Two Schools that Need New Curriculums: We Need to Replace Keynesian and Austrian Economics with a Standard of Living Paradigm

As an Economics teacher of some extremely bright students, I frequently am asked by some of the strongest, "Mr. Lane, are you a Keynesian or a Classical Economist?"   My first reaction is a laugh because I have convinced my students that I am an Economist at all!  But hearing this question every semester, I finally have a decent answer, "Neither, I am a standard of living economist."

These days Keynesian economics by and large encourage government deficit spending and central bank policies that maintain low interest rates, with the goal of muting the magnitude of the business cycles.  While most skilled business people prefer periodic downturns and upturns in economic growth rates due to the business cycle, Keynesians prefer government and quasi-government agencies to act to mute such cycles.  In contrast, laissez-faire Classical economists encourage a default response to economic recession or economic acceleration that demands patience of both households and firms to let markets and human behavior adjust to excesses and shortages.  As anyone who even periodically notices current events knows, Keynesian enjoy-today "because we're all dead eventually" economics is currently en vogue globally, but at some point the pendulum will swing toward the Classical school.

Despite the dominance of these two camps, in working with my students every day, I am becoming more optimistic that the a new camp may emerge:   Standard-of-Living economics.   If policymakers would pick and choose from existing policy options while carefully considering the potential long-term impacts of such options on the average citizen's potential to increase their standard of living over coming years, then it is more likely that policymakers will choose options that provide such a setting.  Unfortunately, I haven't seen or heard much about monetary or fiscal policy focus on standard of living mobility since the very early months of current Federal Reserve chairman, Janet Yellen, took office.  Hopefully these great students I get to teach will be part of a movement to shift economic policy toward upward social mobility tools and paths for the masses, rather than muting the natural business cycle associated with a capitalist economic system.