Why isn’t Keynesian theory dead, dead, dead?

obama gdp recovery v 1981

This comes via Powerline but is taken from a document put out by the Republicans on the Senate Budget Committee: The Obama Economy: a Chartbook. That 92% of American economists surveyed stated that the stimulus had lowered the unemployment rate below the level it would otherwise have been shows that 92% of American economists haven’t a clue which way is up. You really ought to look at the charts. There really is nothing left to say. Not that the American economy was doing all that well before Obama got his hands on it, but since then the decline has been unbelievable.

Yet the theory that has created this mess is still taught as the mainstream view in economics courses across the world. It’s all Keynesian aggregate demand all the time. But if you are curious about what went wrong, might I recommend you have a read of this.

It will also help to explain this, the incredible fall in median incomes.

obama economy median family income

What you are looking at here is evidence that the infrastructure that supports the American economy is crumbling. It’s not just GDP, which is a temporary measure that goes up and down, but the actual stock of capital that is falling to bits.

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