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| [Friend], These are good notes that you have, pitting Karl Menger (the GodFather of Austrian Economics) against John Maynard Keynes. Menger says that folks value something, and then go after it -- or spend money on it. He said that they'll keep buying more and more of something until adding more of it is less valuable to them then keeping a dollar in their pocket. Karl Menger's theory For instance, Jay Leno has a hundred or 2 hundred cars. The reason that Jay Leno doesn't have more cars than that is because Jay values $100,000 in his pocket more than he values yet another car for his garage. This explains the market. Folks will buy and buy and buy. They will stop buying when they value the money they have more than the products that are out there. The entrepreneurs will keep coming up with bigger and better things (e.g. Steve Jobs' new I-pad with a million functions). To grow a market, you need ideas. Ideas of how to do something better or cheaper. Think of an I-Phone that has GPS so that you don't have to carry a map with you anymore. That's progress. People will pay for "progress." If people do not have the money to pay for "progress", then they will work for the money. Anything to make their life better. The entrepreneurs -- as long as they're allowed to keep profits -- will keep coming up with things that make our lives better (e.g. cars with air-conditioning, drugs that cure diseases, toilet paper, etc). What's wrong with the Keynesian argument is that it purports to spend the same money twice. It's called the Keynesian multiplier effect or something. But wealth -- true wealth, like having air-conditioning or toilet paper -- is never created that way. Wealth is created by entrepreneurs who are left free to profit. But what does Keynesian economics do with profits? It takes it out of the hands of the most productive people -- the entrepreneurs who can make our lives better -- and it puts the money in the hands of some half-wit government bureaucrats who look at some kind of a chart and then scream and holler that they need a Government Stimulus Plan, because they think that they know how to spend other people's money in order to stimulate market growth. So Keynesians take the profit out of entrepreneurial activity (with taxes, borrowing, or inflation) in order to "spend" money and temporarily stimulate some secluded sector of the economy. For every job that they create (with a stimulus program), they destroy about 2 jobs in the free market. Every dollar they spend came from somewhere where it could have been used by more intelligent people looking after their own self interests (by creating products that make our lives better). The really, really selfish and greedy businessmen end up employing many people by these ways: 1) re-investing profits in their own companies (which increases employment) 2) investing in other companies by buying stock (which increases employment) 3) living a lavish lifestyle with various yachts and limousines and whatnot (which increases employment for limo drivers, etc) But Keynesian economics -- by taking potential profits out of the hands of entrepreneurs -- destroys all that job growth. Tell me what you think of that. Ed **************** p.s. [to RoR-ers] Are there any gross deficiencies in this thing (or did I hit all majhor points -- and hit on them well?]? | ||||
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