Avoiding Economic Pseudo-Science – Reuven Brenner

John Keynes ’ 1936 General Theory provided the foundations of macroeconomics, justifying deficit spending and increasing national debt to restore confidence and stabilize the economy.

But John Keynes was mistaken that the world needed a new jargon -filled, fact-free mish-mash.

Keynes ' view and solution stood in sharp contrast with Milton Friedman’s for those same years.

The financial sector, with a large number of independent, dispersed players, would have better incentives to prevent such mismatches or correct them more quickly.

This old debate helps to explain how the destruction of access to capital brought panic and bets on policies based on macroeconomics' half -baked ideas.

James Bullard , President and CEO of the Federal Reserve of St Louis between 2008 and 2023 , challenged the macro-myth in his 2012 “ Death of a Theory ” Milton Friedman admitted near the end of his life that using macroeconomic models and aggregates to refute them was his biggest blunder.

The most reliable indicator comes from adding the forward-looking total enterprise values to the value of the government’s total outstanding debt.