Comments on: Keynesian vs. Austrian Debate on Deficits http://blogmybrain.com/2009/08/20/keynesian-vs-austrian-debate-on-deficits/ This blog is the blueprint of the intellectual development of my brain Sat, 04 Sep 2010 13:06:52 +0000 http://wordpress.org/?v=2.2.2 By: admin http://blogmybrain.com/2009/08/20/keynesian-vs-austrian-debate-on-deficits/#comment-230 admin Thu, 24 Sep 2009 21:29:41 +0000 http://blogmybrain.com/2009/08/20/keynesian-vs-austrian-debate-on-deficits/#comment-230 I think in Austrian economics, booms and busts are inevitable. For the lack of perfect information or accurate fortune telling, there will be a natural over-investment during the booms and liquidation during the busts. Keynesian economics wants to smooth out the booms and busts by expanding the role of governments. More specifically: Save during the boom and Spend during the bust. And therefore, ideally, a government should run a budget surplus during a boom and a deficit during a bust. In this scheme, the size of the government should shrink during booms and expand during busts. Unfortunately, Keynesian economics fails to discount the tendency of governments to always expand. Once a government starts a new social program, it is very hard to abolish it. Once government gets its feet into a private industry, it tend to keep it there for as long as it can. And here is where Keynesian economics fail. I think in Austrian economics, booms and busts are inevitable. For the lack of perfect information or accurate fortune telling, there will be a natural over-investment during the booms and liquidation during the busts.

Keynesian economics wants to smooth out the booms and busts by expanding the role of governments. More specifically: Save during the boom and Spend during the bust. And therefore, ideally, a government should run a budget surplus during a boom and a deficit during a bust. In this scheme, the size of the government should shrink during booms and expand during busts.

Unfortunately, Keynesian economics fails to discount the tendency of governments to always expand. Once a government starts a new social program, it is very hard to abolish it. Once government gets its feet into a private industry, it tend to keep it there for as long as it can. And here is where Keynesian economics fail.

]]> By: doug http://blogmybrain.com/2009/08/20/keynesian-vs-austrian-debate-on-deficits/#comment-229 doug Wed, 23 Sep 2009 15:16:39 +0000 http://blogmybrain.com/2009/08/20/keynesian-vs-austrian-debate-on-deficits/#comment-229 The way I understand it, Austrian economics trumps Keynesian by not providing the fuel for the boom and bust business cycle. So if the Austrian method were followed, there would be no need for Keynesian policies. The way I understand it, Austrian economics trumps Keynesian by not providing the fuel for the boom and bust business cycle. So if the Austrian method were followed, there would be no need for Keynesian policies.

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