*Written by William Anderson.
Keynesians are nothing if not consistent: there is just not enough spending to uphold the economy, or so they claim. Therefore, the government needs to ramp up its own spending in the absence of more private spending, gaining the new revenues either by borrowing or by creating new money. As The New York Times recently lamented:
The federal government helped bring the economic recovery to a virtual halt late last year as cuts in military spending and other factors overwhelmed the Federal Reserve’s expanded campaign to stimulate growth.
In this article, I won’t deal with how the government obtains new money to spend, nor will I analyze the effectiveness (or harm) of such actions. Instead, I’ll identify a simple, yet vital, point that’s often overlooked: the Keynesian paradigm violates the means-end framework upon which all economic analysis depends. In violating this framework, Keynesians—and “mainstream” economists in general—wrongly assume that consumption itself is a factor of production.
Next Top Model:
Modern economists often create mathematical models that few people can comprehend. The “top” economics journals are full of the stuff, and it does not matter whether what is written squares with the basic laws of economics. As long as papers seem “rigorous,” and as long as the math seems to work, these publications are trumpeted as a contribution to economic science.
While the models look impressive, they ignore things like the law of opportunity cost and the law of scarcity. Even more important, too many academic economists ignore the truism that economist Murray N. Rothbard pointed out in Man, Economy, and State 50 years ago: all individuals act, and they act purposefully through a means-end framework. Individuals have desired ends, and they work through means to obtain those ends.
CONTINUED at FEE.