The enduring legacy of Keynes

us unemployment jan 2014

After a while the dismal state of the world’s economies becomes merely background. We forget the better times and accustom ourselves to how things now are.

I am, however, in the process of putting together the second edition of my Free Market Economics and have just been through the Keynes versus the classics section. And let me tell you, there has been a lot to add based on our experiences over the past five years but there is nothing that needs to be revised. And the most interesting part that needs no revision is the way that macro continues to be taught which is Keynesian from end to end. How anyone can still think that a public stimulus has anything to offer in bringing recessions to an end after what we have gone through is beyond me. But they do, and Y=C+I+G remains in every text and is taught as the best explanation economists have for how economies work and what needs to be done when an economy is in recession.

Anyway, the data are from the US which is the epicentre of economic policy death. From an article on the last six years of the American Labour Market and picked up at Powerline. It’s a measure I often used to do myself since the labour market data only include as unemployment people who are actively looking for work. After a while you just give up so the unemployment rate falls even while the labour market remains stagnant. That’s what the picture all too clearly shows about the US.

There is more to it than just the deadly effects of the stimulus but most of it starts from there. It’s almost as if the US had never heard about free enterprise and the private sector the way they are going about things.

Meanwhile, at Drudge the main headline highlights a new record of sorts:


And those subheadings beneath add to the picture:

Record Number of Women Not In Labor Force…

Growth slumps…

Slowest in three years…

1,500 people camp out for chance to apply for job…

‘For Every One Job Added, Nearly 5 People Left the Workforce’

MSNBC: ‘Awful,’ ‘Very bad,’ ‘Ugly’…

If you are interested in finding out about Say’s Law and the classical theory of the cycle, or what a classical economist would do when an economy is in recession, so far as I know there’s only one place where you could find any of that out. I may, of course, be wrong but what I write is in accord with the way economists looked at things from 1776-1936 and that includes a very large number of very cluey people. If there really is such a thing as evidence-based policy as opposed to ideologically-based policy, you could do worse than to see what the book has to say.

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