|Peter Boettke|
OECD released its latest report on the global economic slowdown. As reported on NPR's Marketplace by Tracey Samuelson, the argument is that the world's economies are caught in a low-growth trap characterized by "negative feedback loops" and that the only way to break out of the trap is to forget the nonsense about "austerity" and to boast government spending. They even use the term "Priming the Pump" -- which hadn't been in common use for awhile.
To counter, I suggest first reading Ludwig von Mises 1948 classic essay "Stones into Bread: The Keynesian Miracle" and then for a rather interesting immanent critique of the basic, perhaps one might say crude, Keynesian model its real relationship to pump priming, Bryan Caplan's 2011 post about this. With Keynesianism government spending becomes an end itself, and the only way to get the result desired within the model is to have a permanent increase in G. As Caplan puts it: "Keynesians can't honestly say that a temporary relaxation of free-market principles will get the economy firmly back on its feet. Their solution for a sour economy is the permanent expansion of the state - nothing less."
Nevertheless, the debate continues among economists about why the sluggish performance post 2008 and what to do about it.
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