Thursday, January 29, 2009

"Keynesianism Was Almost Dead Until the Past Few Months"

MSM and the political power players have been major players in marginalizing the fact that many economists disagree with the notion that a stimulus package is the way to deal with the recession.

Declan McCullagh, a lone maverick at CBS, writes:

An unusual aspect of the recent debate in Washington is the lengths that supporters have gone to marginalize anyone who questions the so-called stimulus plan. Robert Reich, Bill Clinton's labor secretary and member of President Obama's transition team,claims "almost every economist will tell you the stimulus has to be massive." Nobel laureate and New York Times columnist Paul Krugman accuses skeptics of "making totally non-serious arguments." Sen. Chuck Schumer, a New York Democrat, says"economists agree" that doling out large sums to state governments is "effective." Vice President Joe Biden says that "every economist that I've spoken to"
believes the spending package "has to be big." Perhaps the vice president should broaden his social circles. The truth is that, instead of being uniformly in favor of the massive spending bill, which is being championed by congressional Democrats with Obama's support, economists remain divided...

John Cochrane, a finance professor at the University of Chicago's business school, published a detailed paper this week on the topic. He sketches an argument for lower taxes right now - instead of higher spending - while simultaneously whittling down the budget deficit...

Don Boudreaux, the chairman of the economics department at George Mason University pointed out..."Keynesianism was in fact not a good theory,".. referring to the theories of the late economist John Maynard Keynes that encourage government spending. In the profession, Keynesianism was almost dead until the past few months. It was never dead in the popular mind. It's a flat Earth kind of theory. People look out and see the Earth looks flat, so it must be flat. By and large, macroeconomists rejected at least the standard Keynesian line. Now it's back and that's a real mystery."

The Cato Institute, a non-partisan think tank that takes broadly free-market views, was frustrated enough by the conventional wisdom in Washington that it took out a full-page ad on page 11 of the New York Times on Wednesday. The ad, which will also appear in Roll Call magazine and Thursday's Washington Post, is signed by scores of economists and says "we do not believe that more government spending is a way to improve economic performance."

Economist Robert Murphy is writing an entire book on the subject of how government intervention including spending programs made things worse during the Great Depression. His analysis further points to the fact that the same problems are occurring with the current spending and bailout proposals.

1 comment:

  1. What do economists say about NDP, Net Domestic Product?

    Never heard of it? That is not surprising.

    A businessman that doesn’t know the difference between Gross and NET is a pretty dumb businessman. Maybe the economists are pretty dumb or maybe they just want us to be.

    John Kenneth Galbraith was one of the early Keynesians but he wrote about the planned obsolescence of automobiles in 1959, 13 years after Keynes’ death and 10 years before the Moon landing. What do economists say about it today? How old was Obama in 1959?

    There have been 200,000,000+ cars in the United States since 1995, more cars than there were Americans in the 30s. But how much do Americans lose on the depreciation of automobiles every year? It won’t show up in NDP because economists only care about the depreciation of CAPITAL GOODS. But they don’t point that out to us even in their economics books.

    At $1,500 per car per year that is $300,000,000,000 per year.

    The economy depends on consumers being dumber than economists.