Macro follies continue

It’s been five years of this Keynesian mess with the notion that economies are driven from the demand side. At the start it was direct government spending. As an approach to recovery it has comprehensively failed as no one now denies. So we have now gone to the monetary policy approach with Quantitative Easing, pour money out into the economy and low interest rates will finally lift things up. Also not working but no one quite knows why. So here’s why. Economies are driven forward by increases in value adding supply and by absolutely nothing else. Others can tax, steal or otherwise appropriate the productivity of others and squander what they get. But this will NEVER lead to a recovery, not ever. So we have kept rates low and watched as nothing has happened.

Anyway, it’s that time of year again. Macro follies continue and no one seems to have learned a thing. And it’s not just consumer spending but all unproductive spending that is a draw down on productivity. Consumer demand is, of course, the reason for bothering with any production at all. But if we are thinking about growth and employment, consumer and government demand has nothing to contribute, nothing whatsoever. Nor does mis-directed investment spending. Nor do low interest rates. But we are persistent if nothing else.

The video is in the great tradition of John Papola and the Keynes-Hayek Rap. Here, however, he tells the story of the classical theory of the cycle and Say’s Law.

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9 Responses to Macro follies continue

  1. steve

    Steve,

    What is the chance that the economic academic community will now stop teaching Keynes as a solution to preventing recessions? I mean, if this is true “As an approach to recovery it has comprehensively failed as no one now denies.” and universities are the place that teaches economists economics, it seems to be the natural course of action. Although I believe you will tell me not to hold my breathe………

  2. Luke

    I’m sick and tired of government’s claiming that infrastructure project X has created hundreds or thousands of jobs for State Y.

    No. You haven’t! You provided some billing hours for for a few full-time employees/consultants. The rest you simply gave temporary work for a few months or maybe a year. When the project ends so do those “jobs”.

    In order to have actually created employment you’d have to keep the project going – you know, like all those businesses that employ less people than they otherwise could because they cop the extra tax bill to build those infrastructure projects.

  3. Luke

    @Steve

    Never, because before AGW and carbon regulation, Keynesian economics was the best way to justify regulating economic activity without actually admitting they were socialists.

  4. steve

    @Luke

    OK, I can accept that, but that means that “I mean, if this is true “As an approach to recovery it has comprehensively failed as no one now denies.” is in fact, far from the truth, yes?

  5. Ant

    “Value adding supply” sounds like “hard work”.

    We’re dealing with bureaucrats – or at least the bureaucratically minded.

    That’s a problem right there.

  6. Empire Strikes Back

    Mr Deficits himself unsurprisingly advocates continuing public debt accumulation because:


    We should be wary about trying to artificially pull the budget back into surplus prematurely,” he said.

    “I think it would be a mistake for ambitions about the return to surplus taking precedence over the budget’s role in supporting the economy in what is a very, very soggy world of activity.”

    It’s time for full scale war on C+G. You are doing a fine job of preaching the truth Steve, but it’s going to take an army of classical activists to debunk and destroy JMK. The urge to steal and spend other people’s money runs deep.

  7. stackja

    Mandela and the Economics of Apartheid
    Nelson Mandela, public face of the anti-Apartheid movement and South Africa’s first post-Apartheid president, has died. Much will be written about Mandela in the coming days, but little of it will deal directly with the Apartheid system, particularly its economic aspects. Apartheid is widely misunderstood as a system based purely on racial prejudice, while it was actually a more complex mix of economic controls (primarily, restrictions on capital ownership and movements of labor) and racial separatism — what Tom Hazlett calls “socialism with a racist face.” Apartheid’s political support came primarily from working-class (white) Afrikaners and their labor unions eager to suppress competition from unskilled black labor. As Hazlett notes: ”The conventional view is that apartheid was devised by affluent whites to suppress poor blacks. In fact, the system sprang from class warfare and was largely the creation of white workers struggling against both the black majority and white capitalists.”

  8. Rafe

    Yes W H Hutt explained how apartheid started in the mines with the unions and became institutionalized ten or twenty years later when the interests of the unions aligned with the racist Nationalist Party. The system evolved into an elaborate appuratus of central planning and direction that just about strangled the economy. It was far from being a booming “capitalist economy” and the final crunch probably came in the same was as the fall of the Soviet Wall, when the leaders (Gorbachov and de Klerk) realized that the country simply could not go on being run that way. de Klerk deserves more credit.

  9. Johno

    de Klerk deserves more credit.

    Mandela was a great leader, but he would have achieved far less without F W de Klerk.

    Funny how all the luvvies rushing in to tell us what a great man Mandela was are happy to airbrush de Klerk out of the picture. Doesn’t work with the preferred narrative, I suppose.

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