jbrace
11-12-2009, 04:01 PM
Here it is..
In a majority of universities and high school campus around the United States students are taught the Keynesian model of economics. In this article I want to explain another school of thought, known as the Austrian model. I will be contrasting the two together and showing why the Keynesian model is flawed and how we are on our way to a disastrous market failure in the near future. The concepts of the Keynesian model come from the ideas of John Maynard Keynes, a British economist in the 20th century. He argued that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates policy responses by the public sector (The part of the economy concerned with providing basic government services), including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1 On the other side of the coin, Austrians hold that the complexity of human behavior makes mathematical modeling of the evolving market extremely difficult to predict and advocate a laissez faire approach and to the economy. Austrian School economists advocate the strict enforcement of voluntary contractual agreements between economic agents, and hold that commercial transactions should be subject to the smallest possible imposition of forces they consider to be coercive (in particular the smallest possible amount of government intervention).The Austrian School derives its name from its predominantly Austrian founders and early supporters, including: Carl Menger, Ludwig von Mises and Eugen von Böhm-Bawerk.
These thinkers were advocates of property rights and the freedom to contract and trade. They celebrated the contribution private sector business accomplishments in society. They often pointed how that private sector was a lot more productive and efficient than the public sector intervening in market affairs. Generally, Austrians thinkers oppose taxes, price controls, and regulations that inhibited enterprise.
They also argue that less government intervention is needed for a market to operate properly. The believers in Keynesian would argue that government intervention, such as the 700billion in TARP funds for major corporations were needed, and that the Federal Reserve needs to take an active role in the markets by regulating the money supply, and artificially determining the market rate of interest for loans. This makes no sense to me, I mean, Is it the governments’ job to tell you how to run your life, or borrow money in your name, making your children and grandchildren reliable for their debts? Of course it's not; asking the government to fix the problems they caused is illogical and will lead to even bigger problems than we face today. So why do we allow this happen? We have been duped by Keynesians big words, and use of magical mathematical equations that promise everything will work out. One thing they cannot is replace is common sense; a majority of our problems are directly correlated to government intervention in the free market system. So, those those that condemn capitalism, do not do so for the right reasons. Special legislation to corporations, manipulation in financial sector and the socialization of private sector for the public good is far from capitalism. It's merely laying the foundation to socialism, which is all too evident today. So you cannot condemn capitalism, since we haven't truly had capitalism. Do I think government has a job to do in our lives? Of course it does, for instance, lowering taxes, getting rid of needless regulations, and devising sensible foreign/monetary policies which is what Austrian thinkers promote. Instead we are currently doing the exact opposite; we borrow money from countries, or ask the Federal Reserve to print money out of thin air. Then, we give them to big corporations, or government sponsored welfare/warfare programs and even to military dictators in the Middle-East. Dr. Paul said it best in the article I read,
"Let me see if I get this right: We need to borrow 10 billion dollars from China, and then we give it to Musharraf who's a military dictator, who overthrew an elected government, and then we go to war, we lose all these lives, promoting democracy in Iraq? I mean, what's going on here?"
Appropriating money leads us to bigger deficits and this has to stop, look at our dollar today, it’s crashing. The Federal Reserve coupled with socialist policies and the imperialistic notions of the U.S are driving force behind our problems. There has never been a war fought without destruction, inflation, and the devaluing of currency. Never. The U.S. spends trillions of dollars annually to maintain an empire we cannot afford, our country is broke! We are spending ourselves into oblivion and a majority of Keynesian economist don’t suggest cutting both warfare and welfare programs, but we have to. What do you do if you max out a credit card? Do you spend your way out of debt? Borrow more money to fund your expenditures? Of course not- it doesn’t make any sense to do this. Let’s say you choose to borrow more money… your only prolonging the problem and making it worse. One day the bills are going to be due. (Generally at a higher interest rate) Any rational person would save up and pay off his debts. This simple logic can also be applied to the global scale; no country can spend their way out of recession, or borrow their way out of debt. But for some reason we think we can borrow a billion here... spend a trillion there and somehow it’s all going to work out? In 2009 alone our national debt toppled 11.9 trillion, with 383 billion paid in interest alone! This equates to everyone in the U.S. owing around $3,300 to pay off our debt! It's like our economy is on Red Bull, we keep artificially stimulating different markets and propping them up of for a brief time. At some point the real crash is going to come and the more we artificially stimulate the economy, the likelier chances of a complete market failure. It's time we let the market's naturally correct itself and move away from having a mixed economy with government intervention and have a true free market system regulated by the Constitution of the United States; the way our Founding Fathers intended it to be. The sooner we start listening to the Austrian message when it comes to Economics, the better off we will all be. And A good lesson can be learned from all this, we have an obligation as a country and as individuals to live within our means. History shows us time and time again that countries who fail to live within their means will meet same disastrous fate as the ones before them. And the last time I checked the U.S. isn't immune to economic laws.
