Ep. 114 What’s Wrong With Keynes, in a Nutshell

25 November 2017     |     Tom Woods     |     6

No Krugman column this week for us; instead we step back and look at the big picture: what exactly do Keynesians get wrong in their understanding of the economy?

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  • davegrille

    The best the state can do is remove state created artifacts.

  • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

    Basically, Krugman will invent any rationalization that powerful people want sold to the willfully gullible masses. Why let a little thing like truth or integrity interfere in the maxim,… It is wishing that makes it so!! The rest of the smoke is just to give cover to the those who naively expect Krugman could actually be telling the truth.

  • batymahn

    My favorite example of Keynesian spending was on an old episode of TopGear. The government of Myanmar decided to build a brand new capital city. The 8-lane highways around the city were SO empty that the TopGear boys held impromptu races. Meanwhile the people of Myanmar are desperately poor.

  • DanielRCoats

    Fundamentally I think they always go wrong because their default assumption is that the market is full of negative externalities that must be overcome by the wise and learned experts. Their default worldview believes the market always fails.

  • Willy1964

    – Does Bob Murphy REALLY have a PhD in economics ? In order to bash keynesians he has to resort to some riduculous and faulty assumptions.
    – Yes, an economy is about Supply & Demand (= spending ). And when an economy “slows down”/is in a recession/depression then the amount of spending shrinks.
    – Yes, saving does undermine demand and therefore reduces overall demand in aneconomy. And making a profit IS equal to saving.
    – Yes, giivng the poor a tax cut then it can increase spending. Some of those poor will pay off (part of) their debt (= negative spending) and will actually slow down the economy.
    – Giving the poor a million USD will indeed push prices (much) higher. But then companies can jack up the price and jack up their profits. Those companies should use that extra profits to perform maintenance for their production facilities. And performing maintenance is also a form of (keynesian) spending/consumption.
    – Producing production goods is actually CONSUMPTION. E.g. when I PRODUCE potato chips then I CONSUME e.g. potatoes, vegatable oil and electricity.
    – I know one economist who build an elaborate mathematical model and with that model this person was able to predict (in the 1st half of the 1990s) that the current economy would experience/go through a severe economic crisis somewhere in the future.
    – this same economist has one very simple formula with which he was able to see when the US entered its economic recession in the 2000s. Based on this simple formula this person concluded that the US “recession” already began in the 1st quarter of 2005.

    • http://www.TomWoods.com Tom Woods