Keeping the economic faith 134

Larry Summers is leaving the White House where he tried to put Keynesian economic theory into practice without success. Having proved that it doesn’t work, he is returning to Harvard to continue teaching it.

Why give it up, the beloved theory? Like a theology, it depends on faith, not reason.

Investor’s Business Daily comments:

The departure of Larry Summers as President Obama’s top economic adviser says a lot about the White House these days. As one policy after another runs aground, top officials are jumping ship.

Like Christina Romer, former head of the Council of Economic Advisers, and recently departed budget chief Peter Orszag, Summers was done in by his own incompetence. …

Summers was instrumental in crafting the failed $862 billion stimulus program. With the economy barely growing more than a year after the “recovery” began, and with unemployment at 9.6% and rising, it’s safe to say the Obama-Summers “stimulus” has been a failure. …

Everyone seems to recognize Summers’ eccentric academic brilliance. As Democrats often remind us, he became — at 28 — Harvard’s youngest full professor. …

Summers, like many others in the academic economics profession, embraced outmoded ideas of Keynesian stimulus that ignore how the real world works. We’re paying for it today.

For the record, Keynesianism — the idea that a jolt of government spending can, Frankenstein-like, “stimulate” a dead economy back to life — has never worked. Not during the Great Depression. Not during the stagflationary ’70s. Not during Japan’s two lost decades. Never.

The only reason Keynesianism hasn’t been tossed on the ash heap of bad ideas is that tenured academics at the nation’s universities keep it alive. Summers now returns to Harvard to teach and defend the fallacy to a new generation of brilliant students.

Posted under Commentary, Economics, United States by Jillian Becker on Thursday, September 23, 2010

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