Friday, May 1, 2009

Keynesian Theology

I'm no economist but I am familiar enough with the basics of economic theory to recognize when I'm being sold a bill of goods. My aim here is to point out that the economic solutions that have been rammed down our collective (pun intended) throats over the last few months with the promise of "keeping a financial crisis from becoming a catastrophe" (in the words of a famous politician) are rooted in an outlook that sounds awfully familiar to me. See if it all sounds familiar to you too ...

Let me begin by offering a quote from a real economist and senior fellow at the Cato Institute, Mr. Alan Reynolds, whose article on the financial stimuli and bailout programs, "Faith-Based Economics," appeared in National Review's February 9, 2009 issue. This is the pull quote from the piece that jumped off the page at me:
A theory that can explain everything explains nothing. If Keynesian theorists refuse to accept any evidence as contradicting their theory, they are practicing secular theology, not science

Mr. Reynolds' analysis of the economics behind the recent government spending extravaganza centers on the fact that the policies that have been implemented are based on the theorizing of John Maynard Keynes, an interventionist economist who was all the rage in the aftermath of the Great Depression. In the latter half of the 20th century however, when economists began to develop computer modeling and statistical analysis that allowed them to dig deep into the historical actions that were taken and determine the effects of those actions, Keynes' theory -- that governments should fight economic downturns with heavy spending -- were found to be detrimental to recovery and the general economic health of a nation. Keynesian economics it turns out, didn't work the way the experts claimed it did. It was Keynesian economics that led us into the stagflation of the 1970s.

By the 1990s, when our economy was booming, the claim by those who praised our success was that Keynesian "fiscal stimulus" and heavy spending of did not work and should be avoided. Interestingly, some who defended that view (Robert Rubin, Peter Orzag, and Douglas Elmendorf for example) in writing at the time, have since been tapped to be economic advisers, directors and managers in the Obama administration, and are leading the charge to implement Keynesian solutions -- the exact opposite strategy they previously denounced. Some of these individuals, who warned that the sky would fall with deficit spending of well below 5% of GDP under Reagan and Bush, have become cheerleaders for Obama's deficits that will grow to, and rapidly exceed, 10% of GDP!

So if Keynes' ideas have been proven not to work, why have those who had previously rejected them (when it was politically convenient to do so) suddenly seem to have not only reconsidered, but to have begun actively pushing policies that are derived from them? Why have Keynes' ideas found a sudden resurgence in recent months?

Even though economic circumstances have changed, those who desire centralized control of the world ignore or manipulate the story for their own purposes. Historical data becomes irrelevant because their ideology overrides all else. They already know what they want to do and believe -- who are we to confuse them with the facts? The perpetuation of their own power and control is the trump card that anchors their view of the world and the means they use to uphold it. Those who operate this way have elevated the primacy of power and influence into the religious affirmation of their own god-like status. They are the idol they believe in.

In other words, they are practicing theology, not science ... just like the Darwinists.

Darwinism is also a theory that can explain everything and therefore nothing. If gradualism doesn't work, insert punctuated equilibrium. If homology turns out not to explain common ancestry, assume genetics does the job -- even if you have to assume the common descent in order to prove it. If intricately interwoven systems appear in completely unrelated species, call it convergence. If complex biological systems appear to have been designed, attribute the ability to do so to a blind, purposeless process (natural selection) and never miss a beat. After all, everybody knows that Darwinism has to be true.

When human autonomy is your god and the answer to every question, evidence that your worldview defies actual reality becomes an inconvenient truth that is easy to ignore.

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