The real trouble with Keynes

Forget, for a moment, the debate over whether Keynesian policy “works,” however one wants to define that. Forget the adverse incentives, the moral hazard, the misallocation of capital. There is actually a bigger problem.

The real problem is that Keynes places unrealistic demands on a capitalist democracy. ¬†When you encourage currency debasement, mass redistribution, interest rate distortion, et al — even briefly — you open a populist door that is very hard to close. Giveaways are the politician’s crack, almost impossible to put down once taken up.

The possible exception to this is monetary stimulus, if the central bank is sufficiently independent.

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