Thursday, 16 October 2008

The world turned upside down

One reason for quoting this (British) civil war song (which was probably not played when the British surrendered to the Americans at Yorktown) is the way at which established paradigms are being replaced by discarded paradigms.

Keynes and Keynesianism is a case in point. See this piece by my former colleague Robert Skidelsky (Lord Skidelsky of Tilton):

Of course, Keynes wrote so much that you can probably find a quote to justify anything. Robert Skidelsky's three volume biography emphasised his monetarist leanings.

He did, however, advocate a fiscal stimulus for a faltering economy and there are siren voices calling for that, presumably to be funded by borrowing more money. Lessons learned are quickly forgotten: Keynesianism ended in tears with high inflation, high unemployment and low growth: 'stagflation'. The misery index (unemployment + inflation) shot up.

Once again, we have to be careful what we wish for.

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