Saturday :: Jan 31, 2009

Stupid Economic Arguments

by Mary

Paul Krugman and Brad DeLong are aghast at the incoherent reasons the economists from the Chicago School of Economics give for being against a stimulus package all because they are convinced that Keynes was proven wrong. Brad even brings up the point the Milton Friedman accepted the use of fiscal policy by governments:

The claim that the savings-investment identity prohibited fiscal policy from having any impact whatsoever was the infamous British "Treasury View" of the interwar period, and was dealt with and rejected then--when Milton Friedman writes about his framework for monetary analysis in the 1950s, 1960s, and 1970s, he rejects the theoretical argument that fiscal policy must be ineffective as strongly as Jim Tobin does. And he goes to great pains to emphasize that the claim that the velocity of money is constant in normal times is not true and is not part of his monetarism. And nobody has ever argued that the money multiplier is a constant. That fiscal policy can affect employment and output when the economy has substantial unemployed resources was--I thought--well-settled by the 1950s.

What is so frustrating with the Chicago School boys is their economics is completely divorced from why we have economies. As my friend Dave Johnson likes to say, "Who is our economy FOR, anyway?" It seems that they think it is for creating wealth for wealth's sake. But really the economy should be for creating a system for people which supports their livelihoods and makes it possible for us to effectively negotiate for what we need from others. Why is that so very hard for them to understand?

One example that has been driving me nuts during the past few weeks is the idea that the United States is too poor to pay for healthcare or Social Security for its people. They act like the money isn't there for these expenses - but all of us are paying for that in multiple ways already. For those who don't have healthcare, we have overused emergency rooms or people dying early. Don't tell me this doesn't have a real cost to our current wealth in this country. The reason it makes sense to do a better job of including and covering everyone for these expenses is because the US will be able to dedicate more of its wealth to other things if we pool our money together and pay for these expenses out of a national fund.

Let's be blunt, when people don't want to support fiscal policy to address this economic mess, they are saying it's okay for a huge number of Americans to be homeless, sick, hungry and in despair. They do not care about this country and the politicians that refuse to help are betraying their constituents. After all, one of the main reasons the founding fathers created the constitution was because they wished to "promote the general welfare" of the citizens. And it seems to me that too many people have forgotten that.

Mary :: 1:16 PM :: Comments (6) :: Digg It!