Explaining Why Americans Want to Keep Keynesian Economics

“Keynesian economics is a permanent revolution.” — Mark Blaug

John Maynard Keynes (1883-1946), the British economist, was the most influential economist of the 20th century. His theories justified big government, the welfare state, inflation, easy money, deficit spending and progressive taxation.

Despite all of the efforts of free-market economists (the supply-siders, the Austrians and the Chicago school), Keynesian economics has survived and prospered.

In 1992, I collected a series of essays by top free-market economists in an academic book entitled “Dissent on Keynes: A Critical Appraisal of Keynesian Economics,” published by Praeger Publishing. It contains articles by Murray Rothbard, Bruce Bartlett and myself. It still is in print for $55 or more.

Now, two decades later, a second collection of anti-Keynesian articles has been compiled by eminent Australian economist Steve Kates. He is famous for his articulate exposition of Say’s law. This edited volume, entitled, “What’s Wrong with Keynesian Economic Theory?” includes articles by Peter Boettke, Art Laffer, Steven Horwitz and Richard Ebeling, as well as Professor Kates.

I also contributed an article on gross output (GO), the supply-side Austrian measure that offers an alternative to gross domestic product (GDP), the Keynesian measure of the economy. I am convinced that the only way to get rid of a bad policy is to replace it with a good policy. GO goes a long way in doing just that.

The paperback edition, published by Edward Elgar, is available here for only $38.50, plus $6 for postage and handling: http://www.e-elgar.com/shop/what-s-wrong-with-keynesian-economic-theory.

Professor Richard Ebeling and Mark Skousen at the Citadel.

In my book and the one by Professor Kates, critics of Keynesian economics demonstrate that government stimulus (so-called “fiscal policy”) does little to stimulate the economy and can cause a great deal of harm, especially in the creation of a monstrous national debt.

Yet, it continues to be advocated by government officials, along with an easy-money policy, permanently low interest rates and high taxes on the rich.

Why? Because it gives the impression that they are doing something about the downturn. Today, we are impatient. We want action. Yes, the markets and employment can recover on their own, but we don’t want to wait for a year or two years when there are these new tools of fiscal and monetary policy that can give us a temporary respite from losses in profits and jobs.

As long as price inflation appears subdued, investors like this never-ending policy of easy money and growing national debt. The new money goes into stocks and real estate, and most people are happy… until the next downturn.

In case you missed it, I encourage you to read my e-letter column from last week about the lesson of giving out valuable items for free. This article, and many other past Investor CAFE columns, can be found on StockInvestor.com. Invite you to follow it on Facebook and Twitter.

You Blew It!

Why Does It Cost $25 to Mail a Book to Canada?

I recently mailed a paperback copy of my book, “The Making of Modern Economics,” to a subscriber who lives in Toronto. The U.S. Postal Service charged me $24.50. It would have cost even more if I had sent the book via FedEx.

Meanwhile, that same paperback book can be mailed to Detroit via “media” mail for only around $4. Why the difference?

One reason for the difference is that the U.S. Postal Service only allows you to mail books via air mail, rather than truck.

But the biggest reason is because of the artificial border between Canada and the United States. These are two countries that enjoy a common culture and language, but the nations impose unnecessary expenses when goods and people cross the border.

FedEx is another good example. It charges $25 to overnight a package from New York to Detroit, but $50 to send the same package to Toronto, even though the distance between the two cities is similar.

When it comes to travel between the two nations, immigration is getting tougher as some are treating Canadians like aliens from another world, often harassing them if they come to the United States on business or travel too frequently. This is pathetic and has created a lot of animosity among people who travel between the two friendly nations.