3 thoughts on “Economic theory’s identity crisis: why Keynesianism must go”

  1. Posted 14/06/2011 at 13:15 | Permalink

    I had a conversation with my 11 year-old son about economics at the weekend; he suggested a system whereby money was abolished, and “stuff” was just handed out. I won’t bore you with the ebb and flow of the conversation (particularly the bit where he accused me of not listening), but we did touch on Keynsian economics. He grasped it very quickly, and questioned some of the underlying assumptions straight away. Just goes to show, when you start over-laying academic knowledge on to basic understanding, sometimes the effect is a net negative, as in the devout belief in Keynsian theory Mr Kate touches on above.

  2. Posted 14/06/2011 at 13:36 | Permalink

    That one dollar of public spending is never equal to a dollar of private spending, for in getting to that dollar of public spending, one needs to overcome the friction of the State machine, the propagation delay in spending and the bad/inefficient choices made once a decision is made.

    That dollar of public spending costs more than a dollar of private spending unspent but taxed.

  3. Posted 14/06/2011 at 19:21 | Permalink

    Having previously started a comment with reference to the original work of Colin Clark, only to have the site cut off, I will give a conclusion.

    Because of the manipulative actions (fiscal and others) upon the inputs to “GDP,” taken to achieve political or other ends, to achieve (is that the right word?) a particular statistical result, a less manipuable reasonably determinative measure of “economic” activity is sorely needed.

    Doing so will undoubtedly discomfit the field of “journalism,” which relies upon repeating the bird-calls through out the political jungle, as well as poseurs in academics.

    But, it needs be done.

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