Monday, July 22, 2013

Even a Broken Clock is Right Twice a Day

Paul Krugman, Nobel prize-winning economist, recently stated, "If you came into this for years ago with a Keynesian point of view, you said things that were regarded as outrageous in this town. You said government borrowing won't send interest rates skyrocketing. The Fed printing money won't cause inflation. And by the way, austerity policies will tank the economies that adopt them.  And all of that has come true.  So, you know, you have a theory that works ."

Hayekian predictions include the belief that Clinton's raising of taxes on the rich would destroy the economy. Note:  That's the economy which bloomed. The European Union, under the leadership of Germany, has adopted Hayekian principles and they're doing very poorly compared to us. We adopted a mild Keynesian stimulus and we have gained a mild recovery.

Even the Wall Street Journal reported that United Kingdom's austerity policy produced a second recession.  Krugman points out that when Cameron came into power, Conservatives in America were delighted. They knew that he would adopt the correct procedures to end to all economic problems in Britain. Well, he did take all those correct procedures, at least correct according to the Conservatives.  They were excited because they were certain his austerity programs would show how effectively austerity programs work. Instead, Britain has experienced a second recession.   We should take notice that that the Keynesian economists in America said that Cameron's policies would cause a second recession, as it did.

Krugman also pointed out that Sweden, arguably the greatest welfare state in the world, has done quite well during this time. This is the exact opposite of the Conservative Hayekian predictions of the fate of socialist economies.

Finally, Krugman points out that Iceland, where much of this economic crisis originated, was expected to completely self-destruct, especially because they adopted very Keynesian policies with a lot of government controls as a temporary measure to fix the problem. Actual result:  Right now they're doing better than we are.

This leads only one possible conclusion.  The reason American and European Conservatives  continue to believe in the economic theories of Hayek is that they are convinced that since no man can be perfect and since Hayek has a record of being perfectly wrong, he's overdue to be right. At least they hope so.

1 comment:

  1. Unfortunately for all of us, Hayek and the Radical Republians are not broken clocks.