Delete comment from: Captain Capitalism
Keynes' theory of sticky prices set the stage for some later research which is not without merit. Clearly prices do not adjust instantaneously and no one can doubt the presence of bubbles. But I think efficient markets are a better model upon which to base most economic policies. Especially in microeconomies, people really do respond to the incentives they're given - hence, the housing crisis.
But Ryan is right when he says Keynes is overused. The Philips Curve exploded and Keynesians are scrambling to put the pieces back together.
In Keynes' original models, government could maximize aggregate output by taxing 100% of income and spending it. Now what bloody fool would believe:
1. People would keep working at a 100% marginal tax rate.
2. Government would efficiently and effectively allocate resources to maximize welfare or even maximize output
Keynes gave big government politicians and marxists everything they ever wanted for Christmas: a reason to increase taxes.
Keynes drank a bottle of champagne every day of his adult life. On his death bed, he said that his only regret was that he did not drink more champagne. Now that's some advice from Keynes with which I agree!
Dec 8, 2008, 8:28:00 AM
Posted to Is It Time to Buy?