If we step back and take a hard look at these two competing (Austrian and mainstream) views, we cannot help but notice that the popular (read: vulgar Keynesian) way of looking at an economy is mechanistic at best and absolutely impersonal at worst. In this view, the “purpose” of an “economy” is to clear goods from shelves so people can be employed making things to put back on the shelves. Consumption is reduced to “spending,” and to make things worse, people are supposed to “spend” as their “patriotic duty” to “support the economy.” What “economy”?
Professor Robert Higgs writes:
He [the vulgar Keynesian] supposes: if only the government stepped in and used its own deficit spending to make up for the reduced private investment and consumption spending, then business would be restored to profitability and workers reemployed without any economic restructuring.
Indeed, anyone who believes an economy is nothing more than a mechanical operation in which some people produce, others spend, and then government makes up the difference really does not understand economic processes. Consumption and production are not two independent and unrelated activities; they are intricately tied together to reflect how people meet their needs. Unfortunately, many of today’s “great minds” in economics do not understand that simple point of economic logic. The economy – and real people – suffer because of that.