Less Keynes and More Hayek

From the Wall Street Journal:

Dick Armey on Keynes and Hayek

Years ago I developed the “Armey Curve” to explain the negative burden government has on prosperity. The idea, borrowing liberally from Arthur Laffer’s curve (which demonstrates that tax revenues fall when the tax burden gets so high that it no longer pays to work), is that at some point the burden of government spending exceeds the private economy’s ability to carry it. “Stimulus” spending often does more harm than good, because it takes more money out of the system than it creates and thereby destroys jobs and leads to stagnation and diminished prosperity for all.

Hayek, who famously debated Keynes in a series of articles after the release of “General Theory,” gave what I believe to be the most devastating critique of government action to stimulate “aggregate demand.” Hayek viewed the boom and bust of the business cycle as primarily a monetary phenomenon created by governments’ artificial inflation of money and credit.

The key point is that government doesn’t produce ANYTHING. It can’t create jobs, it can’t “improve” things. All government can do is take money from someone and give it to someone else, always at a loss. The larger the share of GDP the government consumes, the larger those losses are.

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