Economics 101 & Public Square

In the Long Run, We Are Still Very Much Alive

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The Daily Currant recently reported that Paul Krugman, an American economist famous for recommending Keynesian economic policy, ironically found himself in a personal financial crisis:

Economist and columnist Paul Krugman declared personal bankruptcy today following a failed attempt to spend his way out of debt.

The article goes on to explain that Krugman racked up $84,000 on his credit card “in pursuit of rare Portuguese wines and 19th century English cloth,” – and then I realized the joke was on me. They say, never believe anything you read on the Internet. Sure enough this article was a satire poking fun at what Keynesian economics might look like on an individual level.

British economist John Maynard Keynes is famous for saying in his Tract on Monetary Reform,

The long run is a misleading guide to current affairs. In the long run, we are all dead

Keynes believed governments should smooth out the bumps in business cycles through government spending in the short run. This ensured economic growth and stability rather than waiting on the market to adjust, because “in the long run, we are all dead.”

Christians should be alarmed that our government embraces an economic system that more or less assumes that the long run doesn’t matter. This thinking leads to policies that perpetuate a desire to consume today without thought for tomorrow.

As a millennial, my generation has been dubbed the entitlement generation for various reasons; however, as we’ve witnessed the U.S. economy sink over 16 trillion dollars in debt, we no longer expect our federal entitlements to be there for us when we need them.

This isn’t just simply an issue of bad policy, it’s bad stewardship. The politicians legislating debt are simply transferring the responsibility from their generation to mine. But our government’s failure to be good stewards of the federal budget reflects roots from a culture of self-indulgence. Have we forgotten the virtue of self-denial?

Self-denial is central to Christianity. It’s a virtue that manifests in several other virtues and practices, like chastity, charity, and fasting. Especially during this Lenten season, we are called to deny ourselves (Luke 9:23-24) in imitation of Christ and in anticipation for what is to come in the long run.

Compare Keynesian economics to a personal lifestyle. In Free to Choose, Milton Friedman gives this analogy:

When the alcoholic starts drinking, the good effects come first; the bad effects only come the next morning when we wakes up with a hangover—and often cannot resist easing the hangover by taking “the hair of the dog that bit him.”

Like the satirical article about Krugman, Friedman explains Keynesian economics by using an individualized example, and the moral issue becomes clear. If indulging today without any consideration for tomorrow is sinful for an individual, or if spending to get out of debt doesn’t work for a family, why do we so naively hope it works for the federal government?

Despite the immoral implications, Christians are turning a blind eye. Rampant debt, once thought to be irresponsible before the explosion of the credit card culture, is now socially acceptable. Dr. Jay Richards warns Christians in a recent op-ed:

The federal government now borrows and spends with such reckless abandon that it is careening toward a global economic catastrophe. If Christians can’t muster the courage to speak out against what Rep. Paul Ryan has called “the most predictable debt crisis in history,” we won’t deserve to be taken seriously after the collapse.

That isn’t to say debt can’t be used for good—it’s often necessary to take out students loans or borrow money to start a business, so long as the borrower has the means to pay the lender back (Prov. 22:26-27). The Bible does not say debt is a sin. But when Proverbs 22:7 says, “the borrower is slave to the lender,” and several passages celebrate the payment of debt (Rom. 13:5-8, Prov.3:27-28, Eccl. 5:5), we get the impression that God ultimately does not want us to be indebted.

Does this mean Keynes’ economic philosophy implies an element that is antithetical to the Christian view? Ken Ewert believes so.

Ewert says Keynes thought classical economics was based on Adam Smith’s theistic and optimistic view of the world, especially in the classical view of savings, which Keynes was very much against. Ewert proposes the reason behind Keynes’ animosity towards thrift:

The act of saving points to a cause and a purpose beyond oneself. […]Deferring the present for the future represents a value being placed upon something or someone beyond one’s own immediate desires. It is a statement of self-denial. The purposive man, in Keynes’ view, is one who takes actions that will ultimately not benefit himself, but will be left for others. 

