Steve Horowitz has a good piece in the Freeman Online about some of the Keynesian errors of aggregation. The following point especially is instructive:
The Austrian insight is relevant to both capital and labor. In standard Keynesian models (as well as most other macroeconomic models), capital is understood as an undifferentiated mass. The Keynesian model also assumes that interest rates do not equilibrate the supply of savings and the demand for investment funds. Thus when people save more, there’s no signal transmitted to investors that they should build more for the future. As a result, the decline in consumption that accompanies the increase in savings causes firms to invest less as their inventories pile up without any offsetting increase in investment elsewhere due to the lower interest rate.There is much to like in this piece and I hope readers will examine it.
Jeff Tucker, one of the most insightful people I know, has written this piece in answer to the recent work by Charles Murray that calls attention to what he calls the "Great Divide" between American social and economic classes. Tucker notes that the system is rigged against the poor in ways that neither conservatives nor liberals can begin to understand:
That leaves the fundamental question: Why has this actually happened? From what I’ve read, Murray seems to overlook the political reasons for why the lower third has begun to eschew the bourgeois virtues. It all comes down to economic opportunity and deep integration into the division of labor, for it is through commerce that individuals acquire value in the eyes of themselves and others.That certainly seems to be the case in Maryland, which is a one-party state dominated by urban Democrats. All of the Democrats I know here at Frostburg State (which is most of the faculty and student body) claim to have Great Compassion for the poor, but that compassion is reflected ONLY in their view that to really help the poor, we need to make sure that they have enough welfare benefits. Raising the minimum wage also is Holy Grail, and the fact that the minimum wage puts a lot of poor people out of work either is ignored or is dismissed with a reference to the Card-Krueger AER paper (if they know about that paper) or to something else
The regulatory and tax states have made the lower classes into pariahs from the point of view of the commercial world. They are expensive to hire and hard to fire, which makes them even more expensive to hire. The minimum wage is bad enough, but that is only the beginning. A giant machinery governs how, where, when, and under what terms they can work and enjoy fulfilling lives. Business creation is harder than ever for anyone but the highly educated elite.
When they do get jobs, the whole system is allied against their social advancement. Cash business is criminalized. Everything requires a permit. The bureaucracy rules, instead of the entrepreneur. The laws, taxes, mandates, programs — and everything else the state has done — work like a giant bed of sharp rocks in the middle of a river that punishes those who tried to get to the other side.
Inflation and the Fed’s interest-rate policy have punished the accumulation of wealth and shortened the time horizon of the lower third of the population classes. The rise of the police state and the criminalization of their lifestyle have driven them into a culturally, socially, and legally marginal existence, so that they are always one step away from entanglement with police, courts, and jail.
As government grows — and the regulatory and tax states expand — and as the prohibitions on behaviors, services, and goods grow and grow, society becomes ever less economically mobile and dynamic. The class system that is part of every society becomes a caste system of entrenched position. It becomes a society of the put-upons versus the privileged.
What I find is that the poor are revered, but only if they can be revered from a distance, as faculty members and poor people really have nothing socially in common.