Donald Boudreaux: “Until the 1930s, the classical economic understanding was that the burden of government debt is passed on to future generations and that the need to pay off this debt was a genuine burden to the economy as a whole. But in the 1930s, along came John Maynard Keynes’ “revolution” in economic thought. And Keynesians’ “revolutionary” mode of economic thinking (which is largely a gussied-up rehash of economic fallacies that were popular prior to the writings of Adam Smith) led economists, step by unsuspecting step, to reach mistaken conclusions. Keynesian economics’ single biggest flaw on this front is its practice of lumping all people in a country into a single category and focusing exclusively on how much “it” — this collective — spends in the aggregate. If Jones’ taxes rise by $100 and if Smith receives this $100, then as long as we can assume that Smith’s “propensity” to spend is the same as that of Jones, any such tax-and-transfer scheme presents no problem to the economy. Such a conclusion is silly.”
Mises: “An entrepreneur earns profit by serving the consumers, the people, as they are and not as they should be according to the fancies of some grumbler or potential dictator.” [via CafeHayek]
Alex Tabarrok: “Public choice theory is economists doing political science. And it basically says, what if we think about politics the same way we think about markets, which is that people are generally self-interested. When people move from the marketplace to work in government, they don’t suddenly become angels. Like Madison said, we wouldn’t need a government if everyone were angels. Instead, they come with all of the same types of self-interested motivations. Some of them want power. Some of them want to do good. Some of them just want wealth perhaps, all kinds of things. So we ask, well, what if people in government are self-interested? And what Buchanan called politics without romance, that’s not a big leap, but when you think about politics without romance, I think you do become less enamored with what is possible because you begin to see that it’s not good enough to say, here’s something good that we want. Let’s just pass a law. You actually have to say, will the people who are responsible for not just passing the law, but implementing the law, will they have the incentives which are necessary to actually make the law effective? And quite often, the answer to that is no.”
