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Using Keynesian metrics to measure a Keynesian economy?

Posted 06-04-2011 at 05:09 PM by VTHokieFan


Why do we use Keynesian metrics to measure our Keynesian approach to our economy?

At the foundation of the Keynesian economic school is the premise that the public sector is needed in order to deal with alleged economic inefficiencies in the private sector. This is typically done via monetary or fiscal policy.

First, there is no doubt that Keynesianism is a failed school of economic thought. Cast your criticisms of Austrian economics elsewhere folks; you can criticize the Austrian theory to your hearts' content, but I'm armed with examples of failed Keynesian policies practiced in the real world, not in theory and books, to demonstrate Keynes's failure. While we can debate Austrian vs Keynes back and forth, I have concrete, real world examples of Keynesianism's failure. But back to the topic...

The issue I have with Keynesianism is that it measures itself by its own metrics in order to substantiate itself. So if GDP is down, clearly we need the government (G) to step in and prop up GDP. Since the GDP figure will go up, then clearly that means the economy is improving, right? I say that's wrong. Governments are entities that cannot create wealth. They either spend by stealing from the private sector (income taxes) or issuing debt. A forced transfer of private wealth to government ownership (taxation) in order to be wasted on make-work ("shovel-ready projects") projects does NOT create economic growth. Now there are less available funds to be used in capital investment and private consumption.

Another issue with Keynesianism is the insistence on artificially low interest rates so people can borrow to enhance consumption (C) so that our abitrary GDP figure will rise and the Obama kool-aid drinking city-data sheep can post their links about how great the economy is under him, all will be well (until the next bust comes). But is measuring economic growth on debt backed consumption truly indicative of an improved economic reality?

I guess my point is, do you trust GDP? Do you trust such an arbitrary method of calculating macroeconomic activity without researching its underlying causes?

Is the Keynesian concept of GDP a good method for measuring economic growth? The equation C+I+G+Xn is how this figure is measured. Basically as long as a government steps in to offset the methematical losses in consumption and investment during a recession, then it will prevent GDP from dipping, which means the economic decline has stopped? Or has it?

I read an article linked here on CD that made a great point. Our economy was $3.1 Trillion in 1980, and now it's $14 trillion. In the same way, though, our national and personal debts have skyrocketed.

Are we building an economy based on value added services, production, technological advancement and capital expansion? Or are we building one on the fagile stilts of government make-work projects, regulatory bureaucracy and debt-backed consumption.

Before you cheer for our supposed slow, though apparent recovery, remember that the man who created these economic concepts, frameworks and tools, is also the man who created the same metrics we use to measure their success. Sounds like a bit of a conflict to me.
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  1. Old Comment
    Very good sir. Have always said free-market economics is the hardest thing to fully grasp in the political realm and that's why liberals never without exception understand it so they try to control what they don't know through regulations, laws, etc.
    permalink
    Posted 10-06-2011 at 12:02 AM by egamakaded idiut egamakaded idiut is offline
 

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