Keynesianism Is A Mystical Religion That Believes Paying Taxes To Government Makes You Richer Because The Government Is Wise

I came across this post today at by William Anderson, reposted at EPJ, about Tax Day. It’s important to read in its entirety, then I’ll explain how it relates to mystic religion.


April 15 is here and we are required to do the following: tell the government our income and send much of it to Washington.

Austrian-school economists are likely to tell you this is a bad thing and that taxes and government spending lower our living standards. In other words, the more government we are required to finance, the poorer we will be. According to the Austrians, economies grow through capital investments reflecting time preferences of individuals. Furthermore, Austrians actually claim that individual savings lead to economic growth. The more we pay in taxes, the less money we have for capital investment and saving. In other words, the more taxes we pay, the less we have for the building blocks of economic growth.

However, disciples of John Maynard Keynes, like Paul Krugman and others, take a rather different view. For them, wealth is achieved by spending, which creates economic growth. When consumers don’t spend enough, government rescues the economy by upping its spending. Because of this, should government raise taxes, it actually stimulates the economy more than individuals can do through their own spending. We could allow people to spend their money as they see fit. But, it’s better to be on the safe side and tax as much of it as possible, instead.

The Keynesian “Balanced Budget Multiplier” makes it all possible. It is a version of 2 + 2 = 5. The tax-fueled magic is explained as follows:

  • All spending has a “multiplier” effect. Spending increases the incomes of others, who then spend their increased income, and the pattern continues indefinitely.
  • Individual savings, according to Keynesians, are “leakages” from the system, and if not offset by equal “injections” via government spending or increased exports, the “multiplier” then works in reverse, pulling the economy into recession.
  • Government tax increases, however, have two-fold positive net effects. First, government spends new tax revenues, which quickly multiplies and creates new jobs. Second, by reducing individual incomes, people must spend larger percentages of their incomes to uphold their present standard of living. (The famed Keynesian “multiplier” equals 1 over the savings rate, so the less we save, the greater the multiplier.)

The “logic” of the balanced-budget multiplier differs from the logic of taxation and spending in Denmark. There, individuals pay most of their income in taxes, but supposedly receive marvelous government services that are more valuable to them than what they would have purchased on their own had high tax rates not existed.

Instead, the “Balanced-Budget” multiplier creates wealth by destroying savings. Austrians obviously disagree, and the “reality gap” between Austrians and Keynesians is widened. Austrians emphasize savings, capital accumulation, market prices and market interest rates, profits, losses, with entrepreneurs making decisions in an uncertain climate under the umbrella of economic calculation.

Keynesians promise an easy way out. Just give money to the government, which will spend and spend, and the spending multiplies prosperity. Interestingly, modern intellectuals will tell you that Keynesianism is “real world,” while Austrian economics is “pie in the sky.”

On April 15, Keynesians will contribute to growing prosperity by sending more money to Washington. However, Austrians likely will have a different take.


So, we are supposed to believe, according to Keynesian economics, that being robbed means we are becoming wealthier. That government spending is somehow magical because when politicians spend the same money on their own stuff, such as killing people or giving billions to Israeli or Arab despots, it somehow creates prosperity, whereas when you spend that money on what you actually want, it makes you poorer.

So I’m in the middle now of Volume I of Murray Rothbard’s An Austrian Perspective on the History of Economic Thought. It’s such a well written book and so fantastically organized, it’s a pleasure to read. Rothbard writes like the Rambam in terms of organization, though Rothbard is more verbose. It is impossible to be more succinct than Maimonides, unless you’re Rashi, but Rambam was clearer than Rashi most of the time. Maybe I’m the first one to make that comparison.

Anyway, Rothbard writes about the history of a town in Germany where a guy named Bockelson decided Jesus wanted everything collectivized and to each according to his need etc. Sound familiar? And that everyone was going to be forcibly converted to his brand of Christianity called something or other. Anabaptism maybe? I don’t care enough to double check.

