We should also de-regulate.

The housing crisis was caused in large measure by over-regulation that forced bankers to make subprime loans. Banks did not want to make these loans, but government forced them to do so with the goal of making housing affordable to more people, including minorities.

Extreme environmental regulation and laws prevent the safe development of nuclear energy, and fuller utilization of our oil, gas, coal, and even hydroelectric resources.

Over regulation - Sarbanes-Oxley mark to market - are artificially depressing the stock market. Over-regulation discourages business start ups and growth.

Tort reform would also be a good idea. Labor unions are too strong.

Our problems are not so much macro-economic (fiscal, monetary) as micro-economic - death by a thousand cuts.


19 posted on 02/04/2009 11:13:23 PM PST by ChessExpert (The Dow was at 12,400 when Democrats took control of Congress. What is it today?)
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To: Eric Blair 2084

Re “Zombies roam the land”. Have you ever seen a bunch of Democrats in a room?


20 posted on 02/04/2009 11:32:10 PM PST by MadMax, the Grinning Reaper
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