Professor Elam

Friday August 26, 2011

Last evening an alert student asked if I fell into the Keynes or Austrian school of economics. If these ames are unfamiliar to you, look it up in wikipedia at least. Keynes wrote the General Theory of the Employment of Money stating that government spending would boost an economy. We have just tried that; it won't. 

I would land in the Hayek camp described by Stephen Moore in this piece in today's Wall street Journal. 

Indeed printing money, throwing it at banks with a history of bad decisions, has clearly not created any new jobs. It did create bonuses for NY bankers and sales of Maseratis however. 

Ecomomic growth results from positive social mood regarding the probability of a successful outcome. Markets and risk taking shrink in the face of uncertainty. All we have had the last two years are proporsals for higher taxes, more regulation, and even outright bans on building plants in right to work states. 

The result is a U 6 unemployment rate of 16%. Yet I don't see the Administration interested in changing its course of re-making America into the European socialist model. The wake up call never comes for the Keynes crowd.