Kling on Krugman on Debt

Without mentioning Jim Buchanan, Arnold Kling succinctly captures and reveals the essence of Jim’s powerful case against the Keynesian/Krugmanian assertion that internally held government debt is no real burden on citizens.  (HT James Pethokoukis)

Unwise aggregation is always blinding, and never more so than on the question of the burden of government debt.

Quotation of the Day…

… is from pages 101-102 of Robert Higgs’s indispensable 2004 collection, Against Leviathan; specifically, it’s from Bob’s 2002 Independent Review essay “Governments Protect Us?” (original emphasis; footnotes excluded).

My skepticism springs in part from my improved understanding of just how horrendously destructive and murderous governments have been, not only by their involvement in wars with other governments, but more tellingly in their assaults on their own citizens.  According to the statistics compiled by R. J. Rummel, governments probably caused the deaths of some 170 million of their own citizens between 1900 and 1987, and the death toll has continued to rise during the past fifteen years. To this gruesome total must be added some 40 million others who perished in battle in the wars that the world’s governments plunged their populations into during the twentieth century.

Yes, yes, you may be saying, certain governments surely have acted murderously, but that bad behavior reflects not on government as such, but rather on the bad manners of the Chinese, the Russians, the Germans, and so forth.  Or perhaps you are objecting that the fault lies not in government as such but rather in communism, fascism, or some other ugly ideology that prompted the leaders of certain governments to misbehave outrageously.  These objections, however, cannot bear much weight, because the destructiveness of governments has spanned huge ranges of ethnicity and ideology.  In control of egregious governments have been Chinese, Russians, Germans, Japanese, Cambodians, Turks, Spaniards, Vietnamese, Poles, Pakistanis, Yugoslavs, British, Koreans, Croatians, Mexicans, Indonesians, Ugandans, Rwandans, Hutus, Nigerians, and a variety of other ethnic or national types.  The common denominator would seem to be not ethnicity or nationality, but government itself.  In control of appalling governments have been nationalists, tribalists, fascists, communists, socialists, and adherents of various other ideologies or of none at all.  Again, the common denominator would seem to be government itself.

Quotation of the Day…

… is from page 279 of The State Is Rolling Back, which is volume 2 in the 2004 Liberty Fund series The Collected Works of Arthur Seldon; specifically, it’s from Seldon’s 1988 essay “Policies: The Difficult and the ‘Impossible’”:

Keynes’ prescription has been shown to be not only defective in economic analysis.  The public choice analysis of Professors J. M. Buchanan and Richard Wagner has also shown it to be politically unrealistic.  Politicians have to deal with the public not only in the market process, as buyers or sellers of products or services, but also in the political process, as voters and electors.  If it was politically naive to assume that workers would accept reductions in real wages in the short term it was no less politically unrealistic to assume that politicians would faithfully operate budget surpluses in the long term to remove inflation once budget deficits had created them.

Despite some careless grammar, Seldon here summarizes one very important reason why Keynesian economics is far less scientific than its adherents think it to be.  Keynesians unscientifically assume one of the conclusions that they mistakenly believe themselves to have established through rigorous analysis, namely, that empowering government to ‘manage’ aggregate demand is the most feasible means of achieving, over the long-run, appropriate levels of aggregate demand.