Monthly Archives: December 2012

If Free Market Government Really Were God, Its Name Would Be Keynes

Laws, rules and regulation provide the mold, so to speak, that shape the allocation of scarce resources.  Therefore, how a society collectively perceives the decree-er of these “laws” will determine how its resources will be allocated.   If a society sees its government, or a particular party or kind of government, as a deity, able to dictate good and evil, then that society will have much trust in its government.  There will be enough trust in fact to allow it to allocate resources fairly.

Now, with this in mind, consider that economies have up and down cycles.  The Keynesian economic model assumes that government, with divine attributes, can soften these cycles through economic stimulus in down cycles and high taxes in up cycles.  That is about as basic as I can put it, but I think it suffices.  But this theory has a major flaw.  It assumes that those who are elected into government are trustworthy.  It assumes that politicians have somehow transcended the base elements of humanity such as greed and self-interest, and have become angels who desire above all else that the people bask in good economics.  This is folly.

The government, in general, can never decrease its spending in the up cycles.  And it rarely decreases taxes in the low cycles.  See last 4 years.  Political opponents will be more than happy to point out in an ad that mean ole politician Bob cut spending or lowered taxes for the only people who pay them, the rich.  He will show a family sitting in a homeless-shelter looking dispirited and dejected as a result of Bog’s “draconian” and greedy ideas.  So, while up cycles never produce political incentives to cut spending, down cycle always present opportunities to increase spending… again.

The basic element of economics is man.  If the man who studies economics misjudges man, his theories will inevitably be flawed, and men, at least thsoe not in government, will suffer.

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