Thursday, January 31, 2013

Would Keynes agree with America's economic policy?

I consider myself to be an Austrolibertarian and one of the things that I commonly hear among my fellow libertarian brothers and fiscal conservative cousins is "Keynesian economics is ruining the world." This has become a running intellectual brand feud over the years in which subscribers of the Austrian (and to some extent the Chicago School) of economic thought point out why John Maynard Keynes' various theories are inferior for policymakers as they tend toward state monopolization and destruction of an economy.

The problem with placing blame for our current boom-bust business cycle and inflationary economy squarely on the lap of Keynes and his disciples is that it gives rise to the assumption that somewhere out there in an obscure room in a state capitol building or in an undisclosed underground installation in Washington D.C. there is a supercomputer "black box" cranking out numbers that policymakers, like priests, collect and use to create laws based on algorithmitized notions of broken windows and animal spirits for "Thus saith Keynes."

If only this was actually the case!

There is no special black box cranking out highly accurate
numbers that policymakers use to develop their laws and
economic planning policies. Legislators receive retroactive
intellectual and philosophical cover for actions which are
largely done without consideration for actual theory.
(U.S. Air Force file photo)
Having sat in countless closed door caucus meetings and advised numerous legislators I can tell you the truth is that the majority of your policymakers are not so sophisticated as to actually operate on schools of thought but are in most cases going from gut instinct to gut instinct, making up things as they go along, strategically positioning themselves here one minute and there the next as a necessity of changes in political influence and perceived crisis. The intellectual and philosophical cover for their actions is at best grossly retroactive - which is to say, there is always an opportunistic corporation, research agency, think tank, lobbyist, media personality or community organizer who sees patterns in the smoke and assigns legitimacy based on prior discourse of far more (comparatively) erudite individuals.

The truth is, the majority of what you see right now is not "informed policymaking" but people making up things as they go along and court "intellectuals" justifying their every move. Remember, the Pharaoh of Egypt that opposed Moses' liberation of the Israelites asked his magicians and counselors to come up with explanations and fake signs to justify his refusal to let the Hebrews go in spite of what was going on around them. This is something that has been going on for ages - a political figure makes a decision and the "magicians" (which today is the media, the university professors, the community organizers and the otherwise uninformed conformist elements of the public) come up with a justification for it after the fact.

Political leadership is about perception and positioning, it has little to do sadly with pulling out an economics textbook and saying, "Ok, Keynes said we should do this, so in my next bill I will mandate this." This is not to say in the least that I endorse or approve of Keynes, but it should be understood that responsibility for failed policies belongs not to dead intellectuals but to the living who have been entrusted with the keys to the country and its future.

Blame your legislator because they are incompetent, not because they are a disciple of Keynes. So long as we stay fixated on intellectual sectarian conflict, we never actually hold individuals responsible for their personal lack of stewardship or competence. This is why libertarians desire optimally a free market without compulsion because errors are a function of limited human cognition and incomplete information but law compels through state violence the perpetuation of an error upon all. There is no black box and there is no perfect legislator.

So would Keynes, if he were alive today, look at the U.S. economy and the policies of its government and say "good job, well done?" Probably not. I'm guessing he'd blush redder than a steamed lobster and say that people went far beyond what he wrote.

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