Economics

The Power and Necessity of Consumer Surplus

Peter Smith’s October essay (“The Free Market—Efficient, Amoral, and Ready to Go”) is a masterpiece of clarity and simplicity about the essential flaw of Keynesianism and “aggregate demand”. Schumpeter used a term, “capitalism in fetters”, to sum up what Peter Smith is describing: in spite of profligate governments, discriminatory and burdensome taxation, ever-increasing regulation, and arbitrarily-imposed “redistributive justice”, efficient and amoral free-market economic forces have always found ways through to make us all richer.  Peter Smith concisely states the Keynesian assumption about aggregate demand in times of economic slowdown:  If only those pesky consumers still in jobs would lift their…

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