You may have seen or heard the term Keynesianism in the last few months, as a description of the Obama administration’s policy. From the right, calling that policy Keynesian is a criticism, but the left seems to embrace it as the only right way.
Daniel Hannan links to this 7-minute video clip from the Cato Institute, which provides a nice, simple explanation of Keynesian theory and its faults. BTW, kudos to Daniel for being a public voice for millions of sensible people.
In other news… From my late reading of late, I’m beginning to perceive a basic worldview conflict that manifests in the areas of politics, education, economics, religion, and elsewhere. I’m going to give it some more thought, and then try to express it here.
One thought on “Economics: What is Keynesianism?”
The video was ok, but it made a couple big mistakes.
1) using the term “borrow” to identify what the government does to acquire the money. The gov is not planning on giving the money back in any way. All it does is take from the productive, discourage them from producing, and give some of what they took to the unproductive-encouraging them to be unproductive.
2) while he pointed out that the gov wants to redistribute wealth, he failed to point out how much wealth the gov consumes in this process–by mismanagement, bureaucratic overhead, and the fickleness of gov officials. What was taken from the “rich” in one area becomes pork spending in a senator’s home district–not productive spending.
3) Keynesianism holds the false premise that the economy is a zero sum game: That there is only so much wealth in the world. So if the rich have wealth they must obviously be intentionally harming the poor. Capitalism holds that people produce their own wealth when they are free to own property, trade, and make their own contracts. Every tax on those people hurts them. Keynesianism deprives people of property, trade, and the benefits. Capitalism protects the individual.
I think these are three significant points that need to be included whenever there is a discussion of the merits/faults of Keynesianism vs. open market Capitalism.