Saturday, November 6, 2010
The Courage To Do Nothing
I just finished reading a book by this title written by a fellow Cincinnatian, Bill Flax. This book turns out to be an excellent primer on classical economics and why the current government "solutions" to the recession have only made things worse. While I found his beginning sections railing against President Obama a bit tedious (not that I disagreed with them), Flax's economic sense really shines in several places. He maintains that recessions and depressions are not really so bad. They simply reallocate badly-spent money back into more efficient enterprises. His advice? Let the economy solve its own problems. When governments try to prop up failing industries, they are really only delaying a necessary curative process. Malinvestment and inefficiency are the problems--the recession is the cure. Capitalism works!
Flax also brilliantly explains Keynesian economic theory and how it has come to dominate government economic policy in the last few decades. He accuses Keynes of two critically false assumptions: 1) Capital is static and 2) Demand is finite. In the Keynesian way of thinking, consumer demand drives the economy. I want a car, therefore car-markers will hire workers and build factories. This is surely putting the cart before the horse. Keynesians also deny the existence of scarcity. Demand is not finite, as any parent knows. The number of things people want is infinite and far exceeds what is physically and materially available. The Keynesian dream is fueled by easy credit and government "stimulus", a deminishing-returns ponzi scheme that leads to massive inflation.
Better to be back on the gold standard and disband the Federal Reserve, says Flax. Manipulated fiat currency--and the endless printing of money--constitutes taxation without representation. Currency devaluation discourages saving and thrift while encouraging reckless borrowing and consumption. Our country is truly at risk if these harmful trends are not curtailed.
Bill Flax has written a great book urging a simple, but shocking, suggestion to government planners and economy wonks: have the courage to do nothing! He promotes the out-of-fashion but clear-headed Austrian school of classical economics and quotes extensively from its many adherents. He also highlights the importance of freedom and the need to return to constitutional government. Backed by over 60 pages of notes, The Courage To Do Nothing delivers the right solutions for our troubled times.