Economics 101

Keynes Was Wrong: We Are Still Very Much Alive

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The Daily Currant once 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 $28 trillion 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 student 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 canceling 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.

Editor’s Note: On “Flashback Friday,” we take a look at some of IFWE’s former posts that are worth revisiting. This post was previously published on Mar. 28, 2013.

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