Oh Paul… Paul Krugman, our Keynes Reincarnate…  here to influence us to continue walking toward the “Keynesian light”.  I recently read an article by Lilburne from the Ludwig von Mises Institute regarding Paul Krugman’s current influential role in our political economy.  The article is titled “The Second Coming of Keynes” and highlights some interesting points regarding America’s tendency to NOT learn from our experiences.  He states:

Paul Krugman is a devotee of John Maynard Keynes. He’s such a hard core disciple that he was Keyensian when Keynesianism wasn’t cool: the period between the 1970s stagflation, which seemed to disprove Keynesian doctrine, and now, when it is groundlessly renascent due to our society’s stunted memory span.

And what of the years and years of proofing done by classical economists, testing the original ideas of Adam Smith?  Richard Ebeling (former president of FEE) wrote in the Freeman a few years ago:

The classical economists of the eighteenth and nine­teenth centuries had persuasively demonstrated that government intervention prevented the smooth func­tioning of the market. They constructed a body of eco­nomic theory which clearly showed that governments have neither the knowledge nor the ability to direct economic affairs.

…During the Napoleonic wars of the early nineteenth century, many European countries experienced serious inflations as governments resorted to the printing press to fund their war expenditures. The lesson the classical economists learned was that the hand of the government had to be removed from the handle of that printing press if monetary stability was to be maintained.

I will leave the evidence behind these claims to the authors (see their articles and other writings for detail).  Suffice it to say we cannot recall our past with the prudence to understand that the social collectivist movements– no matter the name albeit communism, socialism, or progressivism–  are not effective systems.  We are set to govern ourselves and no individual carries a divine calling as supreme decision maker for the collective (which is interesting considering Marx was anti-religious. I wonder how he assumed his calling?).

Now back to Krugman… as a devout Keynesian disciple, he once stated:

one of the high points of the semester, if you’re a teacher of introductory macroeconomics, comes when you explain how individual virtue can be public vice, how attempts by consumers to do the right thing by saving more can leave everyone worse off. The point is that if consumers cut their spending, and nothing else takes the place of that spending, the economy will slide into a recession, reducing everyone’s income.

I must agree with Lilburne that such as statement is an example of “childish theory.” As Lilburne quotes Gary North:

peak of saving as if it were a system for hiding paper currency under a mattress. They refuse to answer this crucial question: What does the bank do with the money that a consumer deposits instead of spending? Put another way: What analytical or conceptual difference does it make whether a saver deposits a dollar [in] his bank, which the bank will lend, or whether he spends it, enabling the seller to deposit the dollar in his bank, which his bank will lend?

The Keynesian theory is either ignorantly arrogant (as Keynes himself often was) or completely naive to banking and finance processes.

The best part is this country’s people and leaders’ willingness to accept it without a thought or research.  I guess that’s the definition of progressivism: “Don’t look back, don’t read old thinking, we must move forward with “new” ideas that you don’t call “classic” cuz that’s too old and un-progressive…”

It may be much simpler as to why this thought realm is so popular with politicians and governments, as I’ve previously quoted and discussed here, from Ebeling again:

What Keynes succeeded in doing was to provide a rationale for what governments always like to do: spend money and pander to special interests.

Welcome Back Maynard… I mean Paul… whatever…

Tags: collectivism, free markets, government, Keynes, Paul Krugman