Wednesday, June 5, 2013

Keynes turns 130!

130 years ago today, Keynes entered his short-run.  His contemporary disciples no doubt will toss bouquets at his memory. Given today's economics problems, those who look to Keynes even are thought to be "on the side of the angels."

Sound economics, however, begs to differ. Keynesian ideology turns the economic problem on its head, by getting its core completely backward. Keynes thought that because of the vices of precaution, avarice, and usury, our only hope for prosperity was for the state to drive interest rates to zero, stimulating investment, which would increase national output and income and raising employment. This fails to recognize that sustainable economic expansion requires more voluntary saving, not merely more spending of newly created fiat money.

The antidote for economic error is learning economics built on the reality of human action. A good, brief starting point would be Ludwig von Mises' "Lord Keynes' and Say's Law." For a more extensive treatment of Keynes' economic thought, I recommend "The Misesian Case Against Keynes" by Hans-Hermann Hoppe. For a very revealing look at person and influence of Keynes I recommend Rothbard's "Keynes the Man." Perhaps the single best article on the vision and economics of Keynes is Joseph T. Salerno's " The Development of Keynes's Economics: From Marshall to Millennialism."

You might also be interested in an article I wrote as a new professor, "Keynes the Great?" It is a response to Paul Krugman's lauding of Keynes in a column he wrote many years ago in Fortune magazine. My analysis of Keynesian economics is found in Chapter 13 of Foundations of Economics

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