September 12, 2011
Obviously if you add fiscal stimulus to the economy society's aggregate demand curve will shift to the right increasing the demand for foreign trade which will shift the IS curve to the left which means that net imports will increase which means that the LM curve will shift three growth units to the right which clearly results in job creation and an increase in GDP...wait, WHAT!? This clear as mud explanation is what many politicians use to justify passing legislation. If you read the article I attached to this blog post, the tone of the article is as if the economy is a mathematical equation. If you add two parts here then you'll increase by two parts in another area, but in our model of Austrian economics this explanation does not fly. The mainstream media talk about our economy as a machine or an engine, but our job is to analyze the economy as an organism or ecosystem. The President is so sure that his job creation plan will work because his image of the economy is a machine that can be tweaked and primed to perform better. I have a few points that people should think about when considering this article from an Austrian school of thought: 1) In what time frame will these jobs be "created" 2) What is "creating jobs?" 3) How is additional money being distributed throughout the economy going to create additional opportunities for employees and employers to agree to exchange labor for compensation? (aka jobs). The President's plan for "creating jobs" seems to tell me that President Obama and his advisors see the economy as more of a stationary machine rather than a living, growing organism. This is dangerous because dangerous assumptions are made about the behavior of our nation's economy. Instead of thinking about the economy as a bunch of "jobs" and GDP's and IS/LM/BP curves, we should instead try to think of the economy as a market consisting of buyers and sellers who are interested in bettering their own interests. Instead of trying to "stimulate" the economy, with our Austrian school of thought we should be more concerned about preserving the future prosperity of our nation by thinking of the world as an ever changing and adapting organism that is not subject to the mathematics that we often apply to it.
Posted by Spencer Baucke at 5:44 PM