Saturday, 4 September 2010

Rent seeking and economists - part 2

Any government implementing a Keynesian policy simply “Keynesianizes” the economy. The effect is an economy that behaves precisely in the pertinacious routine dictated though the Keynesian assumptions.

As a rational economist, there is value in promoting and executing Keynesian policy. This is of course rent-seeking at its worst, but it is rational.

Keynesian policy is the most indisputable technique to election and re-election for any politician. All the advantages achieved through printing and the outlay of money are instantaneous. They are extremely perceptible. They allow a politician to pork barrel. That is they can focus on politically powerful voting blocs (whether they have any relationship to the majority or not). With the overheads from such a policy being incurred at a later date (the long term), the link between policy and long-run consequences difficult for the voting public to perceive. Better, these perverse incentives and the effects can be spread thinly transversely over the total populace creating a policy which is unlikely to result in short term complaints. That is the poor voter is unlikely to notice the damage and costs they are facing.

As the number of Keynesian demand-managers continues to decline, the effects of supply and demand make the perverse rent seeking behavior more focused and stronger. This dwindling assemblage of economists is sought by government officials who pursue advice and understanding. The occasions to address with the seats of power over the simpler halls of learning incentivise many economists’ to find the good in a theory unsupported by reality.

So, we let the printing press roll and allow government to spend our money in pursuit of short-run stimulation with the cost being against long-run stability.

Of course, when we spend credit (e.g. through credit cards) on short term consumptive goods (such as alcohol) and rack up debt in place of saving and investing, we are all becoming good Keynsians and helping the economy...

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