Keynesian Economics, and Why It Fails

Keynesian economics. You’ve probably heard the phrase before; it’s usually touted by liberals as the ultimate example of perfected economic policy. My college professor explained that Keynesian economics is the idea that the government should spend extra money when the economy is down in order to stimulate it, then cut back on spending when the economy is good. FDR used this model with his New Deal programs, as has the current president with his 2009 Stimulus Program (though both without ever cutting back on spending).

Well my 18-year-old brain was essentially mush at the time I entered college–not completely, but just about. I bought this ideology hook, line, and sinker…then. Now after 4 years of my own study in the school of common sense I’ve realized that my beloved college professor left half the story out of the lecture. The only way that government has any money is by taking it out of the private sector with the down economy, thereby making the problem worse. Certainly large government picks and chooses who gets the money as it sees fit, but it cannot produce more money–only a thriving private sector can do that.

With all this talk of governments spending money, Keynesian economics begins to sound very much like redistribution of wealth (see theft). Well here’s the bombshell:  it is. Keynesian economics follows the same idea that the government knows how best to spend money, and if it can only spend enough it will eventually stimulate a struggling economy. The big problem is that government spending has the exact opposite effect, dragging a slow economy into a worse and worse state. So it really doesn’t matter if you call it Keynesian, or redistribution, or Marxism–they all have the same economically destructive effect.


3 thoughts on “Keynesian Economics, and Why It Fails

  1. Good Article you have .. and yes we have all been fooled at one time or another . .
    First off .. I am a very strict conservative person but also analytic but still open minded ..let me take you back to a better time of economics the USA .. George H Bush had the economy growing at 3.8 % and we had a stable economy even after desert storm … the emergence of Ross Peroit helped defeat Bush for a second term .. but I did believe in his “great sucking sound from Wash DC .” as he proclaimed moving ahead to Clinton .. he cut military spending 10% thereby helping him to win people over and achieve his economics to a 9.6% growing rate ..yes that was the final number .. .If you do your homework you’ll see that our economy in the past was always better at 3-5% growth .. I worked in Construction during the era..yes there was a boom .. but it took place in the latter 80’s first ..the building block of Reagan & Bush .. and it worked until the internet scandals and financial blunders of the late 90’s ..which was readily relayed to George W Bush the continuance of war we have now is a major role in our deficit … I’m not going into specifics .. the only way we are to make the country strong again is to help small business is the fabric of each community, town and city of each state in this Republic .too many jobs have been taken and given away by big government .. Big isn’t better .. why ? because big also falls harder and causes more damage .. regardless of the situation … Everybody has to pull his own weight .. instead of take hard smart and . .persevere .. Small business is the heartbeat of America in economics … . there are so many things to consider you would have to write a book about it didn’t start over night … We had a deficit even though small for some 50+ years … Even though this isn’t a laughing matter … guess you could call this Key .Bob-anomics LOL !

  2. Keynes strikes me as a very brilliant and decent man who had no understanding of basic human nature. Henry Hazlitt’s Economics in One Lesson is the most simple antidote that I’ve read to Keynesian economics. Have you read it yet? It’s cheap on Amazon.

  3. Your analogy of taking water from one end of the swimming pool and adding it to the other end of the pool seems odd to me.

    If the water comes from the same pool, it’s impossible for the end losing the water to get shallower as the water redistributes through the entire pool. Therefore, the level of the pool returns to the state it was before you removed the water.

    That is Keynesian Economics.

    The only way the government can get more money is by shrinking the value of the currency through debt and increasing taxes. With increased taxes more spending can occur. With debt, spending can occur but the value of the currency decreases proportionately because the debt is paid off in the long term. When debt is paid in the long term that’s based upon inflation and the higher things cost in the future the lower the currency value.

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