Taking from the poor to give to the rich

Now at LAX, rated as the world’s worst international airport, but it’s much worse than that.

Anyway, what is found below is from my major presentation at FreedomFest which was on Keynesian economics, using the same title as this post. There was lots more than the quote below from Hutchison, written when Keynesian theory was unchallengeable at the risk of one’s entire career as an economist, but he did repent – mostly – later on. He is quoting John Stuart Mill to show how absurd classical beliefs were. But this is also what every economist in the nineteenth century believed, and then right up until 1936. Virtually no one, except a handful of others today, believe what was absolutely mainstream then. Not only that, almost no one can understand classical reasoning, and it definitely is not because classical economists thought recessions never occurred or recessions ended almost as soon as they began. The first para is me and the rest of the quote is Hutchison.

Say’s law is the proposition that recessions are never caused by a deficiency of demand and that recessions can neither be brought to an end or employment levels improved by an increase in aggregate demand. The typical way in which this conclusion was expressed was to state that overproduction is impossible, that demand deficiency is never a valid explanation for recession and mass unemployment. Although completely siding with Keynes, these issues are thoroughly discussed by Hutchison (1953), where the proposition is examined through the writings of John Stuart Mill who was writing in 1848.

“The idea [wrote Mill] ‘that produce in general may, by increasing faster than the demand for it, reduce all producers to distress,… strange to say, was almost a received doctrine as lately as thirty years ago; and the merit of those who have exploded it is much greater than might be inferred from the extreme obviousness of its absurdity when it is stated in its native simplicity’….

“Mill again agrees that in fact in commercial crises ‘there really is an excess of all commodities,’ which is a regular though transient phenomenon; but on the other hand, ‘it is a great error to suppose with Sismondi that a commercial crisis is the effect of a general excess of production’.” He goes on to denounce the latter notion (but not of course the former) as being (all in one paragraph) ‘ a chimerical supposition’, ‘ a confused idea’, ‘essentially self-contradictory’, ‘a fatal misconception’, ‘a fatal error’, and ‘a veil not suffering any one ray of light to penetrate’. Finally, he makes a pronouncement (later faithfully quoted by Fawcett) affecting the whole shape and task of political economy:

“The point is fundamental; any difference of opinion on it involves radically different conceptions of political economy, especially in is practical aspect. On the one view, we have only to consider how a sufficient production may be combined with the best possible distribution; but on the other hand there is a third thing to be considered – how a market can be created for produce, or how production can be limited to the capabilities of the market.”[Principles, Bk. III, Ch. XIV, para 4.]” (Hutchison 1953: 349-352)

This “chimerical proposition” is now mainstream and has been since 1936, with a major role for economic policy to determine “how a market can be created for produce”. I consider this as absurd as Mill had thought of it, but there is virtually not an economist alive today who agrees with Mill or myself.

Mill was right, and modern Keynesians are wrong, which really means that if the classics were right, the whole of modern macro is wrong. It’s like believing that the earth is at the centre of the universe, but that is how it looks. Nevertheless utterly wrong, but you with certainty do not even know what a classical economist believed or how they thought the business cycle began and ended, since it is no longer ever taught.

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9 Responses to Taking from the poor to give to the rich

  1. stackja

    If Keynes was the solution.
    Why is there still a problem?

  2. pete m

    LAX – shocking state of infrastructure for such a major airport. You’d think they would be rolling in gold for what goes through there, but it is a colossal mess. The Aussie airlines section, shoved to the side and looking third world, is so bad it is hard to describe. Not a nice gateway to their country.

    Sorry – no idea on economics. I’d say you’re right though.

  3. Stackja is quite right.
    That there are still massive worldwide economic problems is surely evidence that Keynes is wrong.

  4. mh

    LA must be rated as one of the world’s worst cities, so they may as well have an airport to match.

  5. MPH

    I think you’ve unveiled the reason that Keynesianism persists – it effects the transfer of wealth from poor to rich, or saying outsiders to insiders might be a better angle. DL’s post above is well timed on this theme, if your wealth only comes from being an insider you’re going to do everything to stay inside and keep the wealth coming in your direction!

  6. Dr Fred Lenin

    I suppose LAX is like San Francisco turning into a third world shitheap in the Decromatic Peoples Republic of Upper California . Squalour is fitting for lefty republics ,the Hollywood Noenklatura will approve .

  7. Nighthawk the Elder

    I haven’t been to LAX since 2006 and it was a total sh!thole back then. Check in was painfully slow and pre-screening of your bags was totally disorganised. No wonder people’s luggage would go missing.

    Once you were through the security screening, there was absolutely nothing on the other side. No cafes, no duty free, nothing except for a couple of lousy vending machines selling overpriced water and bags of stale peanuts. And old bus station seats from the 1970’s that should have been ripped out years earlier.

    Are you all saying in 2019 it hasn’t improved? Sound’s piss poor for a nation’s west coast gateway.

  8. Senorita

    Glad you are coming home. Your articles have been missed in our household. Welcome back, and thank-you.

  9. John Stankevicius

    Having lived through the 91 recession and survived the 2015 to 2017 recession, What is interesting is the businesses that survived the owners took a major haircut, prices remained the same and even declined. There were more back yarders which came in to the market and employees feared for their jobs which meant less job hopping and they did things more efficiently. New technology and processes come on board – 1991 the www and Microsoft; the wine game in Oz, while now it is 5 G and all sorts of new IT technology. I am hoping to see more manufacturing start in Oz.

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