Salsman: Keynesianism is Potterism

Writes economist Richard Salsman over at the IFI blog:

To understand this, think: “Harry Potter’s wands.” That is the essence of Keynesian mythology, the basic idea, the notion, nostrum, fantasy, and fable – “the narrative” (today’s euphemism for fakery). Politicians now are mere vessels, spokesmen for the almighty People; they “speak their truth” and reveal their internalized, private fictions, untethered to reality. Keynesianism is Potterism. As quackery, it doesn’t bother to “follow the science” (of economics). It was mostly rejected during the neo-liberal supply-side revolution of the 1980s-1990s, but has since risen from its too-shallow grave, to stalk and block prosperity. Keynesian policy is always the policy of choice for statists – those who oppose choice (economic liberty) per se.

In 1936 Keynes the Quack wrote an influential book that later was crudely imported into a widely adopted college textbook written by MIT’s Paul Samuelson (Economics, in fourteen editions between 1948 and 1992). For nearly half a century, all over the world, millions of professors, pupils, politicians, preachers, and policymakers were fed Keynesian absurdities, including these:

“Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical [free-market] economics stands in the way of anything better.” “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again, there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.”(John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936)

Perhaps I’m being unfair, quoting a non-serious passage from a stupid work many decades old, which no serious economist today would dare take seriously (let alone invoke as grounds for contemporary policy). But in April 2009, at the end of the U.S. recession which began in late 2007, Princeton professor Paul Krugman wrote “Time for Bottles in a Coal Mine,” for his New York Times column. Citing Keynes’s 1936 passage (above), Krugman extolled a “stimulus” scheme even as the economy was recovering (and presumably didn’t need the “help” of more fake money). In 2012, when it should have obvious that the U.S. economy was out of recession and expanding nicely, Krugman published End This Depression Now! He was more delusional than usual, mad with anger that vastly more “stimulus” had not been forthcoming from his hero Obama; by 2012 Krugman convinced himself that the 2007-09 recession had worsened. This is the quack who got the Nobel prize in 2008. [“Yet Another Anti-Stimulus Scheme“]