Friday, June 3, 2011

Cato's Dan Mitchell on the Fallacy of Keynsian Economics

By the Left Coast Rebel

This morning's horrible jobs data underscores the ongoing failure that is Keynsian economics.

But, just what is so-called "Keynsian" economics?

Some basics on Keynsian economics per Wikipedia:

Keynesianism economics is a macroeconomic theory based on the ideas of 20th century English economist John Maynard Keynes. Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.

Keynesian economics advocates a mixed economy—predominantly private sector, but with a large role of government and public sector.

The "larger" role of government and public sector ushered in by unrelenting faith in central-planning largess is the key to the Obamanomic version of Keynsianism and the malaise inflicted upon the nation today. Bean-counting well-connected bureaucrats have showered cash and golden parachutes upon well-connected corporations while you and I on Main Street are shoved into the corner. The Federal Reserve continues to debase the dollar, delay a true recovery and skew economic data at every corner.

But that doesn't even scratch the surface of the fallacy that is Keynsian economics. Dan Mitchell from Cato offers up some of the basics behind the theory. Please pass it along:

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