The Christmas season is an appropriate time to reflect on Keynesian economics, given this: believing in Keynesian economics is a lot like believing in Santa Claus.
Most Americans grow up believing some chubby guy in a red suit has the stamina to deliver gifts worldwide to billions of people in a single night. Young children, by their nature, are self-absorbed and gullible enough to think that Santa knows how they behaved throughout the year and will deliver presents accordingly.
Most of us grow up and realize that reindeer can’t fly, Santa would freeze to death in the North Pole and his elves would unionize.
But not everyone outgrows gullibility. Some become Keynesian economists. As Keynesians, they don’t quite understand unemployment, because they never experience it – there is plenty of demand for Keynesians, who can find jobs working for the government, in academia or as journalists.
Keynesians believe that increased government spending (aka “aggregate demand”) stimulates the economy and money can be handed out, like Christmas presents, with only positive consequences. They even believe that a dollar spent by the government results in many dollars being spent throughout the economy (the “Keynesian multiplier”). Since they believe there is a Santa Claus, they give little thought to the reality that someone, somewhere has to pay for this largesse.