I'm not a big fan of standing in front of a group, but I'm gonna suck it up in the name of liberty! :)
In a majority of universities and high school campus around the United States students are taught the Keynesian model of economics. In this article I want to explain another school of thought, known as the Austrian model. I will be contrasting the two together and showing why the Keynesian model is flawed and how we are on our way to a disastrous market failure in the near future. The concepts of the Keynesian model come from the ideas of John Maynard Keynes, a British economist in the 20th century. He argued that private sector decisions sometimes lead to inefficient macroeconomic outcomes and therefore advocates policy responses by the public sector (The part of the economy concerned with providing basic government services), including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1 On the other side of the coin, Austrians hold that the complexity of human behavior makes mathematical modeling of the evolving market extremely difficult to predict and advocate a laissez faire approach and to the economy. Austrian School economists advocate the strict enforcement of voluntary contractual agreements between economic agents, and hold that commercial transactions should be subject to the smallest possible imposition of forces they consider to be coercive (in particular the smallest possible amount of government intervention).The Austrian School derives its name from its predominantly Austrian founders and early supporters, including: Carl Menger, Ludwig von Mises and Eugen von Böhm-Bawerk.
These thinkers were advocates of property rights and the freedom to contract and trade. They celebrated the contribution private sector business accomplishments in society. They often pointed how that private sector was a lot more productive and efficient than the public sector intervening in market affairs. Generally, Austrians thinkers oppose taxes, price controls, and regulations that inhibited enterprise.
They also argue that less government intervention is needed for a market to operate properly. The believers in Keynesian would argue that government intervention, such as the 700billion in TARP funds for major corporations were needed, and that the Federal Reserve needs to take an active role in the markets by regulating the money supply, and artificially determining the market rate of interest for loans. This makes no sense to me, I mean, Is it the governments’ job to tell you how to run your life, or borrow money in your name, making your children and grandchildren reliable for their debts? Of course it's not; asking the government to fix the problems they caused is illogical and will lead to even bigger problems than we face today. So why do we allow this happen? We have been duped by Keynesians big words, and use of magical mathematical equations that promise everything will work out. One thing they cannot is replace is common sense; a majority of our problems are directly correlated to government intervention in the free market system. So, those those that condemn capitalism, do not do so for the right reasons. Special legislation to corporations, manipulation in financial sector and the socialization of private sector for the public good is far from capitalism. It's merely laying the foundation to socialism, which is all too evident today. So you cannot condemn capitalism, since we haven't truly had capitalism. Do I think government has a job to do in our lives? Of course it does, for instance, lowering taxes, getting rid of needless regulations, and devising sensible foreign/monetary policies which is what Austrian thinkers promote. Instead we are currently doing the exact opposite; we borrow money from countries, or ask the Federal Reserve to print money out of thin air. Then, we give them to big corporations, or government sponsored welfare/warfare programs and even to military dictators in the Middle-East. Dr. Paul said it best in the article I read,
"Let me see if I get this right: We need to borrow 10 billion dollars from China, and then we give it to Musharraf who's a military dictator, who overthrew an elected government, and then we go to war, we lose all these lives, promoting democracy in Iraq? I mean, what's going on here?"
Appropriating money leads us to bigger deficits and this has to stop, look at our dollar today, it’s crashing. The Federal Reserve coupled with socialist policies and the imperialistic notions of the U.S are driving force behind our problems. There has never been a war fought without destruction, inflation, and the devaluing of currency. Never. The U.S. spends trillions of dollars annually to maintain an empire we cannot afford, our country is broke! We are spending ourselves into oblivion and a majority of Keynesian economist don’t suggest cutting both warfare and welfare programs, but we have to. What do you do if you max out a credit card? Do you spend your way out of debt? Borrow more money to fund your expenditures? Of course not- it doesn’t make any sense to do this. Let’s say you choose to borrow more money… your only prolonging the problem and making it worse. One day the bills are going to be due. (Generally at a higher interest rate) Any rational person would save up and pay off his debts. This simple logic can also be applied to the global scale; no country can spend their way out of recession, or borrow their way out of debt. But for some reason we think we can borrow a billion here... spend a trillion there and somehow it’s all going to work out? In 2009 alone our national debt toppled 11.9 trillion, with 383 billion paid in interest alone! This equates to everyone in the U.S. owing around $3,300 to pay off our debt! It's like our economy is on Red Bull, we keep artificially stimulating different markets and propping them up of for a brief time. At some point the real crash is going to come and the more we artificially stimulate the economy, the likelier chances of a complete market failure. It's time we let the market's naturally correct itself and move away from having a mixed economy with government intervention and have a true free market system regulated by the Constitution of the United States; the way our Founding Fathers intended it to be. The sooner we start listening to the Austrian message when it comes to Economics, the better off we will all be. And A good lesson can be learned from all this, we have an obligation as a country and as individuals to live within our means. History shows us time and time again that countries who fail to live within their means will meet same disastrous fate as the ones before them. And the last time I checked the U.S. isn't immune to economic laws.
I'm not a big fan of standing in front of a group, but I'm gonna suck it up in the name of liberty! :)