Friday, July 9, 2010

Paul Krugman and the Folly of Keynesian Economics + "Fear the Boom and Bust" Rap

Paul Krugman just may be the icon of intellectual dishonesty. His continuing efforts to prove the already much discredited Keynesian theory of economics shows him to be the most anti-perspicacious economist in the current war against the free market. In his recent article, “Pushing the Unemployed With Penny-Pinching”, Krugman decried the fact that the federal government would not extend state Unemployment Insurance (UI) as “everyone took it for granted that UI that normally terminates after 26 weeks would be extended in times of persistence joblessness” (everyone?). The fact that unemployment across the nation has already been extended by 26 weeks seemed to have slipped his mind. What congress has done is decided not to extend any more UI extensions. Krugman defends extending the extensions, calling the fiscally responsible coalition in the Senate “heartless” or “clueless”. On one hand he considers it clueless to believe that extended UI “is a disincentive for them to seek new work”. Why? Well because there is some unknown “recent economic research” that says it’s not so. On the other hand he claims that UI will put money in peoples pockets that will help support consumer spending; I doubt most people would find any disposable income with a 40% reduction in pay.

This of course is the fallacy of Keynesian theory; 1) it ignores the very human decisions (and behaviors) Keynesians fault for inefficient economic outcomes; and 2) it exudes that re-distributing wealth will somehow stimulate the economy. Every time Demand Side economics extends misery, the Keynesians claim victory when the free market finally recovers despite their best efforts, and every time Supply-Side economics (reduced taxes and government spending) works, the Keynesian claim there was some other cause.
One has to remember why Keynesian theory exists in the first place; it's based on a dislike of the free market and a love of government. The intellectually dishonest love to explain that President Obama is not a socialist because he does not believe in state ownership of the means of production. But in most other ways Keynesian economics is like socialism; and it would be great if it worked, but like all ideas that believe government needs to dominate over the private sector, it always ends in misery for the common man.It's the need of bureaucrats and government officials to control everything and a belief that an economy can be planned and supply and demand can be manipulated to create social justice through redistribution of wealth. What is lost on the Keynesians is supply and demand is a law of human nature, trying to manipulate supply and demand is like trying to manipulate gravity; you can stay up in the air for a while, but eventually you have to come down to earth.

This is just flat out genius.

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