Wednesday, May 11, 2011

Politicians and Economics

Remind me again why everyone keeps telling me that Keynesianism is politically advantageous.


- Rep. Boehner would beg to differ - he oversaw a major Republican victory, taking the House of Representatives last fall spouting distinctly anti-Keynesian economics which Bloomberg News recently called him out on.

- This afternoon Robert Murphy has a facebook status sharing that he "has noticed that a surprisingly large fraction of my Facebook friends bear an uncanny resemblance to Texas Congressman Ron Paul", refering to the fact that Ron Paul's visage gets featured in so many facebook profile pictures. Funny observation? Sure. But name one politician (much less presidential candidate!) you know that regularly mentions Keynesianism in his speeches the way Austrian economics gets mentioned in Paul's or who is regularly fawned over in facebook profile pictures!!!

- And while I'm quizzing you and asking you to name politicians, can anyone name a single politician that has come out through all these deficit talks and simply said "I think we should increase or at the very least maintain the deficit and then in a year or two at the earliest talk about major deficit reduction".


They may not all suit your fancy on Capitol Hill - but how in God's green Earth did this idea that Keynesianism is politically attractive catch on???

23 comments:

  1. Because it is politically attractive to in groups who have the ear of government.

    Has Boehner actually done anything that is anti-Keynesian, or did he just make a bunch of noise in that direction? Seems like the latter to me (which is why you can't actually pin down nearly any Republican on what they would actually cut from the federal budget - their replies are always amorphous and rather gaseous on that matter).

    To the political class Keynesianism makes sense - to the population at large (the voters - the other political class as it were) there is a deep suspicion of the Keynes' notion of the multiplier, etc. Politics happens on various levels in other words, and there is a lot of institutional, etc. prejudice in favor of Keynesianism, but that is not reflected in a lot of the general population.

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  2. To be fair, you have Republicans like Karl Rove recounting their love affair with Adam Smith and venerating the free market. Then, all in the same breath, they claim that government intervention in the form of expanding medicare is a way of helping the free market. I don't how Smithian one could consider distorting the profit motive and breaking the pricing mechanism, but I do suggest treating Republicans as if they suffer from dementia.

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  3. One highly arguable data point, and you are jumping for joy?

    Evidence is in the Democratic domination of both houses from 1930s all the way into 1990s. Even republicans like Nixon and Rockefeller were conventional progressives. But for Roe vs Wade, there wouldn't be political alliance/combination that is nominally for "free market" that could win any serious number of seats in the elections. Even Reagan was a neocon military Keynesian. What about "intellectual" Newt? How representatives did tea party send to congress in the last election?

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  4. sandre,

    +1

    Interesting way of putting it; hadn't thought of that way. :)

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  5. Anonymous -
    Definitely - they're no more Smithian than they are Keynesian. This is largely my point - there's no viable economic perspective that justifies most of what politicians say and do.

    sandre -
    I think you're confused. I agree that politicians aren't pro-market. When did I say otherwise?

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  6. Politicians like to spend without taxing, because they can buy votes now and let someone else pay the bill down the line. A small part of Keynesian economics provides an excellent rationalisation for this behaviour. In consequence, politicians are very quick to claim that we're in some kind of recession so they can spend more money. But all this "Keynesianism" is forgotten during times of plenty, because politicians don't like to tax without spending, i.e. run a surplus during good times.

    Sometimes the shit hits the fan. Eventually the unsustainable financial trajectory must be confronted and all the ordinary rules are turned upside down; the recession has quickened this process up a little.

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  7. Because it gives intellectual covering fire to those who want to claim they can safely dig their children deeper in debt to buy votes now, maybe? Because it panders to the "I want it now, for free" crowd?

    Yes, voters often see through the charade and identify the politicians making these promises for the frauds they are. Doesn't mean Keynesianism isn't a heckuva tool for the parasite class.

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  8. Silas -
    Wouldn't you expect more politicians to talk and act like Keynesians if that were the case?

