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1. Krugman's Nobel was for work he did on factor productivity in developing economies, not for Keynesian economics.
2. Economics has no balance sheet. It is the balance sheet that shows there are consequences to government spending: the buildup of debt. There is no line in the Keynesian model for this.
3. Keynesian economics does not look at any of the structural conditions of the economy. For instance, if there is a huge imbalance in the economy due to overinvestment in housing, there is no line in the Keynesian model for this.
4. The reason a private enterprise economy works is that there is accounting that shows whether an investment returns more than its cost. This is value creation. If an investment returns less than its cost, it destroys value. This was one of the problems of the Soviet economy.
5. There is no way to measure the return on Keynesian spending because the whole point of the Keynesian model is spending per se, rather than spending as a result of demand - demand defined as customers receiving more value from a transaction than they pay for it. Since there is no way to measure the effectiveness of Keynesian spending in the Keynesian model, you might as well give the money to your cronies, something Obama is all too good at. In Keynesian terms, the money spent on Solyndra is a win!
6. We have run a deficit of 10% of GDP for 4 years. This is way above any previous peacetime deficit, including the New Deal. How much MORE spending does a Keynesian like Krugman want?
7. The worst depression prior to the Great Depression was the post-WWI 1920 - 1921 Depression. The Harding Administration shrank government spending and signed the Fordney - McCumber Tariff. The result? The Roaring 20's. How does the Keynesian model deal with that?
Read more: http://www.americanthinker.com/2012/05/the_illogic_of_paul_krugman_comments.html#disqus_thread#ixzz1w9mbdaiH
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