I am pretty much a newb to economics in general and to understanding the schools of thought in particular. I think I have a pretty good intuitive feel for the Austrian school… its pretty much based on common sense from what I can see, any layman can easily understand the fundamental principles. But the Keynesians are hard for me to get a handle on. Best I can tell, is that they are apologists for government meddling in the market.
I like to use analogies to gain understanding of concepts and especially how opposing concepts relate, so I came up with this one:
Imagine a patient named Economy lying in a hospital with two IVs in his arm. One IV is slowly pumping a poison called Government Intervention into his system. The second IV is slowly pumping an antidote, although the antidote itself is deadly if too much is pumped in. The antidote is called Monetary and Fiscal Policy. There are two doctors present. One is AMA (Fed) certified and he is an expert on monitoring the patient’s vital signs and then increasing or decreasing the antidote based on his best guess. His name is Keynes. The second doctor is some quack from Austria who was refused certification by the AMA (Fed) because he keeps insisting that both IVs be removed. Ironically, the patient has no idea that he could just get up, yank the IVs out of his arm, and leave the hospital for good, but thats another story.
So how about a contest. I concede at the start because I know I am not good at this but I would like to see what you guys come up with.
Bad analogy. The second IV is NOT an antidote, it too is poison (Monetary and fiscal policy). I don’t understand what you mean when you say it is an “antidote”, but deadly if too much is pumped in. It is poison regardless of the amount. That is not merely an ideological opinion. Monetary “policy” is a disaster regardless of the amount pumped in, and fiscal “policy” likewise simply redistributes and squanders scarce resources. It’s not a matter of finding the “right” amount. It is poison.
I can’t tell if you’re being sarcastic. I think it would be clearer to call Keynes “the Fed certifiied quack”, and the Austrian “the expert that no one listens to”.
This is good.
As far as your “intuitive” feel that Austrian economics is “pretty much based on common sense”, you will need to supplement this feel with study of some of the foundational books. A good place to start is The Mystery of Banking by Rothbard http://mises.org/mysteryofbanking/mysteryofbanking.pdf
Keynesians view the economy as a cylinder with a definite volume and fixed dimensions. They are fetish about seeing the cylinder filled with water up to the brim, but they hate to see the water overflow. In order to keep the water level exactly to the brim, Keynesians suggest we have some men to pour more water when the water level is below the brim, and suck out excess water when water overflows.
Austrians view the economy as a cylinder with a definite volume, but without fixed height and base dimensions(that is, the height and base changes in measure to maintain the definite volume). They hate having men to suck out or put in new water into the cylinder since they believe the cylinder will automatically change it’s dimensions to keep the water up to the level of the brim, and still maintain the volume by adjusting the height and base dimensions appropriately.
PS. The height of the water level refers to the ‘price level’. The ‘volume’ of the cylinder refers to the productive capacity of the economy. ‘water overflow’ refers to inflation(the mainstream defintion of the term). 'water refers to liquidity. ‘men’ refers to fiscal and monetary policy makers.
Doctor Death [Keynes and his ilk] thinks the sign of a healthy man is if he donates blood [spends]. When the patient is ill, he drains blood from him [taxes and inflation] and donates it to the local red cross.
Doctor Life thinks the sign of a healthy man is if he functions normally, stuff like walking around smiling and full of energy [producing more things]. When the patient is ill, he leaves him alone until his body can rejuvenate itself.
I prefer the OP terminology. The term “expert” is, today, totally synonymous with government certification. Indeed, the analogy is perfect. The bit about monitoring the vital signs is great - it brings out that all our “trained and certified experts” know is a government-built system.