There's nothing that ticks me off more than economists who pretend that their black art is actually a science. Just because they use math, mainstream economists think we will believe that their equations describe the real world of resources and people that makes up the economy. These wizards who in actuality are nothing but casino managers, are especially concerned that we might switch allegiance to a different brand - communism, or just as bad - Keynesianism!
Last night NPR aired a totally unbalanced piece on John Maynard Keynes that proved beyond all doubt that Republicans and Wall Streeters can't come anywhere near a scientific or even an intellectual argument challenging the man's ideas, so they are left with attacking his personality. NPR commentators Adam Davidson and Alex Blumberg charged that Keynes was an elitist, anti-semite, bohemian pottymouth. Why no mention of his homosexuality? Probably because the gay lobby is too powerful and easily riled. Unlike gays, bohemians still don't get any respect. And the anti-semite accusation? Remember, we are talking the 1930s here. You could tar almost any prominent person in that age with all sorts of prejudices that no polite member of society would admit to today. Does that mean that our current economic leading lights are free of all moral taint? Please, don't make us laugh. It hurts too much.
So, after nearly five minutes of simmering in Adam Davidson's ad hominem stew, did we taste any actual refutation of the Keynesian idea that government spending can help revive a stalled economy? No. After admitting that government spending worked pretty well to get us out of the depression and build the post WWII economy, one commentator said that government spending failed to revive a slowing economy in the 1970s. Therefore, Keynesianism has been discredited.
That's it. That one statement was the entire argument against government spending. That and the goofy assertion that "government consumes wealth" and "only the private sector can create wealth."
These two points reveal the two big failures of mainstream economic theory. First, the economic slowdown in the 1970s had much more to do with the rapid rise in energy costs than with government investment. And second, if, as Jimmy Carter wanted, government had spent lavishly on renewable energy, mass transit and energy efficiency, can you imagine how much better off we would be today? Infrastructure is wealth, and only government can create it.
Despite comparing economists to Einstein, as this NPR piece does, mainstream economic theorists are incapable of understanding the real world of physical resources, especially the reality that there are limits to those resources. In their model, the economy is like a carburetor. If it starts to falter, you tinker with the airflow, that is, monetary policy. There's no possibility in your mind that the fuel could run out. You can't admit that the whole machine might be obsolete and it's time to build a new one because there's no way for private industry to accomplish that feat.
Economists hate government, because in a rational economy, there would be no room at the top for the free-for-all gambling casino that makes their class rich. In their eyes, it is the casino that actually generates the wealth because it draws in the money and money is like the air in the carburetor. So when the Fed opened the throttle wide last fall with zero percent interest rates and it failed to stop the stall, then what? Why is it Keynes who is being discredited now?
When their machine models fail, economists will invoke the Invisible Hand. You can model the economy as a machine or you can model it as a body. If it is a body, then private enterprise is the many hands reaching out to grab resources. The hands don't want to be governed, but in a body, the head needs to get involved or the hands will eventually get the body into big trouble. That's what Keynesianism is, in a nutshell - using your head. And that's not science, it's just common sense.