Sunday, May 26, 2013

State-wide economic experiments

Currently 25 states have all 3 branches of their government under Republican stewardship, while 15 labor under Democratic control.  Such a distribution allows for a very important "natural experiment" since the economic policies of the two parties are diametrically opposed.  Republican controlled states are, for the most part, engaging in more market-friendly policies (reduced taxes, reduced regulation, etc.) whereas Democratic controlled states -- have escalated their commitment to the Keynesian-approved government intervention via increased taxes, commitment to anti-business green agenda items, and more constraints on businesses.  Thus, in a couple of years, we should be able to take a look at the data and see which approach did better (actually, there's quite a bit of data available currently showing that red states are outperforming blue states economically by a wide margin.  Think Texas vs. California).

Well, in a lengthy, and worthwhile, post at the blog Somewhat Reasonable, political pundit Peter Ferrara examines a recent study from the American Legislative Exchange Council (ALEC) authored by economists Eric Fruits and Randall Pozdena.  Their study is basically a projection of what the results of this "natural experiment" are likely to be.  Here's a sample from Ferrara's post:
The bottom line is that Keynesian economics has long been refuted by experience, empirical evidence, and logic, and the failed doctrine now needs to be put to bed, in American colleges and universities, and throughout the councils of government. Moreover, Obama should have known better, given that Keynesian economics has failed so badly every time it has been tried, from the 1930s to the 1970s, and all around the world since then. He had a responsibility to the American people to know better.
Ferrara's article looks at several other research studies showing the futility of the Keynesian approach and has many excellent observations to share.