Does public “investment” crowd out the private sector? OF COURSE IT DOES!

There is one rule of thumb I always use in trying to tell the difference between an econometrician and an economist. Or, in other words, a Keynesian versus an Austrian economist. That is, Keynesian arguments are generally devoid of any soul or feeling, and treat economics like a laboratory science where if you mix the right chemicals in the right proportions, you’ll have the desired effect. Often their arguments deny the most basic common sense principles using fancy econometric language and quite frankly make me feel like an idiot for even having to defend absolutely fundamental economic realities that even 5 year old children can grasp with ease.

It’s even worse than that actually. It pains me, a punk kid with no degree, to go up against a published PhD and claim that what he’s saying is below the level of a 5 year old with basic common sense, but say it I must, because it’s the truth. It scares me to no end, really, that when the SHTF, people will turn to these authoritarians for answers that will enslave us all.

In my very first economics class when I was a pisher little high school senior, my teacher Mrs. Holcman taught us that economics is, by definition, the study of “scarcity and choice”. Meaning, there is a limited amount of resources on the planet, and economics is the study of choosing between those scarce resources. Presumably, consumers should choose between them in the most efficient and productive way so as to produce the most possible wealth from those resources and raise the standard of living of the human race. What I’m saying here is not rocket science. If a five year old has one dollar and in front of him are a chocolate bar and a toy, and he can only choose one, he understands the reality of scarcity and choice.

Then came the Keynesians and claimed, first, that while economics is about scarcity and choice, it is not the goal of economics to figure out how to best use scarce resources. It doesn’t matter how efficiently they are used at all. They can simply be wasted and aggregate demand for them being equal, everything should turn out the same.

But they claim something even worse than that. They claim that, essentially, there is really no such thing as scarcity at all. The world is an endless pit of resources and we do not even have to choose.

See this article by Yanis Varoufakis. I’ve mentioned him before as a slippery Keynesian who is at first not recognizable as such, and today I’ve figured out why. It’s because he writes with such soul. He has real emotional conviction, and this does not fit into my rule of thumb in searching for a lack of soul to spot Keynesian reasoning. So I was fooled for a while.

The Keynesian Orwellian phraseology for “there is no such thing as scarcity” is “public investment does not crowd out private investment”. He calls the belief that public investment crowds out private investment childish. This is mindboggling and scary.

We are to believe that simply because money put somewhere is put there by government instead of a private person, that simply because the label of the money is different, it is therefore infinite? If public money does not crowd out the private sector, then an infinite amount of public money can be spent without any effect. Essentially, money does grows on trees, as long as it’s the government spending it instead of a private person.

It doesn’t matter what money is labeled and who spends it. If you spend it on one thing, you cannot spend it on the other. It doesn’t matter what sector you are in. Everything crowds out everything, because there is only a finite amount of money and wealth on this planet.

Economics is the study of SCARCITY and CHOICE. That means by definition that if you choose one resource, you cannot choose the other. Government is not a god that can override this human limitation. Varoufakis and other Keynesians want us to believe that government is a god that can provide manna from heaven.

The question is, do you want government choosing where to put resources, or do you want private people choosing where to put resources?


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