Originally published as a subscriber only article on 1 December 2014
It’s a basic human instinct – attempting to avoid pain. And it’s the reason we are in so much trouble now, because when it comes to managing economies, the longer you put off necessary pain, the worse the result in the end. This is the primary distinction defining the difference between Keynesian
economics. The former, which is also known as ‘interventionist economics’, promotes ever-increasing and active central (state) policy responses (think fiscal
) in the management of an economy to thwart the natural course; and, the latter, in its purist form, invites nature, and more specifically, the natural state of man as a rational decision maker (methodological individualism
), to bring about ‘equilibrium’ in markets, setting prices based on actual demand and supply conditions.