This new article by Don Boudreaux is a big improvement. He reads and often responds to my criticism of his consumptionist accusations, so I'd like to think I'm making a dent.
I have a few differences of opinion on the way Don talks here about the ideas that Keynes talked about in Economic Possibilities for Our Grandchildren (he doesn't cite the essay, but that seems to be what he's referencing. He spins it as innovation running out of steam - I think Keynes was more saying that consumption would be satiated. Keynes was wrong on that point, I think. In our consumption/leisure tradeoff we are less likely to rest on our laurels than Keynes imagined (although clearly this varies by culture - Europe matches Keynes's guess better than the United States). So it seems to me Don has this point backwards: "Keynes didn't doubt that consumers would buy new products if such products were offered. But Keynes believed that innovation had all but run its course." Anyway - however you read Keynes on that, that element of Economic Possibilities for Our Grandchildren was wrong (other insights in the essay are far more valuable).
Since I don't have to complain about consumptionism accusations here, it's also worth reminding everyone that I think and have always thought "regime uncertainty" is a good explanation of a weak economy. That seems obvious to me. Anti-investment policies are going to discourage investment. I have two disagreements with Don on this though:
1. He identifies certain policies as being detrimental that I wouldn't always agree with him about. Health reform, for example: is it a massive tax and burden on business, or method of controlling an exploding labor cost? Is the uncertainty about the policy high because the regs have yet to be written or because of the pending court challenges (or both?). We can both agree on regime uncertainty as a problem without agreeing on whether a particular policy causes the uncertainty and concerns.
2. Even if I think that regime uncertainty is reasonable as a process impacting investment spending, I don't have to think it's a primary cause. Keynesian economics does a much better job explaining the relationship between interest rates, inflation, unemployment, and the financial sector. Regime uncertainty - it seems to me - is less good at explaining that big picture. So it seems to me Keynesianism or something like it provides the best explanation for the crisis, and then I'm more than happy to stipulate that regime uncertainty makes us worse off on the margins.
Nobody Said That - NYTimes.com
2 hours ago