Comments on: The Trouble with Keynes

By: The Trouble with Keynes | The Freeman | Ideas On Liberty « Market Track

Tue, 23 Mar 2010 03:32:06 +0000

[...] via The Trouble with Keynes | The Freeman | Ideas On Liberty. [...]

By: Dean West

Dean West — Tue, 21 Apr 2009 02:36:58 +0000

A “Free Market” implies just that – that the market is free, that men (and/or women) are trading in freedom. For the government to merely exist skews the market, making it “unfree”. It cannot possibly work as well as it would have, had the government not existed, taxed, regulated, inflated, etc.

To say that the government is needed to preserve the free market is to say that the virgin needs the rapist to preserve her virginity.

By: Dallas E. Weaver, Ph.D.

Dallas E. Weaver, Ph.D. — Sun, 12 Apr 2009 15:31:21 +0000

I still don\’t fully understand Keynes. It seems that his “theory of idle resources” has an implied assumption that all resources are interchangeable. Implied assumption can be theory killers.

Using the concept of digging holes and filling them up as an example of a stimulus with a positive multiplier may work if you have high unemployment levels (idle resources). In the 20\’s and 30\’s, a hole digger could be anyone who is unemployed and a government contract to dig holes may have a positive multiplier. However the world has evolved and today digging holes requires back hoe operators and filling them up requires Cat operators, which are not the same as framers and dry wall installers unemployed from residential construction jobs. Labor is no longer fungible. This is a huge change that may have major impacts on the effectiveness of his theory is modeling economic reality.

If labor is not interchangeable and you have a multi-year process to retrain labor, any significant spending will exhaust the \"idle resources\" in a sub area and will just take resources from one existing job and use them in another one. This will have no multiplier effect.