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  9. Just to clarify: the appropriate comparison is not "pro-debt (Keynesian) politician vs. pro-responsibility politician", in which case sometimes the latter do get popular support. Rather, the appropriate comparison, which people are making when they claim Keynesianism is politically advantageous, is "pro-debt politician _without_ respectable doctrine backing him up vs. pro-debt politician _with_ Keynesianism to cite for support". Do you deny that the latter do better than the former against pro-austerity politicians?

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  10. @Daniel: Wouldn't you expect more politicians to talk and act like Keynesians if that were the case?

    More relative to what? As I see it, almost all politicians *do* talk and act like Keynesians -- it's just that maybe they might not utter the right magic words like "liquidity preference". But they sure as heck act like deficits are always helpful to "the economy", that the government should "get people spending" when times are tough, that government spending is as good as or better than private spending, etc. etc.

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  11. The idea of "hard Keynesianism" is certainly not politically attractive.

    It would suggest not taking debt just when the capital market is offering the most affordable surplus funds and not spending more when times are good. It would involve building up a surplus just to meet possible future expenses for shortfall in revenues during a possible future recession.

    That kind of caution and restraint would never be politically attractive.

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  12. Keynesianism and politics in action: http://reason.com/blog/2011/05/11/redevelopment-agency-gives-bil

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  13. I suppose it has to do with how one identifies Keynesianism. To grossly oversimplify, Keynesian economics endorses counter cyclical spending. I doubt there are many politicians who are motivated based on a stong understanding of Keyensian (or Austrian) economic theory. A more likely explanation is a Public Choice one - politicians will justify any given policy based upon whatever economic theory would seem to confirm it. Ergo, they might endorse pet projects with a Keyensian rationalization of spending stimulus. But when spending becomes politically unpalatable, they don't lose their Keynesian convictions - because they never really had any to start with. Keynesian economics can thus be a convenient and politically popular rationalizaton. And like all rationalizations, it can be easily discarded.

    Whether Keyensianism is particularly convenient would depend on what politicians try to rationalize more - spending increases or spending cuts. I don't have any data on that, but it would be interesting to look into.

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  14. Daniel says..."But name one politician (much less presidential candidate!) you know that regularly mentions Keynesianism in his speeches the way Austrian economics gets mentioned in Paul's or who is regularly fawned over in facebook profile pictures!!!"

    Politicians don't have to point Keynes out. We are all Keynesians now. Besides, neither are progressives married to Keynes nor is keynesianism a set of principles cast in concrete. It is just a crutch for the politicians. If some other theory comes along that will better justify interventionism of self-important political parasites, pols will divorce keynes faster thann you could say "boo".

    It's not the name Keynes that wins them at polls, instead, It is the current crop of keynesian literatti pontificating from their ivory towers at Princeton, NYU, Harvard, Chicago etc or through popular media that does. It is that empty promise of "solutions" to problems ( using these ivory tower keynesians as a crutch) that wins elections.

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  15. Daniel asks us to point out a politician that said this "I think we should increase or at the very least maintain the deficit and then in a year or two at the earliest talk about major deficit reduction".

    Why would any politician say those words, or a paraphrase that means the same thing. That's a false test. Politicians are politicians after all.

    I can point out plenty of politicians and bureaucrats starting with George Bush who talked about the importance of "stimulus"...

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  16. Kevin is right on the money with the public choice point. Politicians will do what will get politicians elected.

    - Will Keynesianism get politicians elected? No way. That's why politicians for the most part don't talk or act like Keynesians (they managed to in early 2009 when they actually started looking out for the public good as everything was collapsing around us, and then swiftly put that behind them once the deficit numbers started moving up).

    - Will Austrian economics get politicians elected? To a certain extent the rhetoric will, yes. People like to hear calls to slash spending and cut the deficit. The Fed has also been a useful target to get public attention. You can succeed as a politician by talking the Austrian talk in a way that you can't by talking the Keynesian talk. Can Austrian policy keep a politician in office??? Probably not, because it's pretty bad policy and people aren't going to like it when they see it put into action. But regardless of any differences of opinion you may have with me on my economics - the point remains that talking like an Austrian is great for politicians while talking like a Keynesian is terrible for politicians.

