Monday, September 21, 2009

Keynesian Krackpottery

Bank of England warns of the consequences of thrift

"It says in its latest Quarterly Bulletin that household decisions to spend or save will have major consequences for the economic outlook, because consumer spending accounts for two-thirds of total spending in the UK.

"Any attempt to reduce consumption is likely to push down on output and hence household incomes. That could actually make it harder for households to increase their savings – known as the paradox of thrift.""


No matter how many Nobel Prizes they receive, books they write, or government/foundation grants they inveigle, the vast majority of "interventionist" economists (basically all of them) will never shake my disapprobation and the deserving label of Crackpots(Krackpots). They believe they are scientists, rationalists - HA! They deal in pseudo-science, something akin to phrenology. You can create all the fantasy-land models and formulations you want, you'll never be able to understand complex human action this way. Economics isn't physics; it's a social science that should reject radical empiricism for an understanding of individuals and actions.

The idea that we all need to spend/borrow ourselves into a long run oblivion for some nominal, short term gains is pure lunacy. Wealth is created through the interaction of more productive labor, with the better exploitation of natural resources, and the agglomeration of capital; consumption at price X is almost irrelevant. At a low enough price markets will clear in the long run, but politically there is no long run. Somehow the Crackpots don't realize that slight under-consumption(over-production) is a byproduct of growth (as well as a natural corrective force to systemic mal-investment) and the beneficent provider of cheaper consumption goods, freeing up more capital for investment in more appropriate, economical, and productive means. If you think we can collectively spend our way back to long run prosperity you must either be: 1) listening to academic/technocratic crackpots or, 2) actually hitting the crack-pipe...