If the Great Depression is the most difficult economic event for non-Keynesian economists to explain, then the late 1940’s are the most difficult period for Keynesians to explain. From a Keynesian perspective, the government did everything wrong–it slashed spending and reduced spending. Yet, instead of falling into Depression, the economy did fine.

Real economic growth happens when technology and social institutions improve in ways that raise productivity. Higher productivity not only lowers cost per unit of output, it increases total output. This higher output, in turn, lowers prices (unless it is matched by an increased supply of money). If inflation is caused (as it is) by “too much money chasing too few goods,” inflation cannot also be caused by “a fixed amount of money chasing ‘too many‘ goods.”

The right question is not how best to reduce emissions, but how best to cope with the fact that carbon-based technology can have a substantial downside. We might want to deal with that by reducing emissions; we might want to deal with it by finding other ways to cool the earth; we might want to deal with it by moving all our cities northward and inland; we might want to deal with it through some combination of those strategies; we might want to deal with it in some way that nobody has yet imagined. A Pigovian tax does a good job of reducing emissions, but at the same time it causes people to work less hard at the alternatives. Therefore, depending on particulars, a Pigovian tax could be an excellent idea or a disastrous one.

So who’s to say that each Chinese person’s right to the fruits of economic growth are superceded by each non-Chinese person’s (or even each Chinese person’s) right to be free of whatever increased health risks might result from continued economic growth in China?

The full headline from the Examiner is, “Dems cleaning up in record congressional fund-raising, special interests flock to donkeys.” That’s a little unfair, in that just about anyone who has a business to protect from government predation is obliged to hire lobbyists and enlist Congressional supporters. Not all interests are “special.” But those who want something from government are always more comfortable dealing with Democrats. Every now and then, Republicans actually stand on principle.

Boy, the Canadians are just dominating their southern neighbor these days. First, they announced the unilateral elimination of all industrial tariffs in order to boost Canadian manufacturers (as US officials were complaining about the trade deficit and embracing mercantilism). And now, they’ve announced an amazingly sane response to rapid currency devaluation by… wait for it… the United States. Here’s BNA (subscription) with the embarrassing details: