Thomas Sowell and I have many things in common most importantly of which was that we both did our PhDs on Say’s Law and for both of us this was the subject of our first books: here’s his and this is mine. And once you understand Say’s Law, you will never again think of economics in the same way. Rather than Keynes having disproved this law, he made it unfashionable, and thus it has remained for the past three-quarters of a century. But unfashionable or not, it is the indispensable core of economic reasoning which is why its original name was the law of markets. If you want to understand how a market economy works, you must understand Say’s Law.
Anyway. Sowell has put together a column on the nomination of Janet Yellen as the next Chairman of the Federal Reserve (found here) and structures his comments around her incorrigible Keynesian approach to matters economic in much the same way I did myself the other day. This is from Sowell’s column:
The Keynesian economists have staged a political comeback during the Obama administration. Janet Yellen’s nomination to head the Federal Reserve is the crowning example of that comeback.
Ms. Yellen asks: ‘Do policy-makers have the knowledge and ability to improve macroeconomic outcomes rather than making matters worse?’ And she answers: ‘Yes.’
The former economics professor is certainly asking the right questions — and giving the wrong answers.
The amazing part of the way Thomas Sowell writes is how much he can pack into a few hundred words. If you can read what he writes and still not at least start to think that maybe, just maybe, there is something to that classical economic theory after all then you are as incorrigible as Janet Yellen and about as clueless how to manage an economy as well.