Keynesianism Is A Mystical Religion That Believes Paying Taxes To Government Makes You Richer Because The Government Is Wise

I came across this post today at by William Anderson, reposted at EPJ, about Tax Day. It’s important to read in its entirety, then I’ll explain how it relates to mystic religion.


April 15 is here and we are required to do the following: tell the government our income and send much of it to Washington.

Austrian-school economists are likely to tell you this is a bad thing and that taxes and government spending lower our living standards. In other words, the more government we are required to finance, the poorer we will be. According to the Austrians, economies grow through capital investments reflecting time preferences of individuals. Furthermore, Austrians actually claim that individual savings lead to economic growth. The more we pay in taxes, the less money we have for capital investment and saving. In other words, the more taxes we pay, the less we have for the building blocks of economic growth.

However, disciples of John Maynard Keynes, like Paul Krugman and others, take a rather different view. For them, wealth is achieved by spending, which creates economic growth. When consumers don’t spend enough, government rescues the economy by upping its spending. Because of this, should government raise taxes, it actually stimulates the economy more than individuals can do through their own spending. We could allow people to spend their money as they see fit. But, it’s better to be on the safe side and tax as much of it as possible, instead.

The Keynesian “Balanced Budget Multiplier” makes it all possible. It is a version of 2 + 2 = 5. The tax-fueled magic is explained as follows:

  • All spending has a “multiplier” effect. Spending increases the incomes of others, who then spend their increased income, and the pattern continues indefinitely.
  • Individual savings, according to Keynesians, are “leakages” from the system, and if not offset by equal “injections” via government spending or increased exports, the “multiplier” then works in reverse, pulling the economy into recession.
  • Government tax increases, however, have two-fold positive net effects. First, government spends new tax revenues, which quickly multiplies and creates new jobs. Second, by reducing individual incomes, people must spend larger percentages of their incomes to uphold their present standard of living. (The famed Keynesian “multiplier” equals 1 over the savings rate, so the less we save, the greater the multiplier.)

The “logic” of the balanced-budget multiplier differs from the logic of taxation and spending in Denmark. There, individuals pay most of their income in taxes, but supposedly receive marvelous government services that are more valuable to them than what they would have purchased on their own had high tax rates not existed.

Instead, the “Balanced-Budget” multiplier creates wealth by destroying savings. Austrians obviously disagree, and the “reality gap” between Austrians and Keynesians is widened. Austrians emphasize savings, capital accumulation, market prices and market interest rates, profits, losses, with entrepreneurs making decisions in an uncertain climate under the umbrella of economic calculation.

Keynesians promise an easy way out. Just give money to the government, which will spend and spend, and the spending multiplies prosperity. Interestingly, modern intellectuals will tell you that Keynesianism is “real world,” while Austrian economics is “pie in the sky.”

On April 15, Keynesians will contribute to growing prosperity by sending more money to Washington. However, Austrians likely will have a different take.


So, we are supposed to believe, according to Keynesian economics, that being robbed means we are becoming wealthier. That government spending is somehow magical because when politicians spend the same money on their own stuff, such as killing people or giving billions to Israeli or Arab despots, it somehow creates prosperity, whereas when you spend that money on what you actually want, it makes you poorer.

So I’m in the middle now of Volume I of Murray Rothbard’s An Austrian Perspective on the History of Economic Thought. It’s such a well written book and so fantastically organized, it’s a pleasure to read. Rothbard writes like the Rambam in terms of organization, though Rothbard is more verbose. It is impossible to be more succinct than Maimonides, unless you’re Rashi, but Rambam was clearer than Rashi most of the time. Maybe I’m the first one to make that comparison.

Anyway, Rothbard writes about the history of a town in Germany where a guy named Bockelson decided Jesus wanted everything collectivized and to each according to his need etc. Sound familiar? And that everyone was going to be forcibly converted to his brand of Christianity called something or other. Anabaptism maybe? I don’t care enough to double check.

He ended up getting sieged along with his followers while everyone was starving because the division of labor broke down, as it always does in forced communism. Rothbard writes the following about Bockelson, towards the end, after he had already declared himself king and everyone was starving to death.

It is not surprising that the deluded masses of Munster began to grumble at being forced to live in abject poverty while the king and his courtiers lived in extreme luxury on the proceeds of their confiscated belongings. And so Bockelson had to beam them some propaganda to explain the new system. The explanation was this: it was all right for Bockelson to live in pomp and luxury because he was already completely dead to the world and the flesh. Since he was dead to the world, in a deep sense his luxury didn’t count. In the style of every guru who has ever lived in luxury among his credulous followers, he explained that for him material objects had no value. How such ‘logic’ can ever fool anyone passes understanding.

And then I realized, the Keynesian nonsense ‘logic’ that giving your money to politicians and bureaucrats makes you richer, is the same exact thing. All western society has been indoctrinated into a religion that essentially preaches the government as King Bockelson. Bockelson can live in luxury while the his people starve because Bockelson is beyond the flesh.

And Washington can live in luxury while its subjects are forced to pay the taxes that Washington consumes, because giving Washington money makes the people richer, since Washington is beyond the flesh. Spending makes you richer. Savings makes you poorer. The more money politicians have, the better off everyone is. The richer Bockelson is, the better off his people are.

It’s the same religion. Keynesianism and insane early protestant Christian messianic communism.


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