By fighting for freedom in Washington, I’ve condemned myself to a life of frustration and aggravation. One of my many pet peeves is that so many people in DC believe that economic growth depends on consumer spending.
Back in the early days of this blog, I wrote the following.
Many people assume that consumer spending drives growth because it is roughly two thirds of the economy. But this puts the cart before the horse. Higher levels of consumer spending do not cause prosperity. Instead, more consumer spending is best understood as a symptom of prosperity.
So you can imagine how irritating it is for me to see news reports about how Black Friday spending will goose the economy.
This video, narrated by Hiwa Alaghebandian of the America Enterprise Institute, debunks this notion, while also explaining that Keynesian economics is flawed because it misinterprets the role of consumer spending.
Hiwa also narrated this video on IRS complexity.
Property + Capital –> Savings –> Growth
Thanks for speaking sanity in the insanity filled world of fiat money and artificial markets.
Yeah, but what about the massive role of consumption in the Dixit-Stiglitz monopolistic competition framework? Also, demand drives the formation of the core, agglomerated areas in the economy. This isn’t Keynesianism, it’s micro theory that highlights the importance of consumer preferences.
[...] understandably partial to my video debunking Keynesian economics, and I think this Econ 101 video from the Center for Freedom and Prosperity does a great job of showing why consumer spending is a consequence of growth, not the [...]
[...] understandably partial to my video debunking Keynesian economics, and I think this Econ 101 video from the Center for Freedom and Prosperity does a great job of showing why consumer spending is a consequence of growth, not the [...]
Love the information. Don’t like the presentation. Needs to look more like “american idol” or a videogame commercial before folks are going to absorb it. Reality is boring and the current political system wants americans to be in denial as long as possible, so the pols can make maximum profits as they loot the economy.