There has been an unsettled debate among economists for a century now of whether government intervention is beneficial to an economy. The heart of this debate lies between Keynesian and Austrian economists (though there are other schools as well).
In order to get a full understanding of the two schools of economic thought, we offer the following via The Austrian Insider…
And some responses to popular criticisms:
– “Animal Spirits is misrepresented” – I just personally thought explaining that further would be too much text. If anyone would like to get a full explanation of what Keynes meant by this term, read this Wikipedia article on Animal Spirits. (I added the link)
– “This is biased towards the Austrian School” – Well I am obviously an Austrian economist, so there is only so much I can argue with that point. That said, I HONESTLY tried to represent Keynes properly and would love to hear from any Keynesians what can be changed to help represent them properly. (This is the proper representation of the Keynesian positions.)
– “Malthus was not an economist” – He may be more of a philosopher, but many consider him an influence of Keynes.
– “Ron Paul is not an economist” – Just because he is a doctor and politician by profession does not mean he is not a well known Austrian Economist. He has many books on the subject, is a senior fellow of the Mises Institute, and has personally got many individuals to research Austrianism further.
– “It should not be total utils, but marginal utility on that graph” – It is supposed to represent the marginal utility graph, I just didn’t label it. The graph should show total utility marginally decreases with each dollar increase. The printable version has the entire chart labeled.
– “Praxeology is not the right term to describe the whole organizational pattern of the social order. It refers only to the logical implications of human action that can be known through deduction.” – Well put. Just hard to figure out how to graphically represent that…
The Austrians are right. The Keynesians are
left wrong. The Austrians have no version of the Keynesian Paradox. The Keynesians don’t understand that government spending doesn’t help the economy, it hurts it.
Or maybe they do understand that. But that would mean that their actions are willful, and that they actually want to make more people worse off in order to make themselves better off. Hmm…