Mitt Romney vs Obama: we are safely in the hands of New Keynesians.

I think the most amusing thing about how the election is shaping up, is how the economic orthodoxy has seized the reins again.

As a believer in a hetro-orthodox school (post Keynesian economics), I would abhor the rise of Austrian economics, or extreme neoclassical views.

However, the fact that new Keynesian views have seized the election once again, just shows how established mainstream views are so hard to break out of.

New Keynesians, are amusingly enough, not the nightmarish creations Ron Paul would have you believe they are, nor are they particularly ardent in their belief in government intervention. Prior to 2008, the only line of debate between them and the more extreme proponents of neo-classical economic thought were a belief in monetary policy effectiveness, and perhaps a slight theoretical underpinning for fiscal policy, if not outright support.

The new Keynesian school was born of synthesis, and is a broad school that allows for many perspectives. This is why the former chairman of Economic Advisors for Bush, and current Romney advisor, Gregory Mankiw, can work so well with the husband of the former chairman of economic advisors for Obama, David Romer. In fact, the two are legendary for collaboration in the economic field, and they were each others' best man.

Mankiw wrote the seminal New Keynesian critique of the real business cycle.

http://ideas.repec.org/p/nbr/nberwo/2882.html

Real Business Cycles: A New Keynesian Perspective

N. Gregory Mankiw

He is now the main economic adviser to Romney. Make no mistake, this is the economic playbook Romney is reading from; monetary policy effectiveness, imperfect markets, market rigidities, imperfect competition->the exact same as Obama is reading from.

Don't take this as a ringing endorsement for Ron Paul or anything, since I abhor his positions (they run directly opposite to mine)---but I guess it's true. The more things change, the more things stay the same---especially in the conformist two-party general election.

I've ignored Santorum and Gingrich, because I honestly think they have put no thought into economic theory. With Gingrich, this is fairly obvious; his claim of allowing for $2.50 gas fails a basic macroeconomics class. Santorum, well, let's just say he's spent much more time talking about Satan than Keynes (though they're probably one and the same to him).

 

I'd say, just as the article says, that the failure of the left is in stigmatizing VATs, sales taxes, and consumption taxes as automatically regressive---given post-tax transfer policies, and direct transfers to the poor (the playbook followed by Nordic states), this is blatantly false.

however, to me, that is a very small sin compared to the blatant fallacies displayed by the American right on taxation.