Boxing is the sweet science, medicine is the artful science, and economics is surely the dismal science (link). Economists, whether one-armed or two, are always disagreeing about everything from soup to nuts. To be sure, their books are filled with fancy graphs and complex formulas (after all, calculus is a pre-requisite), but if it was all so scientifically clear why are there so many arguments about the most fundamental things? We no longer debate the germ theory of disease or whether a walk is as good as a hit, but economists cannot agree on whether it makes sense at all for us, through our central government, to borrow from foreigners an unimaginable sum of money to spend on ourselves, money we would not otherwise spend but for fear about our current recession.So to know what to believe I fall back on well-tested, old-fashioned principles -- living within one's means, borrowing money only when absolutely necessary, and balancing budgets. I also believe that when something seems too good to be true, especially when it violates common sense, it almost certainly isn't true. So Keynesians with their multiplier theory can try all they want to convince me that 1+1 = 3 (talk about real Voodoo Economics), but I'm not buying it. To me, it's part of a tactic to "not let a crisis go to waste" that can be used to scare us into accepting huge new spending programs that will permanently enlarge the size of the federal government and its role in our lives, foisted by those who value statism over individual liberty, which requires limited and divided government to long survive.
Here’s a relevant excerpt (Chapter 5) from my yellowing copy of Milton Friedman’s Capitalism & Freedom (link), which was required reading for me years ago as an undergraduate in a “Common Core” social science course at the University of Chicago:
When private expenditures decline for any reason, it is said, governmental expenditures should rise to keep total expenditures stable…. Each recession, however minor, sends a shudder through politically sensitive legislators and administrators with their ever present fear that perhaps it is the harbinger of another 1929-33. They hasten to enact federal spending programs of one kind or another. Many of the programs do not in fact come into effect until after the recession has passed. Hence, insofar as they do affect total expenditures… they tend to exacerbate the succeeding expansion rather than to mitigate the recession…. The chief harm done by this [spending] theory is therefore not that it has failed to offset recessions, which it has, and not that it has introduced an inflationary bias into governmental policy, which it has done too, but that it has continuously fostered an expansion in the range of governmental activities at the federal level….Richard R Balsamo
One thing is however clear. Whether the [Keynesian government deficit spending] views so widely accepted about the effects of fiscal policy be right or wrong, they are contradicted by at least one extensive body of evidence. I know of no other coherent or organized body of evidence justifying them. They are part of economic mythology, not the demonstrated conclusions of economic analysis or quantitative studies. Yet they have wielded immense influence in securing widespread public backing for far-reaching governmental interference in economic life.
