Seeking champions for Alaska's future: Whose economic theory will guide Alaska--Keynes or Hayek?

• Author: Petro, Rachel
• Position: GENERAL OP-ED - Friedrich Hayek, John Maynard Keynes

A man is walking along a road in the countryside and comes across a shepherd and a huge flock of sheep. He tells the shepherd, "I will bet you $100 against one of your sheep that I can tell you the exact number in this flock." The shepherd thinks it over; it's a big flock so he takes the bet. "973," says the man. The shepherd is astonished, because that is exactly right. "I'm a man of my word. Take an animal." The man picks one up and begins to walk away.

"Wait," cries the shepherd, "give me a chance to get even. Double or nothing that I can guess your exact occupation." The man takes the bet. "You are an economist," says the shepherd. "Amazing!" responds the man, "you are exactly right! But tell me, how did you deduce that?"

"Well," says the shepherd, "put down my dog and I will tell you."

Dogs and sheep aside, Alaskans are engaged in a nearly century-old debate among economists. Sometimes referred to as the "dismal science," just saying the word "economics" has been known to induce coma-like symptoms. Heck, an economist told me that shepherd joke. And yet, every day we awake to the real-world impacts of the debate between Keynesians and Hayekians.

ECONOMIC THEORIES

Keynes postulated that deficit spending to stimulate in poor economic times would be repaid in the resulting good economic times. Hayek asserted that government-led spending would miss the correct market signals, and deepen the economic troubles, leading to further interventions, further deficit spending, and further removal of capital from the private sector--the economic version of a nose dive.

Worldwide, elements of Keynes' ideas reigned supreme from the 1930s through the 1970s, and then elements of Hayek's ideas gained the upper hand. The bursting of the dotcom and real estate bubbles has world leaders running back to the Keynes camp. Our own presidents George W. Bush and Barack Obama jumped feet first into the Keynes camp by proposing government stimulus and "too big to fail" programs with borrowed money.

Please note that I qualified that governments have adopted "elements" of each economists' ideas. I was not the best economics student, but I know these two and their acolytes wrote, and are still writing, volumes of theories that few human beings could digest, let alone understand and implement in the public arena.

On one hand, some Alaska leaders think that in tough economic times, government spending is the preferred method to create jobs and invigorate the economy. On...