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Janet Yellen

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On October 15th, Thomas Sowell wrote a column about Janet Yellen being nominated as head of the Federal Reserve System.
The following paragraphs are from Professor Sowell’s article.
“Ms. Yellen, a former professor of economics at Berkeley, has openly proclaimed her views on economic policy, and those views deserve very careful scrutiny. She asks: "Will capitalist economies operate at full employment in the absence of routine intervention?" And she answers: "Certainly not."
Janet Yellen represents the Keynesian economics that once dominated economic theory and policy like a national religion -- until it encountered two things: Milton Friedman and the stagflation of the 1970s.”
It is no surprise that a liberal Democrat like Barack Obama would nominate a Keynesian for a powerful position in government.
Every economic policy of liberal Democrats in lockstep with Keynesian economic theory despite the stagflation of the 1970’s that proved that Keynesian economic theory is flawed.
How did the stagflation of the 1970’s prove that Keynesian economic theory is flawed?
According to Keynesian economic theory, the cause of inflation is a booming economy and there is a trade-off between inflation and employment. Higher employment means more inflation and lower employment means less inflation.
The classic definition of inflation is too many dollars chasing too few goods. It should be obvious from that definition that more production means less inflation and more production means more employment.
For Democrats, the problem with classical economics is that it does provide a reason for the government to control the economy. In fact, classical economic theory says that the economy is much better off without government intervention.



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