Jim Hlavac
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Economic Theory
| Economic Theory |
During the years between the Panic of 1870 and the Depression there
were many people who looked at the business cycle and the ways
government impacted the economy and the ever growing complexity
of modern society. They developed all sorts of theories about the
way the economy worked and didn't work. And they all presupposed
that govenrment was the tool to direct the economy. That
government had to step in to solve the problems caused by capitalism.
This is based on the thought of marx who of course said that
capitalism is bad and the best remedy is for the government to take
over all the economy to get rid of the capitalists. These theorists
weren't willing to go that far, especially in America.
What they came up with is Keynesianism -- which is all about the
juggling of taxes, incentives, spending, borrowing, deficits, the supply
of money and a central bank -- all constantly tinkering to keep the
economy on an even keel. It is filled with policy prescriptions and
ides and proposals and tools and mechanisms. It fills the economic
textbooks of the western world, especially America. There are lots of
equations and charts and graphs, and all sorts of suppositions and
principles and theorems. It is a great flow of ideas since that Panic,
and up today.
It's called Keynesianism after John Maynard Keynes, who wrote
the book and explained it all. But lots of people expoused the ideas
and were involved in its creation and promulgation. And it all sounds
so very neat and clean, so rational, so reasonable.
Yet it fails by just one proposition on which it is based: This one
thing will work if all else remains the same.
Nothing it proposes, no idea in the set of theories it includes,
ever allows for the reality that things will not remain the same. It is a
static explanatory system for a constantly moving reality. Hence,
anything done has at the most a 50-50 chance of succeding. And
usually quite less.
All the constant monkeying with interest rates and the values of
currencies, and the changes in the tax code are all supposedly to
move the economy in certain ways wanted by the government.
However, not one thing ever done with Keynes' ideas is ever
provable. The net effect can never be quantified, nor can the
exceptions to the theories be explained, nor the unconformed reality
with the theory be identified as to cause and effect.
This is because all the theories require that "all else remaining the
same," to be a part of the equation. Reality however prevents this.
And thus whether they "succeed" or "fail" is utterly not dependent on
what they think they are doing. Oh yes, their action have real affect,
but the subsequent actions of individuals will be direct relation and
proportion to what they do.
In an effort by governments to control what is essentially
uncontrollable they are driven to add ever further complexity and
multiplicity of purposes all of which basically either confounds the
people or cancels each other out.
were many people who looked at the business cycle and the ways
government impacted the economy and the ever growing complexity
of modern society. They developed all sorts of theories about the
way the economy worked and didn't work. And they all presupposed
that govenrment was the tool to direct the economy. That
government had to step in to solve the problems caused by capitalism.
This is based on the thought of marx who of course said that
capitalism is bad and the best remedy is for the government to take
over all the economy to get rid of the capitalists. These theorists
weren't willing to go that far, especially in America.
What they came up with is Keynesianism -- which is all about the
juggling of taxes, incentives, spending, borrowing, deficits, the supply
of money and a central bank -- all constantly tinkering to keep the
economy on an even keel. It is filled with policy prescriptions and
ides and proposals and tools and mechanisms. It fills the economic
textbooks of the western world, especially America. There are lots of
equations and charts and graphs, and all sorts of suppositions and
principles and theorems. It is a great flow of ideas since that Panic,
and up today.
It's called Keynesianism after John Maynard Keynes, who wrote
the book and explained it all. But lots of people expoused the ideas
and were involved in its creation and promulgation. And it all sounds
so very neat and clean, so rational, so reasonable.
Yet it fails by just one proposition on which it is based: This one
thing will work if all else remains the same.
Nothing it proposes, no idea in the set of theories it includes,
ever allows for the reality that things will not remain the same. It is a
static explanatory system for a constantly moving reality. Hence,
anything done has at the most a 50-50 chance of succeding. And
usually quite less.
All the constant monkeying with interest rates and the values of
currencies, and the changes in the tax code are all supposedly to
move the economy in certain ways wanted by the government.
However, not one thing ever done with Keynes' ideas is ever
provable. The net effect can never be quantified, nor can the
exceptions to the theories be explained, nor the unconformed reality
with the theory be identified as to cause and effect.
This is because all the theories require that "all else remaining the
same," to be a part of the equation. Reality however prevents this.
And thus whether they "succeed" or "fail" is utterly not dependent on
what they think they are doing. Oh yes, their action have real affect,
but the subsequent actions of individuals will be direct relation and
proportion to what they do.
In an effort by governments to control what is essentially
uncontrollable they are driven to add ever further complexity and
multiplicity of purposes all of which basically either confounds the
people or cancels each other out.