The dangers of being wrong on Keynes
By Ezra Klein,
WashPost
Published: July 18
If you ask economists what went wrong during the Great Depression, you’ll often hear: “We hadn’t read Keynes yet.” That’s John Maynard Keynes, author of the “The General Theory of Employment, Interest and Money.” After the crash, his description of economic crises — and how to get out of them — became so widely accepted that, in the 1960s, President Richard Nixon said, “We’re all Keynesians now.”
Well, we’re not all Keynesians now. When you hear “Keynesian” today, it’s usually with “Obamacare” and “socialists.” It’s Republican shorthand not only for the economic theory that governed the Obama administration’s response to the crisis, but also for the general Democratic outlook. And it’s not a compliment.
“The president’s team were fervent believers in the theories of a British economist called John Maynard Keynes,” wrote Majority Leader Eric Cantor (R-Va.) in his election-year manifesto, “Young Guns.” He’s right about that. Lawrence Summers, the former director of the National Economic Council, and Christina Romer, the former head of the Council of Economic Advisers, were two of the most influential Keynesian economists in the country. Obama didn’t just have a team of Keynesians. He had the Keynesian all-star team.
Perhaps the president’s team should have better explained their theories to Cantor. In his book, Cantor goes on to describe Keynesianism as the theory “that government can be counted on to spend more wisely than the people.” He’s wrong — and wrong in a way that’s making it harder to recover from this crisis, and could make it harder to respond to the next one.
(More here.)
WashPost
Published: July 18
If you ask economists what went wrong during the Great Depression, you’ll often hear: “We hadn’t read Keynes yet.” That’s John Maynard Keynes, author of the “The General Theory of Employment, Interest and Money.” After the crash, his description of economic crises — and how to get out of them — became so widely accepted that, in the 1960s, President Richard Nixon said, “We’re all Keynesians now.”
Well, we’re not all Keynesians now. When you hear “Keynesian” today, it’s usually with “Obamacare” and “socialists.” It’s Republican shorthand not only for the economic theory that governed the Obama administration’s response to the crisis, but also for the general Democratic outlook. And it’s not a compliment.
“The president’s team were fervent believers in the theories of a British economist called John Maynard Keynes,” wrote Majority Leader Eric Cantor (R-Va.) in his election-year manifesto, “Young Guns.” He’s right about that. Lawrence Summers, the former director of the National Economic Council, and Christina Romer, the former head of the Council of Economic Advisers, were two of the most influential Keynesian economists in the country. Obama didn’t just have a team of Keynesians. He had the Keynesian all-star team.
Perhaps the president’s team should have better explained their theories to Cantor. In his book, Cantor goes on to describe Keynesianism as the theory “that government can be counted on to spend more wisely than the people.” He’s wrong — and wrong in a way that’s making it harder to recover from this crisis, and could make it harder to respond to the next one.
(More here.)
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In the broadest sense, monetary and fiscal policies have failed because government financial transactions are not the key to prosperity. Instead, the economic well-being of a country is determined by the creativity, inventiveness and hard work of its households and individuals. from Three Competing Theories by Lucy Hunt
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