The mysterious and inexplicable survival of Keynesian economics
Now this was very promising: The Reasons Behind the Obama Non-Recovery: It wasn’t the severity of the Great Recession that caused the weak recovery, but government policies, an article by Robert Barro which I was alerted to by a post at Powerline. The Global Financial Crisis was over within six months. The deep and ongoing recession we are in is due to the Keynesian policies that followed.
The essence of a Keynesian policy is to start with Y=C+I+G, assume that the problem is demand deficiency and then try to fix things by raising the level of G. As I have also pointed out in the past, unless government spending is value adding – that is, until whatever is being produced earns revenues greater than their costs – such expenditure is a drain on the economy and will make you worse off, not better. I am near enough the only person I ever come across saying this, so here I lived in hope that perhaps Barro would start to say it. Someone has to say it before we wreck ourselves totally by following one Keynesian idiocy after another.
Here’s the thing. Neither the words “Keynes” nor “Keynesian” show up neither in the original article nor in the comment at Powerline. The vast waste of our resources in one mis-guided stimulus program after another goes unmentioned (although it does show up in a few of the comments). Almost no one even thinks that the problems with policy is the nature of modern economic theory.
The strange thing about my What’s Wrong with Keynesian Economic Theory? is how unique it is. No one seeks to go after the actual problem, which is macroeconomic theory based as it is on deficient aggregate demand. Indeed, no one would even dare to suggest Say’s Law may actually be true, the absolute fundamental guide to managing an economy.
Here it is as it seems to me. I said in 2009 that the stimulus would be a disaster. I wrote my article for Quadrant, The Dangerous Return to Keynesian Economics in which everything that has occurred was mapped out before it began. I started writing my Free Market Economics which is now heading for a third edition. But really, I never thought the reasons for this catastrophic fall in our living standards would remain such a mystery and for so long.