The View From 1776
Friday, November 14, 2014
From one aspect, Keynesian economics is about aggregating many very different kinds of economic data into single indexes. It is this which animates the Federal Reserve’s monetary policies, Congress’s stimulus spending packages, and New York Times propagandist Paul Krugman’s never-ending calls for increasing governmental deficit spending.
Robert Stapler brought to my attention David Stockman’s essay The Fed’s Paint-By-The-Numbers Delusions About The Labor Market.
Mr. Stockman documents the greatly differing kinds of jobs - too many of them part-time - and widely varying incomes associated with those jobs that are rolled into one statistic for new jobs created each month. Obama administration spokesmen and the main stream media treat all reported new jobs as if they were parts of a homogenous statistic called employment.
Going back to the 1930s, when Keynes’s ideas first gained a foothold in the United States, we can understand why this simplistic view of employment pervades today’s discussions. Keynes notoriously promoted the idea that the only economic variable that counted was government spending to employ people. What those so employed did was, in Keynes’s view, immaterial. Hire men to dig holes one day, then fill them back up the next day, re-dig them the third day, and so on ad infinitum. At another time, in the same vein, he suggested burying money in bottles by one crew, then unburying them by the next crew.
In short, the vast complexity of an economy, ranging from mining and lumbering, to producing steel, cooper, and aluminum, to drilling for petroleum and natural gas, to production of manufacturing machinery, to railroads and trucking, to wholesale distribution, to retail stores, to software coding, to restaurants and schools, is looked upon by the Federal Reserve and by Congress and the administration as a single thing that can be controlled simply by the amount of deficit spending by the government and the amount of fiat money created by the Fed to fund deficit spending.
The record, as Mr. Stockman lays it out, shows that meddling by Congress and the Fed during recent decades has failed Keynesian expectations and, instead, made the employment picture steadily worse.