You may have heard me mention once or twice before that Keynesian economics is junk science, but just in case you missed it I am going to mention it again. What has brought all this to mind is reading the front page story in The Oz in the context of the booming economy in the US. In The Oz we have this: Bill shock as standard of living slumps. In the United States we have this: US private sector added 250,000 jobs in Dec, vs estimate of 190,000: ADP. It also mentions that “the report helped send the Dow to break the 25,000 mark for the first time”. Of course, here in Australia we have something else instead:
Australians have endured their longest period of falling living standards in more than a quarter of a century as growth in costs outstripped earnings for the fifth consecutive quarter, leaving households worse off than they were six years ago.
The moronic focus on public spending to lift our economies is such dead stupidity, but even more dead stupidity is that economists continue with Y=C+I+G as the mantra of macroeconomic thought. I have just been sent my copyedited article that will be published in June: “Making Sense of Classical Theory”. It is an attempt to remind others that there was not only an economic theory before the publication of The General Theory in 1936, but that theory was vastly superior to the theory that disfigures our economic textbooks today.
As it happens, I have just been re-reading the third edition of my Free Market Economics. There is, unfortunately, nothing like it. Perfectly clear and as easy to read as a blog post but entirely framed around classical economic theory. The economics of John Stuart Mill, the greatest economist who has ever lived, recast for the 21st century. If you don’t want to buy it yourself, just get your library to buy a copy.
The reality remains that our living standards will continue to descend if those who make policy continue to believe that public expenditures like the Snowy Mountain Project Mark II will make the economy grow. It will, in exactly the same way as the NBN.