Austrian Economics, Not Keynes

The economy, although many people do not understand it and do not wish to do so, is decisive for everyone’s life, the economy has direct effects, not only on your pocketbook, but also on your mind as a stress generator if it is negative, or as a generator of tranquility and even happiness if it is positive. Today, the economy is seen through different points of view, today I want to talk about two of them, Keynesianism and the Austrian School of Economics.

Currently the world is immersed in a tremendous Keynesianism, many countries choose politicians in favor of controlling the economy, based on Keynes, because this theory allows the intervention of the state in economic matters, either by controlling prices, with high taxes, among others…. In other words, The Keynesian School believes that governments are an important market intermediary. Quite the opposite of the Austrians, who believe in a free economy where the government does not intervene in any way in economic matters. “You can mess with my mother, but not with prices,” says Javier Milei, Argentinian Libertarian Economist.

Politicians tend to choose Keynesian economists over Austrians for a simple reason, not because Keynesian theory is better, quite the contrary, they choose them because that way they can have what all politicians want: Power. The Politician may ask “How can I improve the economy?” to a Keynesian, he will say, “Controlling the economy and prices in addition to a fairly considerable amount of taxes”, whereas if he asks the same question to an Austrian, he will say “All you have to do is do nothing, the problem is you…. Clearly, for the politician, the Keynesian solution is much better, not because it will allow him to improve the economy, but because it will allow him to earn much more money, will allow him to have much more power and therefore enlarge his government.

There are many problems with Keyne’s Ideas, as this article by Llewellyn H. Rockwell Jr. called “Keynes Must Die” explains, but to give you an overview, why is the idea not better than the Austrian one, because in addition to all the mistakes of the “Keynesian Theory”, there are only four ways to spend money:

  1. Spending Your Own Money on Yourself:

    It is obvious to think that by spending your own money you will spend it wisely and in the most efficient way you can find, because it is your money, you know exactly what you want and you know how hard it was to earn it. It’s the best way to spend money without a doubt.

  2. Spending Your Own Money on Other People:

    Suppose we want to make a gift, we usually look good with the person we want to make a gift to by spending as little as possible, and here too we can’t be sure what that person wants, so it won’t be a very efficient expense because you won’t spend it on yourself and you don’t know exactly what the other person wants. We must therefore bear in mind that this way of spending our own money is less than the previous one.

  3. Spending Others Money on Yourself:

    This may sound good and even fun, but it really isn’t. When you use other people’s money on yourself the first thing you will notice is that it will not be the same as spending your own money, that is, money you earned. This makes it much more likely that you will spend money without thinking, it makes it more likely that you will waste money, either buying stupid things or things you wouldn’t really buy if you were making money yourself. In other words, here we can observe the lack of efficiency and seriousness when it comes to spending. Oh…. Yeah, it’s immoral on top of everything else because it’s a robbery.

  4. Spending Others’ Money on Others:

    Here you have no incentive to be efficient with money, you have no incentive to take care of it or think through what you will do with it. It doesn’t represent a benefit for you, so you will most likely spend it on something you consider appropriate, without considering better alternatives or smarter projects, and it is also a theft… It is the worst and most inefficient and immoral way to spend money.

Having explained these four ways of spending money, the first thing we can observe is that spending money on oneself is always more efficient than spending it on other people, because no one knows ourselves better than we do. At the same time, we can see that spending our own money makes us more aware of what we are going to do, as opposed to what we would do by spending others’ money. Also, you’ve probably noticed we just talked about Freedom and Taxes, with Freedom being the number one way to spend money and Taxes being the fourth way. While in taxes the government steals money to benefit other people in a very inefficient way, when you have the freedom to choose with your own money you can hire or buy the products and services you want and look after your individual interests.

Even in the case of investment something similar happens, the government continues to spend others’ money on others while you spend your own money on… Others? Yes, but not at the same time. Let’s bear in mind that when we make an investment, we do it to obtain a profit later on, so technically you are also doing it for your own benefit, that is to say it would be a kind of mix between spending your own money on yourself and others.

All this is something that the Keynesians do not understand and that if the Austrians do, that is why the Autrian School is superior to the Keynesian School. The economy is something you must let flow calmly and the pockets of the citizens are sacred and the only ones with the power to “control” it, private investments are better than state investments, citizens are better off using their own money than the government, the private sector is better off than the state in absolutely everything, more than 200 years of economic history indicates it, not for nothing, the most economically free countries are the most prosperous and the least free are a disaster and here you can see it. 

With all this in mind, then, why do politicians still believe in Keynes?, the answer is simple convenience, for the state it is better to have power than not to have it, having a small government is something that politicians are not interested in. Thank you for reading, peace.

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