In an article that urges the federal government to get out of the business of subsidizing home mortgages and making and guaranteeing college loans, National Review‘s Kevin D. Williamson makes a compelling argument against the “neo-Keynesian” urge to boost consumer consumption.
Whatever consumer spending amounts to as a share of the economy, we do not need to encourage it, because getting people to consume in sufficient quantities is not the problem — ever been to McDonald’s? Walmart? Tiffany? A household with 600 cable channels? The after-Christmas sale at Saks? Neo-Keynesian sophistry to one side, no man, no household, and no nation becomes wealthy through consumption. We become wealthy through production. And our policymakers get the direction of the consumption-production vector 180 degrees backwards: As Say’s Law teaches us, we produce in order to consume; we don’t consume in order that others may produce. But Washington continues to believe that if it can just goose consumption enough with cheap money and giveaway interest rates, production and economic growth will magically follow suit. You can empirically test that theory by wishing for lunch and seeing how long you remain hungry.
Williamson’s words remind me of Mount Olive College economist Paul Cwik’s assessment of Say’s Law, as explained to Carolina Journal Radio/CarolinaJournal.tv earlier this year.