The problem with Keynesianism

Lew Rockwell:

KEYNESIANISM'S CENTRAL FORMULA

The account of Keynesian economics on Wikipedia is a good place to begin. Here, we read of the textbook Keynesian formula:

In scientific notation, the Keynesian Formula consists of the following make-up:

C + I + G + X – M = Y(GDP)

which means:

Consumption + Investment + Government Spending + Exports – Imports = Gross Domestic Product

This is standard stuff. Start here.

Spending is the heart of Keynesian economics – aggregate spending. Consumption (C) is a series of society-wide individual allocation decisions. Investment (I) is a series of society-wide individual allocation decisions. Exports (X) are a series of society-wide individual allocation decisions. It is the same for imports.

Government spending is an allocation decision of a different kind. "See this gun? See where it is pointed? Hand over your wallet."

The student can see that total spending is based on all the letters of the formula. C, I, X, and M all begin with the original owners of resources. But G does not begin with the original owners. G begins with the new owner after multiple transactions with the gun.

G does not create. G confiscates. G cannot spend anything that it did not extract from consumers or investors.

C, I, X, and M are based on production. They are creative forces. G is based on confiscation. It is not a creative force. Everything spent by G comes at the expense of C, I, X, or M. When G spends, it does so at the expense of the others.

A bright student is smart enough to figure out what most people do when constantly threatened with robbers with guns, even if the robbers carry badges. They will not put all of their money in their wallets. They will hide some of their currency. They will not spend it. People who carry badges and guns call this currency hoarding. This is a Very Bad Thing, we are assured.