• The Economy Needs No Conductor

      My column this week discusses the fallacies of Keynesian economics and government central planning. Politician claim they "create" jobs. They certainly do create some, but:

      One of the most important questions in politics should be: ‘Would the private sector have done better things with that money?'

      A healthy economy does not just create jobs of any kind, it creates productive jobs. The pharaohs of ancient Egypt created plenty of jobs building pyramids, but who knows how much better the lives of ancient Egyptians (especially the slaves) might have been had they been free to engage in other work? They would all have had better housing, more food or snazzier headdresses. Even as smart a person as economist John Maynard Keynes seemed to forget about that when he wrote in his "General Theory" back in 1936, ‘Pyramid-building, earthquakes, even wars may serve to increase wealth.'

      By that logic, government could create full employment tomorrow by outlawing machines. Think of all the work there'd be to do then!

      Think about the two other methods to "increase wealth" that Keynes lumped in with pyramid-building: earthquakes and war. Now, sure, after a war or earthquake, there's plenty of construction to be done. After the Haitian earthquake, Nancy Pelosi actually said, "I think that this can be an opportunity for a real boom economy in Haiti." New York Times columnist Paul Krugman made a similar error. On CNN, he said if "space aliens were planning to attack and we needed a massive buildup to counter the space alien threat ... this slump would be over in 18 months." Before that, he said the 9/11 attacks would be good for the economy.

      This is Keynesian cluelessness at its worst.

      You can read the rest of my column here.

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      Free Markets