16 February 2009

Keynes: The new Lazarus

The idea of using the government to stimulate an economy in the event of a downturn was first proposed by John Maynard Keynes in the 1930s. He argued that an economy get so firmly quagmired that it becomes necessary for government to bail out it. Many (if not most) of his theories were questionable at best at the time, and most have been proven fallacious. For all intents and purposes, Keynesian economics was nominally dead by the 1980s. To see just how effective his theories were, one need only turn to the economic policies of the Great Depression, or Japan's lost decade (1990s).

In fact, John Cochrane of the University of Chicago noted that the idea of fiscal stimulus is "taught for its fallacies" in university courses now. And yet, here we are. But how? The major problem with government intervention in any long-term plan (economic or otherwise) is that politicians are short-term creatures. They want the quick fix. Whatever will help them carry the next elections. Who really cares if a particular policy has long-term viability? The ineffectualness of any policy can always be blamed on another party, another challenger, etc. So who has our long-term interests in their best interests? (This is not a rhetorical question, by the way. If any of you have a legitimate answer, I'd love to hear it).

But why am I even questioning the Great One's motives? Don't you know that "there is no disagreement that we need action by our government, a recovery plan that will help jumpstart the economy."? Maybe someone should let these guys know. You know, just a handful of conservative kooks. Universtiy professors, nobel laureates...the kind of people you just can't trust.

So congratulations, Mr. John Maynard Keynes. You've just risen from the dead. Sort of like Lazarus. Or this guy:

1 comment:

  1. Hurry! Hit it with the 40lb, 1000 page porkulus bill!

    "In extreme circumstances, the assailants can be stopped by removing the head or destroying the brain. I will repeat that: by removing the head or destroying the brain."

    -Shaun of the Dead