As I just looked at the headline my first thought was "Yes I would ditch
Keynes for the actress Selma Hayek anyday, regardless of her financial policy
leanings". But then I read the article and became heartbroken. I was really
hoping it was Selma. Oh well, back to the funny pages.
SEY,But how can you test an economic philosophy EXCEPT with data and
numbers? If the economic ideas don’t stack against the data, then the
philosophy is likely wrong.I have done a bit of homework. Though
there is always more to do. Perhaps I have been listening to biased voices. Or
perhaps you have. Which remains to be seen. The test will be in the data - the
real world results. Otherwise, our economics philosophies are just nice
sounding ideas.To quote Keynes (hey, I couldn’t resist):
"The ideas of economists and political philosophers, both when they are
right and when they are wrong, are more powerful than is commonly understood.
Indeed the world is ruled by little else. Practical men, who believe themselves
to be quite exempt from any intellectual influence, are usually the slaves of
some defunct economist."Finally, remember that you noted that
Hayek moved away from strict Austrian ideas as he aged. Perhaps there was a
reason other than being co-opted. It is worth considering.
@Twin Lights: this is my last comment, so you get the last word.Data
and short-term results rule the economic world, there's no argument there.
But crunching numbers is an exercise in futility when the philosophy behind
their use is wrong. Data are like the rungs of a ladder to help you surmount a
wall. But if your philosophy directs you to place the ladder against the wrong
wall, what good does it do you? That's my complaint about econometricians
who spend their time spinning out useless or, worse, misleading data that do
more damage than good. That's why we're in such mess.Your
charge that Austrian economists are outdated is baseless and, I'm sorry to
say, ignorant. You know not whereof you speak. You've been listening to
biased voices. I suggest you do your own homework before you say something like
SEY,In modern economics, it is data and results not philosophy that
generally rules. This is where the strict Austrians cannot compete. Its not
prejudice, its that they practice as though this were the days pre computer.
@ Twin Lights: or you could say that Hayek forgot his roots. "Learning"
does not always and necessarily mean increased wisdom. The fact is that
it's next to impossible for an Austrian economist to earn an academic post
at a prestigious university or economic thinktank. Some of them have been known
to cave in to Keynesianism in exchange for a coveted appointment or academic
praise. Sadly, this was something Hayek couldn't resist. Ludwig von Mises
and several other Austrian economists stayed true to their principles, so Hayek
is not the best example of the Austrian school. I'll have to
take issue with one point: Keynesians get almost everything upside down and
backwards. So I'm content in believing that Keynesianism has essentially
nothing worthwhile to offer, unless you want to say they are a good example of
what not to be or do.
To Joe Capitalist 2: A deficits financed tax cut provides the same economic
stimulus as deficit financed spending. That's basic Keynesian economics.
SEY,So Hayek learned as he aged. Not that Keynes is the be all and
end all. In truth modern economics takes from many schools, not just one.
Because each school has some good points and others it gets wrong.
While I agree with most of the article, I take exception to the following quote
"Tax cuts are a kind of government-created economic stimulus, like building
highways or buying aircraft carriers."This thinking follows the
liberal mindset that tax cuts are a "gift" to those receiving them.
Letting people keep more of their hard earned money (whether rich or poor) is
not a gift by the government.Government needs taxes to operate and
contrary to what many liberals say, those who suggest that the government
collect less taxes do not advocate "No Taxes" which can lead to
anarchy.We can argue all day about what a "fair share" of
taxes is for rich, middle class, and poor alike, but we need to get rid of this
mindset that the government "owns" all our money and if they let us keep
some more of it, it is a gift. That is a socialist mindset.
Wow. Amazing. A column about the eternal debate between Keynes and Hayek that
completely gets both economists wrong.
@ Kent: still waiting for you to explain what you mean when you say "We need
to restructure the way corporations are owned," and how that's
compatible with capitalism. Sounds very Marxist to me.
