The echoes of John Maynard Keynes still resonate across the intellectual and policy terrain traveled by economists. Thankfully, though, these echoes seem to be growing fainter with each passing year.
From Here to Economy serves as an example of such developments. Author Todd Buchholz provides an interesting overview of the economics world, though his book is occasionally marred with Keynesian fallacies.
First, let’s deal with the downside of Buchholz’s book. He lends some credence to such myths as the “overheated economy” and Keynesian pump-priming—giving them more serious treatment than warranted. Buchholz is, at times, a little too generous in his description and application of “macroeconomics.”
In addition, one would have hoped for greater substance when describing free-market schools of thought, such as Austrian and supply-side economics. Though generally fair in his limited discussions of these two schools, the author is too dismissive of the Austrian influence in the study of economics.
Despite these negatives, there remain many positive aspects of From Here to Economy. Buchholz often manages to combine sound economics with an entertaining writing style.
Most important, Buchholz generally acknowledges the efficacy of markets and the many problems of government intervention. He sees the limits of government power and knowledge. Buchholz recognizes Friedrich von Hayek’s important contribution in this area: “Hayek’s most damning criticism of government intervention in the economy rests on [his] ‘ignorance argument’—governments cannot possibly gather enough information from throughout the world to intelligently choose whether the price of tin should be X or Y dollars. In contrast, market players do not need to know anything other than prices in order to make their choices.”
On other subjects, Buchholz hits the mark as well.
He understands the woes plaguing the health-care market: “The basic problem is that most people who receive medical treatment are using someone else’s money.”
The author also provides some fairly good entries on the evils of protectionism. He even offers a clear description of David Ricardo’s concept of comparative advantage.
Buchholz concludes From Here to Economy with recognition of the entrepreneur as the driving force in the economy. To his credit, he also acknowledges the limitations of economists in this world of entrepreneurs: “While these almost mystical forces are hard to analyze with the economist’s standard toolbox, we do know that [entrepreneurs] thrive in basically free environments. Too many rules, regulations, and taxes can snuff the entrepreneurial spark.”
As is the case with the economics discipline in general, Buchholz excels when using the tools of microeconomics and falters when applying macroeconomics. With each turn of the page, Buchholz emerges as a market-oriented microeconomist struggling to shed years of Keynesian macroeconomic indoctrination. The time has arrived to sentence Keynes to the same irrelevancy of one of his forerunners—Thomas Malthus.
From Here to Economy symbolizes the entire economics discipline’s struggle to recover from its self-inflicted Keynesian wounds. In this sense, it makes for interesting reading. However, for its intended purpose as an introduction to economics, it falls a bit short due to the aforementioned lingering Keynesian scars. I recommended Buchholz’s previous book a few years ago in a review—New Ideas From Dead Economists: An Introduction of Modern Economic Thought—and I do the same with From Here to Economy, but with some serious reservations.