I'm no Keynesian!

Shortly after I read about the supposed "stimulus" effect of the money spent to rebuild the Middlebury Post Office plaza, I read a persuasive argument against such tax- or borrow-and-spend government initiatives in the pages of the Intercollegiate Review.

In the current issue, author/historian/amateur-economist Thomas Woods uses the forgotten Depression of 1920 to prove his thesis, that Keynesian/Oobamian deficit/stimulus spending prolongs and worsens depressions/recessions, exactly contrary to what the government-spending proponents argue.

The 1920 depression was swift and deep; there was no government intervention (in fact, government cut taxes sharply and spending even more sharply, leaving more disposable income (and spending/saving/investment options) in private hands, and within a year it was all over, except in agriculture, where chronic commodity over-production caused by continuous productivity advance and no supply management has plagued the industry while pleasing urban consumers for most of the last century.

When I was an undergraduate, the Keynesian theory of government deficit spending to cure economic downturn was taught in Econ 101 as a law of nature right up there with the Newtonian one on gravity, the Boylesian/Carnotian three on thermodynamics, and the Vitruvian three on architecture. Equally unchallengeable then were the Piltdown Man's skull and plate tectonics in Bones 101 and Stones 102, the former getting a "yes" and the latter getting a "no".

Now we know that the skull was a human-cranium/ape-jaw fraud and floating-mobile continents are real. Even Maynard Keynes is beginning to be challenged, my old Econ lecturer, and the we-are-all-Keynesians-now pronouncements of Milton Friedman in the 1960s and Richard Nixon in the 1970s notwithstanding.

Usually, the anti-Keynesian argument says that government spending doesn't have the multiplier effect of private sector spending, some anti-Keynesians presenting statistics showing that tax- or borrow-and-spend actually generates less economic activity than it prevents by removing the money from the free market by statute.

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