He ended up getting sieged along with his followers while everyone was starving because the division of labor broke down, as it always does in forced communism. Rothbard writes the following about Bockelson, towards the end, after he had already declared himself king and everyone was starving to death.

It is not surprising that the deluded masses of Munster began to grumble at being forced to live in abject poverty while the king and his courtiers lived in extreme luxury on the proceeds of their confiscated belongings. And so Bockelson had to beam them some propaganda to explain the new system. The explanation was this: it was all right for Bockelson to live in pomp and luxury because he was already completely dead to the world and the flesh. Since he was dead to the world, in a deep sense his luxury didn’t count. In the style of every guru who has ever lived in luxury among his credulous followers, he explained that for him material objects had no value. How such ‘logic’ can ever fool anyone passes understanding.

And then I realized, the Keynesian nonsense ‘logic’ that giving your money to politicians and bureaucrats makes you richer, is the same exact thing. All western society has been indoctrinated into a religion that essentially preaches the government as King Bockelson. Bockelson can live in luxury while the his people starve because Bockelson is beyond the flesh.

And Washington can live in luxury while its subjects are forced to pay the taxes that Washington consumes, because giving Washington money makes the people richer, since Washington is beyond the flesh. Spending makes you richer. Savings makes you poorer. The more money politicians have, the better off everyone is. The richer Bockelson is, the better off his people are.

It’s the same religion. Keynesianism and insane early protestant Christian messianic communism.


Deep Praxeological Thoughts by Rafi Farber

I’m not exactly Jack Handey, but I’ll give this a try. It’s ironic, because I used to be a humor writer and now I’m taking a humor icon and turning it somber and serious. Life happens.

In hard sciences nobody has the audacity to try to change the laws of nature. They are what they are, and scientists attempt to use the laws of nature to navigate towards specific goals. The more they find out about the laws of nature, the more they can use them to construct outcomes. This is the long form description of “technology”.

It’s what physicists do, it’s what chemists do, it’s what (some) ecologists and psychologists do, but it’s not what most economists do. Notice that the more macro you get, the more politics interferes. There are almost no political physicists. Not to say there aren’t physicists who have political opinions, but almost none of them allow politics to infect their scientific thinking. There are no politics as to where a rocket will go when fueled with x at y trajectory. Same with chemistry, one level macro above physics. Biology you start having political biologists somewhat when it comes to the “gender pay gap” and whatever other nonsense explained by “biology”, but there’s not so much. Biology is macro-chemistry.

When you get to ecology/psychology, which are both macro-biology, you start getting political. Climatologists and other soothsayers are surveyed by the government about what laws should be passed for carbon footprints and whatnot. Psychologists often advocate government interference for a bunch of stuff. Those reading this who believe in global climate warming change should know that my carbon footprint is astronomically small for my economic position (which is not high, but I live quite beneath my means), so don’t give me any crap please. I’d bet it’s smaller than most climate global change warming activists.

By the time you get to economics, which is macro-psychology and macro-ecology, almost everything is political. Economists do not respect the immutable laws of economics. They attempt to change them. Supply and demand no longer apply when they can be changed by politics. Minimum wage doesn’t unemploy those whose labor is not worth minimum wage. Increasing the quantity of money does not decrease purchasing power. Supply and demand doesn’t apply all the time. Free markets don’t always work, like gravity always works. Etc. But supply and demand actually do, always, work, which means minimum wage causes unemployment, the end. But this is ignored by most “economists”.

The humbling thing about economics is that its laws cannot ever be changed. And people desperately want to change lives by force. It is the drive for power. Someone figures out the laws of motion and can create a rocket. By the time you get to economics, you are dealing with free will of human beings, which has a divine quality to it. If the laws of physics and biology are immutable, so are the laws of economics. Everything is one system.

And that is the difficulty of being a real economist. You cannot use your knowledge to tinker with the system, without betraying the knowledge you have learned. Once you try to tinker through politics, you start playing God with human lives without their consent. With biology you can tinker with human lives, but only with their consent. With economics, suddenly it’s OK to tinker with the entire human population with impunity? No. It is not.

