Keynesian theory

Bread for today, and for tomorrow…never mind, we’re all dead. Perhaps a neat way to sum up the keynesian theory. In fact, Keynes, when asked about the long-run implications of his theories, would answer that in the long-run, we’re all dead.

And that is the big issue that is the paradox of the keynesian theory,that while the theory acknowledges to a certain extent the unsustainability of these practices, it dismisses them as irrelevant.

To be fair, it probably is irrelevant. Irrelevant to the politician who will only be in power for four years, or to the lobbyist defending his own interests, often alleging that his concern is for the people.

This is why Keynesianism and Politics today marry so well. Keynesianism offers quick-fix solutions for the economy, or at the very least, ensures that you can kick the can down the road for a few more years. This is done in the form of big expenditures by government, to try to cover-up economic downturns, or as you might hear “boost demand”. Demand is not the problem, its supply that is wrong. In fact, demand creates supply, therefore, creating unsustainable demand, will create unsustainable supply, the logic couldn’t be more clear.

In fact, it is evident  that we have been suffering from the long-term consequences of these policies and they are responsible in great part for the lack-luster growth of the last 40 years. Though much is done to hide it, a lot of the western economies have lost their production ability, the economy, having to carry the great burden of debt and inflation, is in shambles.

It’s going to have to get a little worst before we do anything about it, but we’re definitely getting there


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