Week in Review
Keynesian economics is a lot like the first 2 rules of business. Rule number 1: the customer is always right. Rule number 2: when the customer is wrong see rule number 1.
Keynesian economics has a similar set of rules. Keynesian economic rule number 1: Keynesian economics always works. Keynesian economic rule number 2: when Keynesian economics doesn’t work see Keynesian economics rule number 1.
Paul Krugman holds these Keynesian economic rules sacred. He can go and an on about Keynesian macroeconomic principles to explain why the economy is still wallowing in recession despite massive doses of Keynesian economic stimulus. Because it always goes back to these two Keynesian economic rules. You see, in his world there is no such thing as a Keynesian failure. For when there is there is a reason. And that reason is that we didn’t go Keynesian enough.
It’s obvious that Keynesian economics works. Just look at Keynesian economics rules 1 &2. Need I say more? At least, this is ultimately the argument Paul Krugman makes. Which is purely political. And rather ironic. For he calls the non-political economic system, Austrian economics, political (see Krugman Disses Hayek by Peter Klein posted 12/6/2011 on The Independent Institute).
Krugman closes with the unintentionally funny snark that “the Hayek thing is almost entirely about politics rather than economics.” I suspect if one polled professional economists on which recent Nobel Laureate received the prize not so much for technical contributions, but because the Nobel committee wished to make a political statement, the answer would overwhelmingly be Krugman. I don’t know anyone who thinks Krugman’s work on trade and geography merited the Nobel at the relatively tender age of 55. Indeed, the Krugman thing is almost entirely about politics rather than economics. Quelle Ironie!
Hayek’s Austrian economics does not feature the government playing an active role. Keynesian economics does. That’s why it’s the economics system of governments everywhere. Because it empowers them. Gives them ‘authority’ to tax and spend and ‘stimulate’. Because a lot of macroeconomic graphs say it works despites all empirical evidence that it doesn’t.
Now if that doesn’t say politics nothing does. Keynesian economics is political economics. Which explains why the biggest of Big Governments choose it for their economics. Not because it works. But because it gives them political power.