Wednesday, August 01, 2012

Keynesians Winning in Explaining Economies in Deleveraging Shock: Krugman has the Story in Money for Nothing at the New York Times

We read Paul Krugman not because he is always right,
and indeed he admittedly does not always claim to be,

but Krugman stands out in the ranks of the world's top economists in rejecting voodoo economics, gullible wishful thinking and unproven politically-colored economic dogmas and pet theories, preferring to subject his own ideas to the actual empirical evidence. Krugman prefers an economics that is "evidence-based" rather than one based on some economic "school".

Read how the Keynesians are winning in explaining economies in "deleveraging shock", as Krugman has the story in Money for Nothing at the New York Times. One need not be a Keynesian. One needs to look at the facts to see that Keynes was right in major essentials, while others were wrong.

Compare the sensible things that Krugman writes to the abysmal theoretical economics written at Krugman-in Wonderland by a proponent of the largely reality-removed Austrian School of Economics, a theoretical school of economics somewhat comparable in its inflexible dogmatism to modern American "voodoo economics" of the American extreme right wing.

As noted at the Wikipedia about the theories of "Austrian School" classicist Friedrich Hayek:
"Jeffrey Sachs argues that among developed countries, those with high rates of taxation and high social welfare spending perform better on most measures of economic performance compared to countries with low rates of taxation and low social outlays. He concludes that Friedrich Hayek was wrong to argue that high levels of government spending harms an economy, and "a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness."
It is in fact rather astounding that such muddled economic thinking as can be found in the Austrian School is "made in Europe", a Europe whose modern astounding progress since WWII can be thanked to exactly the opposite kinds of economics as proposed by Hayek or compatriot Ludwig von Mises, who wrote dreamfully and in error that:
"The captain is the consumer…the consumers determine precisely what should be produced, in what quality, and in what quantities…They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction…In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people…Capitalists…can only preserve and increase their wealth by filling best the orders of the consumers… In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted."
In contrast, Steve Jobs, who made Apple the most profitable high-tech product-selling company in the United States is famously quoted as saying that "It isn't the consumers' job to know what they want."

Jobs was apparently very right and von Mises very wrong. Consumers are the suckers in the system, not "the captains".

Similarly and currently in the patent wars, what can be bought or not in retail shops is being decided by the patent laws and how these are being interpreted by the courts and the legal system. The consumers are not the ones deciding what they will be able to buy in the future.

So much for the so-called "Austrian School of Economics".
There is a good German saying for that school and it is "weltfremd".

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