This is why economics, real economics, is the most important subject in the world to learn, understand. The smartest people in the world think they can interfere with good results. They are all, 100%, absolutely wrong. Only the Austrian School understands this.



I REALLY Don’t Like Eli Yishai of Shas

Every time Eli Yishai, the head of the Shas party, does something, he exhibits the perfect combination of cowardice, ignorance, pompousness, and something so way beyond chutzpah it’s hard to describe. He has done more to embarrass Judaism and God than any other Jew on the planet.

When anything bad happens, he blames it on gay people. Like the big Carmel fire last Chanukkah when 40 policemen were burned alive in a bus. Gay people did that. Well, thanks for making such a great name for the Jews, because you were the one in charge of the national fire department, which you neglected, probably worried about gay people, while we had to beg for equipment from abroad while the country burned. And you still don’t accept responsibility.

But he just keeps getting worse. The man just does not stop being an ass. Today, I was reading the Israel Hayom newspaper, quoting Yishai as saying we have to go into debt in order to “cheapen living costs” because as a “leader” he has to “take care” of the people by spending borrowed and/or printed money.

He added, “If we go a little off budget, it’s not a big deal.”

The reason living costs are so damn high is that the government taxes the crap out of everything that moves and Ehud Barak and Eli Yishai spend it on first class trips to France and Netanyahu spends it on elaborate anti-missile defense systems that shoot down $10 rockets with million dollar precision guided missiles and everyone cheers him on. Well, at least Netanyahu doesn’t want to put us in debt – he just wants to raise taxes some more. As much as that sucks, at least it’s honest.

But Yishai, ecchh, he wants to put us all into debt because he “cares” about “the people”.

The truth is he actually cares about buying some VOTES before elections next year. He’s a “leader”. He has to look out for the “little guy” by “bribing him with welfare” so he’ll “vote” for the guy that didn’t “take care of the fire department” and 40 people were “burned alive” and he blamed it on “gay people”.

Yishai – I’m sure that when non observant Jews look at you, they say, “Wow, Judaism is a great religion. Maybe I’ll take Tefillin today and strangle Eli Yishai with the shel yad.”

You want to endanger everyone’s shekels because you want to buy some votes? Have a happy Pesach. Thank God Netanyahu doesn’t have to listen to you. As bad as he is, at least he’s fiscally responsible, and when he wants to buy a vote, at least he keeps the budget balanced.

You know what? Maybe Yishai isn’t as bad as Bernanke. At least Yishai isn’t saying that breaking the budget will stimulate the economy and make us all rich.


The inanity of government hiring regulations, Natasha case in point

Before I get started with this case study, let me clarify that Israel is a socialist country founded by Marxists. So there is very little freedom here.

Now, that being said, government controls healthcare and education entirely. My wife, Natasha, works at a college that is funded by the government. It is extremely inefficient because, no matter how wasteful it gets, taxpayer funding is always guaranteed. Natasha is also very pregnant. There is also a law here that you can’t fire pregnant women. Sounds great, right?

Well, I came home today and Natasha told me that because she’s giving birth (God willing) before the semester actually officially ends, the college cannot legally NOT rehire her. So because she’s having a baby, she’s assured a placement next semester, regardless of whether the college has a class for her to teach.

Well, good news for us, right? Eh…I’d much rather not pay taxes than pay taxes and have my wife get a job because it’s illegal if she isn’t rehired.

It turned out OK for us, but what if circumstance were reversed? What if they refused to hire Natasha initially, suspecting she was pregnant, because they know that they wouldn’t be able to let her go the following semester?

The whole system is rotten. Taxpayer money flowing through a system and misdirected through legal mechanisms will only cause mal-investment, which, any Austrian will tell you, will have to be liquidated. Money earned through government force may as well be welfare. Money must represent value. Not government intrusion.

Natasha is a good teacher. She should be rehired on the basis of need and talent. If they have no need for her, they shouldn’t rehire her just because she was pregnant. If they do, we’re getting money that represents no value.

And the debt bubble expands just a little bit more.

What will we spend it on? Probably gold.