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How Long Will We Do the Same Thing Over and Over and Expect Improvement? July 7, 2014 8:01 AM | Tagged as Growth, Keynesian
WSJ July 3, 2014 Page A13: “The Failure of Macroeconomics” by John Cochrane.
Cochrane begins by noting the terrible truth about the economy since the 2008 recession. Our growth is abysmal. Quoting Stanford’s Robert Hall, the years since 2007 [is] "a macroeconomic disaster for the United States of a magnitude unprecedented since the Great Depression.” Cochrane also notes that both major camps of macroeconomists agree that the lack of growth is our most pressing economic problem. Not employment. Not inflation.
This isn’t funny. The reduced well-being of ourselves, our children, and grandchildren will be painful. Fewer improvements in medicine and healthcare, science and engineering, IT and so forth will result as fewer dollars are available for investment. We will also have diminished military capability as we attempt to deal with terrorism and malevolent dictators.
This “macro stuff” really matters. The question begs: How do we get the economy to grow?
Per Cochrane, the Neo-Keynesians have stumbled with their vast econometric models and equations that always seem to support federal intervention -- like stimulus spending by government and lowering interest rates at the Fed – as the way to kick start growth. It hasn’t worked. They are the architects of our slow growth. They think if government could just spend more and more, it would finally work. Keynesians have become a real life example of the old axiom: Doing the same thing over and over and expecting different results is insanity.
We have become Japan who has been Keynesian-ized for two decades...with no results.
Other, more traditional, macro-economists have a better solution to restore growth: Fix the structural problems in our society. These include reforming our tax code, eliminating over-burdensome regulations, restoring a high regard for the legislative branch, and ending lucrative social programs that dis-incentivize people from working. That is the job of Washington.
It is time to get moving. It all depends on the Keynesians being removed from office in November and being replaced with people with traditional economic principles.
[Although opinion is included, The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]
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