Monday, July 18, 2011

Keynesianism at George Mason University

Following an earlier tweet by Tyler Cowen, where he essentially stated that he couldn't be bothered to blog all the standard arguments against a balanced budget, Cowen has handed the ball off to WaPo columnist Robert Samuelson and thumbs:
Now, although Cowen doesn't come out and say he is in favor of what Samuelson has written, there is no disclaimer that he disagrees. One would think that if there was some type of disagreement, Cowen would note such. But what is shocking about Samuelson's attack on a balanced budget amendment is how Keynesian the attack is. Samuelson does raise some objections that political leaders will find ways around the balanced budget amendment:
For starters, it would inspire evasion. States and local government balanced-budget requirements have “driven a lot of activity into independent authorities,” says economist Rudolph Penner, former director of the Congressional Budget Office.
But for the most part, Samuelson's argument is Keynesian. He charges that a BBA would result in not enough government spending during an economic downturn:
Another danger is that a balanced-budget amendment could force the government to worsen an economic slump. Recessions spontaneously cause tax revenue to fall (incomes decline) and spending to increase (unemployment insurance and other benefits rise). These “automatic stabilizers” can turn budget surpluses into deficits. If Congress had to remedy them by raising taxes or cutting spending, it might prolong or deepen the recession.
Raising taxes during a recession is a bad thing, but it is always a bad thing, and as far as cutting government spending during a recession that is a good thing, since it would get more money into the hands of the private sector. It is only Keyenesian theory that argues that increased government spending is a good thing during a recession.

So does Cowen agree with Samuelson on this very important policy and theoretical issue? It appears so, but Cowen never does give us an answer of his own, since he seems bored by it all.

In the past when I have  put up a post like this suggesting Cowen's Keynesain leaning I will get comments and emails along the line, "Why do you bother, we all know Cowen is a Keynesian?" But I am not sure that's the case.

Cowen occupies the Holbert C. Harris Chair of economics as a professor at George Mason University and is the general director of the Mercatus Center at George Mason University. Both of these operations are heavily funded by the Koch brothers. The brothers funding comes attached with a "free market" branding and there are some who teach at GMU that have somewhat of an Austrian school/free market leaning, probably most representative by Peter Boettke.

But Cowen does not appear to hold Austrian school views and, indeed, if his direction to Samuelson's link is any indication of what he holds to be accurate theory, then he is an out and out Keynesian. Now, Cowen is free to hold any views he chooses and the Koch brothers are certainly free to support any views and economists they choose. But it should be understood that Keynesian theory is far from free market theory. It is the exact opposite, it is an interventionist theory of the grand kind, calling for government spending and tax policy to manage the economy. The failure of Keynesian theory is for another post, but, at this point it should be noted that the promotion of Keynesian theory is no way advancing free market economics.


  1. Keynes and Marx are all the government needs to justify staying on the road to hell. At some point the only option will be a balanced budget for most of the DM countries that are drowning in debt. They only way to slow that down from happening is printing money and even that can only go so far.

  2. @Wenzel

    It's linguistic pollution. Nothing means what it says.

    "Racists" are people who crack silly jokes or hold offensive opinions or make sweeping generalizations about (some) groups.

    "Racists" are never people who are actually rounding up and killing other groups or materially harming them.


    Those are "humanitarians" (as in, humanitarian intervention) and "idealists" (as in idealist foreign policy).

    "International community" doesn't mean the whole world, it means a select group of powerful folks from first-world countries with a few stooges from elsewhere thrown in.

    "Anti-semites" apparently include people who are defending semites (Palestinians).

    "Peace-keeping" means sending in troops to fight.

    "Defense" is all about aggression.

  3. What about Walter E. Williams, the John M. Olin distinguished professor of economics at George Mason University? Doesn't he truly represent the Austrian school?

  4. The little of which I've read from Cowan has the distinct odour of Keynes!