As Hayek aged, he tended more towards Keynes, so even he was no longer
"Hayekian." So it depends on which Hayek the author is referring to, the
early or the later Hayek. It was the work of the early Hayek that won him the
Nobel prize (even though he received the prize later). GWB and his
economic advisors were not Hayekian by any stretch. Supply-side economics is
just another version of Keynesianism, so some of the argument put forth by the
author is a false one. The early Hayek was a strong proponent of Austrian
economics which the author only touched on. The main point is that government
subtracts from capital formation, it doesn't and can't add to it.
Wealth can be created only by capital formation and creating a demand for
savings, not by government stimulus of fiat money and low interest rates. The
less money diverted away from the economy by taxation and borrowing, the better.
But it works only if the government spends less. Lower taxes by themselves only
create greater debt.GDP calculations are misleading. They are a
Keynesian measure of spending as if spending is the key determinate of economic
Under certain circumstances, tax cuts may increase revenue. But taken to its
logical conclusion, this argument assumes that cutting tax rates to zero will
increase tax revenues. This is utter nonsense. Currently, our problem is not
that we are paying too much in taxes. That may have been true when the top
marginal tax rate was 94 percent, or even 77 percent, but our rates are at
historic lows (since the 1930s).We need to gradually cut expenses
(cutting too much at once simply shrinks the economy); we need to raise tax
rates, especially on the wealthy; and we need to close loopholes, which
primarily benefit the upper class.But this is still a short-term
fix. We need to restructure the way corporations are owned, so that those who
actually create the products and the wealth receive a fair share of the profits
their work generates. Only then will we be addressing the underlying cause of
the inequality that is devastating our economy.
Federal spending currently is 23.5% of GDP, not the 40% figure cited in the
article. As a comparison, it averaged 22% under Reagan.GM was
showing off prototypes of the Volt on the auto-show circuit in 2007, almost two
years before Obama became president. The car has absolutely nothing to do with
Obama.We could also mention that Hayek thought that the provision of
healthcare was a legitimate government function.
Mark I, Lower tax rates can generate more revenue. That is absolutely true..but
the key to it's truth is the word "can". It's not true if you
change the operative word to "will". If the American
economy is part of a global economy where capital moves freely from oppportunity
to opportunity why should we believe American capitalists will invest their
resources in such a way that it benefits Americans? What's the
incentive..patiotism..I don't think so. The intent of a mixed economy is
to tilt the playing field to the locals. It may mean a less efficient economy,
and it may help fuel bubbles and down turns..but at least we're still in
the game. We're not on the sideline watching someone else
Disagree Esquire. I've been reading The Price of Enequality and trying to
reconcile important points in that book to current GOP policies. I think this
guy just gave me one of the keys. I am a Republican that thinks we need to
raise taxes somewhat on the upper third, close loopholes, and reduce spending in
some areas. This guy asserts that the GOP needs to stop focusing on tax rates
per se, and instead look at how govt is trying to push certain markets (like the
housing market in the nineties). This is key.In short, we need more
regulation, I think, but less market-managing by govt. I had thought of those
as the same thing before, but I'm befinning to see that they need not be.
We can do both, and we must.
This whole piece is flawed because it fails to mention one critical word, rates!
Lower tax rates can generate more revenue. When a retail store wants to
generate more revenue, it doesn't raise prices it lowers them. Making less
money per item, but more money overall.Republicans fell for the
"spending cuts for tax increases trap" twice before. Reagan agreed to
this, and so did Bush 41. The tax rate increases happened, but the spending
cuts NEVER showed up. That is why Republicans are not going for this
"compromise" again. Fool me once, shame on me....
The economy tanked in the GWBush administration. It is slowly beginning to
recover in the Obama administration. Oman is wrong in his assessment.
Oman should stick to teaching law rather than dipping his toes into selective
facts to bolster his political views on fiscal policy. While a few of his points
have some merit for discussion, he distorts reality with essentially political
points and fails to address some bigger flaws in the GOP policy pursuits we have
seen over the past 30 years.