Away from Freedom: The Revolt of the College Economists by V. Orval Watts

By V. Orval Watts

Murray Rothbard writes the advent to the reprint of this 1952 gem. it's by way of V. Orval Watts, one of many prime anti-Keynesians of his time. he's writing throughout the nice entrenchment of the Keynesian viewpoint in the economics career, and he demonstrates the risks and unworkability of the Keynesian viewpoint. What Watts bargains here's a freshness that incorporates seeing all his colleagues abandon the previous liberal creed—the very mark of the outdated economics profession—in prefer of a brand new making plans approach that the recent Deal and international conflict II. what is extra, he indicates that Keynesianism isn't new yet is basically a restatement of outdated fallacies that have been in the past refuted. "Keynes did little if something greater than use new phrases for previous ideas," he writes. Watts zeroes in on center error: "The Keynesian economist treats of products and credits as if they have been really separate issues. He teaches that the output of products creates a necessity for credits and currency.... The classical view, nonetheless, is that items themselves are the resource of all sound credits and sound currency." He foresees nationwide catastrophe from the highbrow developments, predicting widening enterprise cycles, decrease output, and inflation so far as the attention can see. He extra defends sound funds and loose markets. This booklet had a robust effect on a generation—a form of primer on Keynesian fallacies that also pervade the occupation if no longer by means of that identify.

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This stimulating effect, however, lasts only until the lagging costs catch up to the rise in prices— as they soon do. After that, further inflation only raises the general price level and reduces confidence in the currency. Eventually it must result in a flight of capital, which in turn sets off a degenerative spiral of growing unemployment, currency inflation, rising prices, and further export of capital. Therefore, Hahn says, the Keynesian theory that currency inflation and increased spending can increase employment is valid only if one assumes a lag in wages, and this lag will continue only as long as wage earners can be kept in ignorance of what is going on.

Under government urging and government orders, the central banks of almost all countries fostered an era of easy money (credit) in order to finance public works and deficits in government industries, to prop up various forms of economic disequilibrium which arose out of World War I, to maintain prices and wage rates for over-expanded industries, and to maintain confidence despite the unbalance and the unsound use of credit. This story—the record of government's role in the boom-and-bust of 1920-1932 has so far been told best by the late Benjamin M.

Under these conditions, banks and other lenders could safely expand credit only as the supplies of gold increased, or as producers found ways of producing goods that, at the prices asked, buyers preferred to gold. When they expanded credit faster 51 than this, both borrowers and lenders suffered losses. This means that inflation of currency or credit could not proceed far, under the gold standard, before automatic checks came into play. Under the gold standard, even government borrowing was deflationary, not inflationary.

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