Interesting article from Paul Samuleson, a Nobel Prize winning economist, who is as big of a Keynesian as there is. He has some good points, but I don’t agree with his overall philosophy. Keynes is dead, and I wish his ideas were too. What gets me the most about Keynesians is they are so Democratic. It goes beyond economics to the political. Why must they make political points? Stick to the merits of the “science” of economics. Mr. Samuelson is certainly smarter than I am, but his politics keep him from making valid points. He attacks Greenspan’s association with Ayn Rand. In fact, he tries to blame this association with the problems in the banking sector that Greenspan ignored. This is simply not true. Rand would not approve of Greenspan. The fact that she so no need for the Federal Reserve is proof enough. She wanted markets to determine interest rates, not a group of conflicted bankers. She tossed Greenspan from her inner circle before he ever became the Fed Chair.
Samuleson’s shot at Greenspan that he incorrectly thought markets would regulate themselves is also unfounded. Markets do correct themselves. They do not do it minute by minute, but when malinvestment and excesses build, the markets clear them. No one ever said market corrections were meant to be painless. That simply is not the case and any economist who thinks it can be done is naive, at best, or downright ignorant. The Kenesians like Samuleson think the government can smooth out the business cycle and the boom/bust feature of economies through regulation and Keynesian deficit spending. How is an inefficient entity controlled by soul less despots pandering for votes going to do better? They won’t; they just make things worse.
The other Keynesian nonsense from the weekend is a NY Times article from Greg Mankiw. Mankiw spews the same nonsense about how governments should run deficits during war times and economic hardships. Don’t these guys understand we have too much debt? This is going to put a drag on the economy as the debt deflation rages on. If the government listens to Mankiw or Samuleson, they will just extend the malaise just as Japan has.