Lean Government

The Blind fighting the Blind – Obama Keynesians vs Bush Keynesians

The nearly unimaginable problem we find us in now was caused by Keynesian and Neoclassic macroeconomic theories. The belief that by adjusting levers and micro tinker the economy you can smooth the economy i.e. cooling a overheating economy and heating up a recession. Both Neoclassic and Keynesian economics theory uses as its base the rational individual. The Neoclassic believe in Homo Economicus on an individual level and the Keynesian, nowadays also Behavior Economic theory, believe in the rational politician, bureaucrat, the illusion I call Homo Illuminatus.

In fact we are all individuals and we all behave, and if an individual is not behaving rationally how can an individual that is a politician, bureaucrat be assumed to behave more rationally? This is the fallacy of the Neoclassic theory that individuals always behave rationally but an even greater fallacy is the assumption that individuals always behave irrationally. Individuals in fact behave rationally most of the time, irrational behavior is rare but it exists and causes problems.

We have seen time after time since WWII that the effects of trying to manipulate, adjust the economy has led to the opposite of the intended effect. Overheating an already hot economy and supercooling an already cold economy. In fact in the US since Bill Clinton have had two types of Keynesian, conservative and liberal. The Conservative Keynesians has cut taxes to stimulate the economy but has not cut spending, George W. Bush Liberal Keynesians, as we have now, focus on public spending and has no focus on cutting future deficits.

We are now witnessing the Obama NeoKeynesian and Behavior Economic theorists talking down Neoclassical theories. They perceive that Neoclassic theory has brought us her and refuse to see that Keynesian ideology is equally or perhaps even more at fault. Instead of a moratorium on tinkering, manipulating they once more is intending to to impose the Enlightened planner, the Homo Illuminatus. Hayek has already explained that there can be no individual nor politician, bureaucrats that can no all preferences over time for all individuals.

The Use of Knowledge in Society
F.A. Hayek AER, 1945


What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given.

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May 1, 2009 Posted by | Uncategorized | Leave a comment