Mondays With Murray: The Death Of Keynesian Economics

Why would a noble prize winner ignore a fundamental question regarding the basis of the economic philosophy he has spent his life defending?  Could it be because this famous economist and New York Times Op-Ed columnist is unable to provide an answer?  This situation occurred last weekend when Paul Krugman was challenged by Mish Shedlock to answer a simple, childlike question regarding the basic fundamentals of Keynesian Economics.Economic Policy Journal’s Robert Wenzel posted a summary of the initial challenge.  EPJ linked to the article written by Mish Shedlock that issued the challenge and also included Krugman’s evasive response to the basic philosophical question.  In his article, Mish linked to a video of economist Hans Hermann-Hoppe, which I have included below.http://www.youtube.com/watch?feature=player_embedded&v=EqHUBYfxh4kHans-Hermann Hoppe encourages Austrian Economists to not get tricked into being bogged down by detailed, micro economic questions when debating Keynesians.  He advises to keep it simple and insist Keynesians explain how an increase in paper pieces can make a society richer.  Ask them to explain, if this is true, why do we have poverty in the world?  If every central bank is capable of creating prosperity via the printing press, why does not every country with a central bank enjoy prosperity?  It would be fair to assume that Krugman would jump at the opportunity to answer such a simple, direct question.  Right?Krugman ignores the question and instead chooses to go on the offensive against the “hard-right commentators” that have challenged him with this very basic question.  Krugman answers the question with the following:

Angry Bear finds some of the usual suspects explaining How to Debate Paul Krugman, and the answer appears to be this: invent a straw man who bears no resemblance at all to the economist/columnist of the same name, and ridicule that imaginary person.I have to say, never in my wildest dreams did I imagine that I could play the role of History’s Greatest Monster to so many people. Thank you for the honor!Aside from the silliness of the exercise, this little exchange is another illustration of a point I’ve noticed before: the way hard-right commentators assume that the other side must be their mirror image. They insist that no government intervention is ever justified; so liberals must support any and all government interventions. They want smaller government, as a principle; liberals must want bigger government, never mind what for. They believe that deficits and printing money are always evil; liberals must be for deficits and money-printing under all circumstances.

As you can see Krugman avoids the question like the plague.  In order to gain some insight into why a Keynesian Economist would act in this manner we turn to the always insightful Murray Rothbard for a bit of background on the Keynesian philosophy.  (I couldn’t leave Murray out of Mondays With Murray!)http://www.youtube.com/watch?v=tjdl1VBlBdcRothbard talks of the economic collapse in 1973 and 1974 that yielded 13 or 14% inflation and coincided with a recession.  One of the reasons I chose this topic, is because it is similar to the economic conditions we have today.  Although, most would agree that the situation today is worse due to an exceptional increase in unfunded liabilities along with exploding government spending.The elites in Washington and the fat cats on Wall Street claim that we are on the road to recovery, but the average American sees the increasing prices at the grocery store and a shrinking employment market.  The only “solution” that the Federal Reserve cartel has is to increase the amount of paper pieces available.  They have achieved this by keeping interest rates at record low levels.  Keynesians will point to the rise in the stock market and the increases in the real estate market and claim monetary expansion is succeeding.  The relief is an illusion, just like the many booms that preceeded this time period.  Another bust is a certainty.  It is not a matter of if we will have another depression, only a question of how crippling the crash will be to society as we know it.As Rothbard points out, Keynesianism has been dead from the neck up since the 1970s.  Keynesianism methods have proven ineffective and immoral, but this does not mean that they will stop trying to enact their policies.  They will not quit.  Therefore, it is more important now, more than ever before that we continue to ask questions and demand answers.  When the system comes crashing down, let there be no mistake which economic philosophy was responsible for the demise.So Paul Krugman, how exactly does an increase in paper pieces make a society richer?Receive access to ALL of our EXCLUSIVE bonus audio content – including “Conspiracy Corner”, “Degenerate Gamblers” and the “League of Liberty Podcast” by joining the Lions of Liberty Pride and supporting us on Patreon!