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Keynesians Should Listen to Keynes
Posted By David Weinberger On December 16, 2011 @ 5:00 pm In Enterprise and Free Markets | 4 Comments
As we’ve argued countless  times , government attempts to stimulate the economy create uncertainty that often paralyzes business decisions. Don’t take our word, though. In a letter to President Roosevelt during the Great Depression, the father of Keynesianism himself, John Maynard Keynes, wrote the following :
You are engaged on a double task, Recovery and Reform…. Even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to put other motives in their place.
Might Obamacare, for example, which creates a monument to complexity with its indeterminate taxes and regulations, “upset the confidence of the business world”? Or might the trillions of dollars in deficit spending—stimulus, auto bailouts, etc.—that any business man or woman planning for the future knows will create unpredictable trouble down the line “weaken their existing motives to action”?
If one accepts Keynes’s notion of “animal spirits”—the confidence that inspires businesses to increase investment—as most commentators seem to, how could one then deny Keynes’s notion that too much governmental tinkering weakens that confidence? Yet, not wishing to give up their policies and their opportunity to play economic engineer, most Keynesians balk at the latter . This is one time they should listen to Keynes. Our economy would be much better off for it.
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2011/12/16/keynesians-should-listen-to-keynes/
URLs in this post:
 countless: http://blog.heritage.org/2011/10/13/poor-sales-or-economic-uncertainty-preventing-stronger-recovery/
 times: http://www.heritage.org/research/reports/2010/01/why-government-spending-does-not-stimulate-economic-growth-answering-the-critics
 John Maynard Keynes, wrote the following: http://newdeal.feri.org/misc/keynes2.htm
 balk at the latter: http://krugman.blogs.nytimes.com/2011/06/09/the-white-house-believes-in-the-confidence-fairy/
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