We're All Keynesians Again (If only Keynesians knew their own history)

The Spectator ^ | 4/17/2009 | Joseph Lawler

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John Maynard Keynes is fashionable again, thanks at least in part to President Barack Obama. Obama's economic team features economists like Larry Summers, whom the BBC termed a "pugnacious Keynesian." Yet Obama's team maintains a centrist reputation within academia, avoiding the liberal label despite their Keynesianism.

This reconciliation of the ideas of Keynes, the father of progressive economics, with the mainstream would not have been respectable 30 years ago. "Keynes has become a dirty word to many people," wrote Robert Skidelsky, the noted biographer of Keynes, in the August 1981 issue of The American Spectator. "The easiest way for any economist to make a name for himself is to attack the fallacies of the Keynesians."

What precipitated Keynes's comeback from dirty word to White House savior? Dr. Bruce Caldwell, an economic historian at Duke University, noted the key to Keynes's recent popularity: "[Keynes's] theory, by providing a theoretical justification for action, is custom-made for a crisis. 'Don't just sit there, do something' is a universal human instinct when times get bad.'"

Franklin Delano Roosevelt succumbed to this instinct during the Great Depression. Keynes's unorthodox ideas regarding deficit spending provided the basis for the New Deal. On December 31, 1933, Keynes spelled out, in an open letter to FDR, the underpinnings of his style of crisis economics. He suggested that the purpose of the New Deal should be twofold: recovery and reform. The latter could wait, though. The former involved immediate massive debt-financed spending, by hook or crook. How the money was spent didn't matter too much: "the object is to start the ball rolling. The United States is ready to roll towards prosperity, if a good hard shove can be given in the next six months."

[SeekAndFind]

Key Points :

* They failed to appreciate Keynes's distinction between voluntary and involuntary employment, and embarked on the quixotic goal of eliminating all unemployment. "What was called Keynesian economics, developed by Paul Samuelson and others, had nothing to do with what Keynes said," Davidson argued. "Samuelson got it all wrong, he assumed there was a trade-off between employment and inflation.… Keynes doesn't say that at all."

* Keynes himself might caution them with his maxim that the future isn't risky so much as uncertain. No matter how sensitive to the risk of inflation the Obama team's model is, they cannot be certain based on past experiences that their countermeasures will tamp down monetary expansion's pernicious effects.

* Keynes was for the government spending us back to prosperity, but it wasn't this pump-priming, jump-starting kind of operation." Instead, Keynes would have the government maintain aggregate demand for as long as it took for the private sector to recover full potential. Anything else would merely increase the debt without fixing the economy.

[AliVeritas]

ping

[ChicagahAl]

"Keynes is fashionable again"

So are genital herpes and bloody diarrhea. But only if you are completely insane.

[Uncle Miltie]

Keynesianism (government spending) has never worked, ever, not once to cure recession.

Keynesianism’s main efforts have failed to end recession, see Great Depression (US) and Lost Decade (Japan).

Tax Cuts work to end recessions every single time they are tried. Examples abound.

[LibertyGrrrl]

[April Lexington]

Look... Keynes wrote his General Theory (Title knock-off of Einstein's book)in 1936. The worst of the recession was over and Hitler was preparing to invade the Sudetenland. NOBODY EVER USED KEYNES’ THEORIES DURING THE GREAT DEPRESSION. Keynes became popular AFTER WWII during the cold war. Do the research. See for yourself that Keynes was a late comer to the Great Depression. I'm sick of all of this media crap about how Keynes was the big savior of the USA during the depression. He was NOT. But, what does truth matter these days...?

[MissouriConservative]

Friedman thoroughly destroyed Keynes’ positions. Roosevelt’s spending during the depression only lengthened it and made matters worse.

Government needs to keep its grubby little fingers out of the private sector. Businesses that are destined to fail will fail once the government spending stops, if it ever does. These businesses need to be left to either get leaner with better management or fail. The market is sick and only the market can heal itself. Businesses taking government money are only prolonging their end through this “life support”. The plug needs to be pulled, the pain (short term) needs to be gone through, and then the recovery can truly begin.

[Cacique]

btt

[ex91B10]

We're All Keynesians Kenyans again...

[Jacquerie]

Keynes is to the statists as Jesus was to the Spanish Inquisition.