Ewert believes Keynesian economics ultimately takes the “purposiveness” out of the person. To Keynes, we carry no meaning beyond death, but the Christian can confidently say, “In the long run, we are still very much alive.”

By cancelling our debt, Christ freed us. That freedom requires more of us, not less. We are to live intentionally and purposefully, with a hope for a better future. Let us extend the hope Christ offers to the future of our nation.

What do you think? Are debt and Keynesian economics antithetical to Christianity? Leave your comments here

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  • Jim Price

    ” In the long run, we are all dead.” When Mr.Keynes made that statement, I think that he was saying that some things can’t wait. That, hungry people can’t wait until a business cycle completes itself. That preschoolers can’t wait until a community becomes enlightened enough to provide it’s own, Head Start.

    A young couple cannot wait until they have saved all the money needed to buy a car are a home. Judicious use of debt, both personal and governmental, has helped America become great. One can see the U.S.’s, 16 Trillion debt as an investment in our future, each of us has benefited from large investments made on our behalf, much of that in the form of debt to build schools and infrastructure.
    Mr. Friedman, on the other hand , associates any attempt to invest in peoples future as investing in those with failed characters and thus with failed results.

    • Lea Johnson

      “So long as the borrower has the means to pay the lender back ” . Most government debt has not been borrowedin any conventional term and US debt is so massive that it is no longer sustainable. A business, an individual, or a family would never operate at the level of debt or spending the government does.

      I think Keynes truly meant that in the long run we are all dead, so let’s forget about repayment to our lenders.

  • Most of that debt is owed to Americans. So, the US government borrows money from US citizens, and promises to pay them interest on that borrowing. Most retirement portfolios include government debt. Government debt is a favor to its citizens who hold it, because obviously the federal government could just PRINT THE MONEY if they REALLY WANTED TO, without borrowing a dime. Government debt gives citizens reliable savings, and limits the new amount of money entering into circulation.

    Government debt is nothing like personal debt, and so has nothing like its moral implications.

    • Thanks for your comment. I would argue separating the moral aspect from government debt which you are describing is precisely the problem because in the long run, it government effects each person individually.

    • anarchobuddy

      Let’s look at the other side of your statements:

      “Most of that debt is owed to Americans.” Yet ALL of that debt is expected to be paid by Americans (or US dollar holders if the debt is monetized).

      “Government debt is a favor to its citizens who hold it…” and an albatross around the necks of those who don’t.

      “…the federal government could just PRINT THE MONEY if they REALLY WANTED TO, without borrowing a dime…” which would be the equivalent of theft through inflation.

      “Government debt gives citizens reliable savings…” It’s not savings, but a promise to rob someone else to pay the bondholder in the future. And how reliable it will be when interest rates inevitably rise remains to be seen.

      “…and limits the amount of money entering into circulation.” I think what you’re referring to is government borrowing, not debt itself. Of course, when governments borrow money (meaning someone abstains from consumption by an equal amount) then no new money is created. But if the US Treasuries are bought by the Fed, then government debt is the impetus for new money creation.

      Thus, I would argue that there are, in fact, moral implications of government debt. Any benefits paid out to Americans have to be paid by someone else. It essentially robs one group to pay for the consumption of another group.

  • anarchobuddy

    I would like to make this comment: Those who believe that it is individual Americans’ responsibility to pay back the government’s debts are wrong.

    In some ways, public debt is not like private debt. With the latter, it is through the individual’s own decision-making that led him to be in debt. With public debt, it is decisions of an oligarchy spending other people’s money that created the debt.

    No one I have voted for has ever won their election. Can one truly say that I have political representation? I do not support these foreign wars, yet I am expected to pay for them. I don’t expect to receive Social Security or Medicare, yet I am forced to pay for them as well. These are the biggest contributors to US debt. Should I be forced to pay for them even though they were not my decision and I want nothing to do with them?

    Rather, those who bought US Treasury bonds should have to face the risks of those buying private bonds: they assume the risk that they won’t be paid back. That would be more just than robbing more people to pay the debt.

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