    Now, I only agree with Kevin so far. I agree that public choice theory goes a long way towards explaining political behavior.

    I disagree on Kevin's point about Keynesianism. Look, I don't expect politicians to produce economic treatises or mention the technical terminology. But I do expect this much: if we refer to politicians doing Keynesianism, it ought to at least involve them saying "running deficits is a good thing and I don't want to reduce the deficit in a downturn - I want to increase it from it's normal debt-stabilizing level". That statement is not beyond the capacity of politicians. Now what politician says that? None of them. Kevin talks about specific spending projects. Sure politicians justify specific spending projects. I think that doesn't cut it. If "Keynesianism" simply means "governments spending money" the term becomes meaningless. It has to at least mean "counter-cyclical deficit spending" (ie - embracing spending increases and/or tax cuts on the WHOLE budget not pet projects). Otherwise it's just plain old spending that anyone might or might not embrace.

    So I reiterate - neither talking nor acting like a Keynesian is politically beneficial. Politicians are alergic to Keynesianism. It doesn't help them justify special spending projects (after all - special interests are already convinced!), and they've certainly shown no enthusiasm for deficits.

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  17. And... the central point of why this bothers me of course: if Keynesianism is not good for politicians, you shouldn't cite the political attractiveness of Keynesianism as a major reason for its rise in the 40s and 50s.

    Keynesianism back then was rough, and of course it has gone through revisions as any new theory will. But it succeeded because it's good economics. Anyone trying to pass the buck onto politicians is just obfuscating because they don't want to admit that.

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  18. Daniel...

    " Will Keynesianism get politicians elected? No way. That's why politicians for the most part don't talk or act like Keynesians (they managed to in early 2009 when they actually started looking out for the public good as everything was collapsing around us, and then swiftly put that behind them once the deficit numbers started moving up).

    - Will Austrian economics get politicians elected? To a certain extent the rhetoric will, yes. People like to hear calls to slash spending and cut the deficit. The Fed has also been a useful target to get public attention. You can succeed as a politician by talking the Austrian talk in a way that you can't by talking the Keynesian talk. Can Austrian policy keep a politician in office??? Probably not, because it's pretty bad policy and people aren't going to like it when they see it put into action. But regardless of any differences of opinion you may have with me on my economics - the point remains that talking like an Austrian is great for politicians while talking like a Keynesian is terrible for politicians."


    You think those remarks are self-evident, but they are not. In fact, the opposite is self evident. Yes, the rhetoric that libertarians don't care, that they pander to the rich, or saving union jobs, is a better selling argument in a world were most of us are middle class.

    You may not think that this comment contradicts this "I agree that politicians aren't pro-market. When did I say otherwise?". It actually does.

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  19. Sandre, I'm sorry - that point was unclear.

    I'm not saying there's a single successful political strategy of course. Railing against the rich and talking up an institution like trade unions which very few Americans are apart of these days can pay dividends too, of course.

    Lot's of approaches work.

    Does Keynesianism work? No, not at all. Which is precisely why not many politicians talk or act like Keynesians.

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  20. "Austrian policy"

    Ugh, two words that should never go together.

    http://www.coordinationproblem.org/2010/11/what-austrian-economics-is-and-what-austrian-economics-is-not.html

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  21. Anonymous -
    Well OK - people can take a scientific conclusion and use it to pursue whatever normative values they want with it. Also, people can temper the application of a scientific conclusion with practical and strategic concerns as well.

    How about this: "the policies that a reasonable person, dedicated to a stable and prosperous economy, is likely to adopt if he were to accept the principles of Austrian economics".

    Keynesianism isn't a set of policies either. This can be said for virtually any body of economic theories. I should hope what I mean is clear.

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  22. Having some problems with blogger?

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  23. Blogger's been having some issues the past day or two. I'm not sure anyone with a blogspot.com address has been able to do anything, and a lot of posts have gotten eaten up... some (like this one) are getting re-posted randomly.

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