Letter to the Editor

U.S. should abandon Keynesian economic policies

Friday, January 27, 2012

To the editor:

They've been goin‚ at it for a century.
Keynes wants to direct the markets.
Hayek wants to set them free.

This little ditty sums up a debate that is central to the role government plays in our economy as well as our personal everyday lives. I wish I could take credit, but it is in fact a paraphrase from a series of videos produced by the economists John Papola and Russ Roberts. You can find them on YouTube. Just search Keynes v. Hayek.

Most of you have probably heard of Keynes. Keynes' theories came to dominate the philosophies of most governments the all over the world. His theories are the basis for policies of the Federal Reserve as well as for almost all attempts by government to steer the economy. Keynes believed that government could regulate the economy and steer economic activity toward certain desired goals. Governments, in their zeal to justify their existence, readily adopted policies advocated by Keynes.

Most of our presidents, with the possible exception of Reagan, have embraced Keynesian economics. The stimulus checks during the Bush administration, as well as the gargantuan stimulus package of the current administration, were Keynesian in nature. Boost aggregate demand and the economy would respond positively. Obama's policies are Keynesian on steroids. Government not only tries to stimulate economic activity, but also to steer it to predetermined desired results. Think Solyndra and the Chevy Volt, products of the administration's attempts to steer the economy in the direction of renewable energy,

You may well have never heard of Hayek. Fredrick Hayek provided a counterpoint to Keynes. Hayek noted that Keynes' theories were based on a basic conceit -- that someone other than the owner of a resource, who has the best knowledge of that resource, could determine the best use for that resource. Government, in its arrogance, believes that it can best determine how a resource can benefit society as a whole. That someone other than the farmer, who trods over, tills, feels and even tastes his soil, could find a better use than that determined by the farmer. In his book, "The Road to Serfdom," Hayek notes that governmental attempts to direct the economy lead explicably to loss of personal liberty and totalitarianism. Think Soviet Union and Nazi Germany.

When I first encountered Keynesian economics, my first question was the same as many before me. OK, I can see how this might work in the short run, but what about the long run? I was told that Keynes believed the long run was merely a series of short runs and that -- and here comes the most cynical of statements-- "in the long run we're all dead." It is unimaginable that our economic policies are guided by such cynicism. All around us we see the devastating effects of these cynic-based theories. Mr. Keynes, you may be dead, but I am still alive and so are my children and grandchildren. All over the world we see the effect of government directed economies, and it is not pretty.

Keynes did make one statement that is good advice indeed: "When circumstances change, I change my mind." It is high time we took Keynes' advice and listened to Hayek.

Randy Jefferis
Blytheville