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4 Responses to “An $800 Billion Mistake”

1. Michael David Rubin Says:
   January 30th, 2009 at 2:17 am

   Stimulus?
   Try this:
   “But we can never produce statistical information which would show how much the prevailing prices and and wages deviate from those which would secure a continuous sale of the current supply of labor.”
   And:
   “… the increase of aggregate demand (has-MDR) become a cause of a very extensive misallocation of resources, which is likely to make later large-scale unemployment inevitable. The continuous injection of additional amounts of money at points of the economic system where it creates a temporary demand, which must cease when the increase of the quantity of money stops or slows down, together with the expectation of a continuing rise of prices, draws labor and other resources into employments which can last only so long as the increase of the quantity of money continues at the same rate - or perhaps even only so long as it continues to accelerate at a given rate.”
   From Hayek’s acceptance speech for his Nobel, 1974.

   Don’t you wish you’d been there, just to watch the faces of the Committee?

   With respect to Dr. Feldstein, and granting his technical objections to the wonders of Obamanomics, if he’s a ‘conservative economist,’ then I’m Nancy Pelosi.

2. Michael David Rubin Says:
   January 30th, 2009 at 3:59 pm

   Thanks to Ms. P. for a little buffoonery from Dennis-the-Mensa.

   Doesn’t calling Keynsians “students” dignify their refusal to observe facts, decade after decade? Wouldn’t students be those who actually learn something?

   Some historical thoughts on Lord Keynes, the Stimulator, from Ludwig von Mises, the Terminator of the Left:

   The Keynesians tell us that his immortal achievement consists in the entire refutation of what has come to be known as Say’s Law of Markets.

   …during the whole rest of the nineteenth century, the acknowledgment of the truth contained in Say’s Law was the distinctive mark of an economist. Those authors and politicians who made the alleged scarcity of money responsible for all ills and advocated inflation as the panacea were no longer considered economists but “monetary cranks.”

   …the inevitable consequences of an increase in the quantity of money in circulation and of credit expansion. It elaborated the monetary or circulation credit theory of the business cycle which clearly showed how the recurrence of depressions of trade is caused by the repeated attempts to “stimulate” business through credit expansion. Thus it conclusively proved that the slump, whose appearance the inflationists attributed to an insufficiency of the supply of money, is on the contrary the necessary outcome of attempts to remove such an alleged scarcity of money through credit expansion.

   …such a contrived boom must inevitably collapse after a while and produce a general depression. This demonstration could appeal to statesmen intent on promoting the enduring well-being of their nation. It could not influence demagogues who care for nothing but success in the impending election campaign and are not in the least troubled about what will happen the day after tomorrow.

   …the “new economics” of Lord Keynes. The policies he advocated were precisely those which almost all governments, including the British, had already adopted many years before his “General Theory” was published. Keynes was not an innovator and champion of new methods of managing economic affairs. His contribution consisted rather in providing an apparent justification for the policies which were popular with those in power in spite of the fact that all economists viewed them as disastrous. His achievement was a rationalization of the policies already practiced. He was not a “revolutionary,” as some of his adepts called him. The “Keynesian revolution” took place long before Keynes approved of it and fabricated a pseudo-scientific justification for it. What he really did was to write an apology for the prevailing policies of governments.
   This explains the quick success of his book. It was greeted enthusiastically by the governments and the ruling political parties. Especially enraptured were a new type of intellectual, the “government economists.” They had had a bad conscience. They were aware of the fact that they were carrying out policies which all economists condemned as contrary to purpose, and disastrous.

   The exuberant epithets which these admirers have bestowed upon his work cannot obscure the fact that Keynes did not refute Say’s Law. He rejected it emotionally, but he did not advance a single tenable argument to invalidate its rationale.

3. Michael David Rubin Says:
   January 31st, 2009 at 2:19 am

   Makes two of us.
   But, then, we’d probably have ended with the delusional view that politicians would listen to real economists.

   From Theodore Dalyrimple:
   ‘As Winston Churchill put it, “If you put two economists in a room, you get two opinions, unless one of them is John Maynard Keynes, in which case you get three
   opinions.”‘
   Gives one hope that once in a while a political leader sees through the fakery.

4. Otto Loistl Says:
   February 2nd, 2009 at 6:39 am

   Churchill made a good point about Keynes. His changeableness has been one of the two reasons causing Hayek not to review Keynes “General Theory”: Great was my disappointment when all these effort (i.e. carefully reviewing Keynes’ “Treatise on Money”, OL) because after the appearance of the second part of my article he told me that he had in the meantime changed his mind and no longer beleived what he had said in the work.
   This was one of the reasons why I did not return to teh attack when he published his now famous “General Theory” a fact for which I later much blamed myself. But I feared that before I had completed my analysis he would again have changed his mind. Though he had calle dit a general ‘theory’ it was to me too obviously another tract for the times, conditioned by waht he thought were the monetary needs of policy”.
   The other reason has been described in the Nobel lecture: When he describes the importance of “organized complexity” for economics. But he had no quantitative available that would have been necessary to substantiate his review of “General Theory”, i.e. that it is necessary to base the macroanalysis on the actions and interactions of individual agents. Quite recently this postulate is raised again, requiring a change of paradigm: Reflexivity paradigm instead of equilibrium paradigm or exchange paradigm instead of value paradigm.
   The current crisis causes will be solved only when quantitative tools will be developed that do not rely on the equilibrium paradigm.
   I would ask you a favor: Is there available a documented source for Churchill’s nice quote.
   Thanks in advance and best regards
   OL
   Quite recently there

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