Main Menu

I firmly believe that the reason why Keynesian economics is the main economics taught in America - taught at most universities - is because America is the successor to Britain (the British empire) in terms of influence in the world, having also taken on just about everything from Britain, including the economic system, except the governmental system itself (Britain has a parliamentary system, America has a presidential system).  Keynes was British.  In other words, America took on Britain's version of an economy and Britain's version of economics, rather than the continental European versions.  And what Keynes actually said makes sense, in a way - but it is not how human psychology actually works, and so it does not work that way in the real world.  What Keynes actually said was that governments should do deficit spending during downturns to get the economy back on track and then eliminate the debt during the good times so that the system will be ready for the next time around. 

The problem is that societies do not actually get around to doing that - they deficit spend during the downturns to try to eliminate the downturn and then continue to deficit spend during the upturns because it feels so good, with the result that the debt continues to pile up until the society gets overwhelmed by it.  (We are very close to that point now.)

Austrian economics both anticipates that the debt will not be paid off during the good times and that, therefore, the debt will eventually overwhelm the society.  That is why Austrian economics has been able to anticipate what actually happens. 

Because Austrian economics anticipates that, it advocates that recessions should simply be allowed to run their course, let them simply happen and be over with as soon as possible, without interference (which is probably also unrealistic, and that is why we are in the situation that we are in, but at least Austrian economics anticipates the situation that we are now actually in, which at least modern neo-Keynesianism, as taught at the universities, does not). 

I have a family background from Germany and have many connections there (and am fluent in the language).  So when I came across Austrian economics in the mid-1980's, I suppose I had a natural inclination to check it out.  But what also made a difference is that I found out that the Kondratieff wave actually anticipated the recession of the early 1980's that had caught me so thoroughly by surprise, and so I became very interested in the Kondratieff wave.  As I quickly found out, Austrian economics is compatible with the Kondratieff wave - but Keynesian economics is not - and that is probably also why I checked out Austrian economics more. 

As noted up near the top of this website, the Kondratieff wave is a natural cycle in capitalistic societies that cannot be overcome - so trying to avoid recessions forever is just plain unrealistic, and therefore doing even what Keynes advocated can't be done in the long run because the characteristics of the Kondratieff wave will eventually manifest themselves, no matter how hard one tries to make it be otherwise. 

But modern economists in America have taken even what Keynes advocated to an extreme - which is why I at times call them neo-Keynesians - and what they are trying to do simply can't be done at all in the long run, and we have had the first salvo, in 2008 (right on schedule per my model), proving that.  I describe on this website why that happened - and I also talk about what is to come on the basis of what the neo-Keynesians have actually done, over the course of time in recent decades, to implement the system that they think works (noting that I anticipated the downturn of 2008 several years in advance, whereas they did not anticipate it at all and are still studying their models a couple of years later to try to figure out why they did not see it coming; I will simply note that their models are utterly incapable of seeing it coming and that is why they didn't see it coming, but try telling that to a typical Keynesian economics Ph.D and you won't get very far). 

Many Keynesian economics Ph.D's think very complex models are necessary to model the economy and they think that the models are going to have to become even more complex in light of the failure to account for the downturn of 2008, since they think something is missing in their models because their models did not see that coming. 

As I note elsewhere on this website, my model is not totally simple, either - but it would certainly not take several books to describe it in full and it is certainly not anywhere near as complex as what the Keynesians are talking about.  But my model saw the downturn of 2008 coming several years in advance - including both the approximate timing (2007-2010) and severity - whereas the Keynesian models did not see it coming at all.