Whatever Arnold Kling writes, I read. So I made sure to read his essay in AEI’s American, “When Labor is Capital.” So should you!

Kling’s article is about two theories of what constitutes an economy. For Keynesians, “economic activity consists of spending,” also known as aggregate demand. Hence, “when economic activity slows down, their prescription is to increase spending by government, businesses, consumers, or all three.” The Fed’s monetary response to the recession has had that goal in mind. The government’s fiscal stimulus operated under the assumption that increased government spending would spur consumer spending and thus help the private economy indirectly.