In a nutshell, John Maynard Keynes held that one cannot have complete trust in a market economy, which is inherently unstable. If left free, the market economy could lead to self-destruction. Hence there is the need for governments and central banks to manage the economy.
There is, after all, a very keen similarity between Hamiltonian mercantilism — or an economy directed and controlled by government, supposedly "in the public interest" but in reality for the benefit of a privileged few — and the economic fascism of Italy (and Germany) of the 1920s and '30s.
The state punishes those who do good (those who provide services that customers are willing to pay for at a price they are willing to pay) and rewards those who do evil (those who use the coercive power of the state to prevent people from entering the marketplace and earning a living).
They want to abolish private control of the means of production, market exchange, market prices, and competition. But at the same time they want to organize the socialist utopia in such a way that people could act as if these things were still present. – Ludwig von Mises
The consequences of inflation, higher taxes, and more regulation that result from government bailout plans, however, are sure to make losers of us all.
Hamiltonian mercantilism is essentially the economic and political system that Americans have lived under for several generations now.
Money passing back and forth from the amorphous fiscal blob in DC and listed corporations is as difficult to follow as a shell game.The public is expected to sit blinking like a corporate mistress in a James Thurber cartoon.
Presented to the Auburn University Economics Club, Auburn, Alabama, on 14 October 2008.
Really smart guys (and now gals too) built impressive models that were quite rigorous in some respects, yet woefully deficient in others. In the case of economics, this hubris led to horrible government policies. We can only hope the same doesn't happen because of the climate models.
By outlawing short selling, the Securities and Exchange Commission outlawed a practice that produces information necessary for financial markets to function smoothly.
