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What’s wrong with other economists?

September 29, 2016

This is a note I have written to the contributors to What’s Wrong with Keynesian Economic Theory?
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I hope you have all by now received your own copy of the book.

I have also put a blog post up at the Elgar website which is my own view of the book and how significant I think it is which you can find here

Let me therefore again thank each and every one of you for your articles. As I try to convey in the Introduction, a book such as this is an extreme rarity. This is from a blog post I wrote here in Australia where I tried to explain just how rare the book is.

The following quote is from Henry Hazlitt’s Economics in One Lesson.

When the government comes to repay the debt it has accumulated for public works, it must necessarily tax more heavily than it spends. In this later period, therefore, it must necessarily destroy more jobs than it creates. The extra heavy taxation then required does not merely take away purchasing power; it also lowers or destroys incentives to production, and so reduces the total wealth and income of the country.

The only escape from this conclusion is to assume (as of course the apostles of spending always do) that the politicians in power will spend money only in what would otherwise have been depressed or “deflationary” periods, and will promptly pay the debt off in what would otherwise have been boom or “inflationary” periods. This is a beguiling fiction, but unfortunately the politicians in power have never acted that way. Economic forecasting, moreover, is so precarious, and the political pressures at work are of such a nature, that governments are unlikely ever to act that way. Deficit spending, once embarked upon, creates powerful vested interests which demand its continuance under all conditions.

Hazlitt also published his Critics of Keynesian Economics of which it is said..:

Henry Hazlitt confronted the rise of Keynesianism in his day and put together an intellectual arsenal: the most brilliant economists of the time showing what is wrong with the system, in great detail with great rigor. With excerpts from books and articles published between the 30s and 50s, it remains the most powerful anti-Keynesian collection ever assembled.

And here’s the thing. The book was published in 1960 and other than Mark Skousen’s sadly out-of-print Dissent on Keynes (Praeger 1992) there has not been another attempt to do the same until my own modest What’s Wrong with Keynesian Economic Theory? which was only released last month. It is thus almost twenty-five years since anyone has has brought together a series of critics of Keynesian economics and more than fifty years since the only other. And as scarce as they were even then, critics of Keynes were easier to find, let me tell you, in the 1930s, 40s and 50s [and I might mention that Hazlitt included two nineteenth century articles of sublime excellence by J.-B. Say and J.S Mill]. Such economists are almost completely gone today in spite of there being every reason to think they should be found at every turn.

There are 13 of us in this book. I would doubt there are a hundred economists in the world who are actively anti-Keynesian and see the problem with economic management in Y=C+I+G. Yet even now there is talk of a further stimulus and negative interest rates which are further attempts to deal with our economic problems from the demand side. There was a recent article in The Wall Street Journal by Robert Barro where he said “It wasn’t the severity of the Great Recession that caused the weak recovery, but government policies” which for me is progress.

And he notes the fall off in productivity. But he doesn’t specifically say as I would that the fall in productivity has been because of the diversion of our resource base into various Keynesian stimulus projects, or due to low interest rates misdirecting resources. What I have, however, learned in putting this collection together is that some of those who are anti-Keynesian – and will remain nameless but I can say that Robert Barro was not among them – declined to contribute an article because it would put them offside with their colleagues.

So I thank you again. Hopefully the book will find its way to enough readers to make a difference to how policy is framed from now on in.

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