June 04, 2003
Why is this man smiling? Well, perhaps its because he's an employee of the Federal Reserve Bank, living fat and happy off the profits earned every time the Fed. inflates the currency and depreciates the value of your savings. How dumb is this man? Well, he's suppose to be the one Fed. bank president who's a great and true believer in the free market. But it turns out he doesn't believe in the very best thing which capitalism provides us -- the accumulation of capital goods through investments savings. I.e. the thing which makes our wealth possible. Unbelievably, McTeer seeks to illustrate the value of an economics education using perhaps the most damaging fallacy every brewed up out of the witchcraft of Keynesian crankonomics:
Economics training will help you understand fallacies and unintended consequences. In fact, I'm inclined to define economics as the study of how to anticipate unintended consequences. Most fallacies in economics probably are fallacies of composition: What's true of the individual may not be true of the whole. You may be able to see better if you stand up -- but not if everyone stands up. John Maynard Keynes' paradox of thrift provides a currently relevant example: Individually, most consumers need to save more. But, if all or many consumers start trying to save more, the economy will be in deep trouble.
From today's Wall Street Journal, subscription required. The original speech.
Posted by Greg Ransom
