Two weeks ago, the Cato Institute published a full-page ad rejecting Obama’s claim that a consensus among economists support his demand-side Keynesian policies. The ad functioned as an incredibly quick prebuttal to Obama’s claim this week in his press conference (see a transcript) that “economists … across the political spectrum” or even “[m]ost economists, almost unanimously” essentially agree with his demand-side policies. Keynesian economists seem to crowd Obama’s horizon.

For those in a hurry to understand, as Obama should be, Dick Morris has provided a Cliff Notes™ explanation of why most economists no longer embrace the Keynesian Fallacy. This is not to deny that more than a few – though few as well-credentialed as Paul Krugman – are eager to stir the kool-aid, rationalizing from-the-prudent to-the-profligate redistribution.

Last week, George Leef published a rather insightful dialog* with Duke University’s Mike Munger, one of its signatories, in “The Unstimulating Stimulus Bill”. He is appropriately sanguine about politicians Machiavellian urge to “DO SOMETHING” and to “take credit”. Sadly, instead of observing the quasi-Hippocratic dictum “first do no harm”, these physicians choose to bleed the patient. And instead of taking credit, they’ll insist on cash.

One of the other signatories of the Cato full-page Ad is Richard Vedder, co-author with Lowell E. Gallaway of Out of Work: Unemployment and Government in Twentieth-Century America. Someone needs to get P-BO a Cliff Notes™ version in a hurry. My attempt follows.

Out of Work establishes the clear market dynamics of unemployment and demonstrates the counteproductiveness of liberal policies that purport to help the worker. It refutes and discredits Keynesian theories (especially the Phillips curve), policies (like over-reliance on the “money illusion”), and icons (like Paul Samuelson and Robert Solow). It shows how, by the late 1970’s, after two decades of demonstrably futile attempts to manage and eliminate unemployment and other economic ills, Keynesians despaired that growth and prosperity were naive and old-fashioned. (Retrospective of the Reagan era, these dark tendencies made “rational expectations” and endogenous growth theory seem all the more insightful.)

Structurally, the book begins with three chapters of accessible neo-classical Austrian theory (a la Schumpeter and von Mises) explaining how unemployment is plausibly and strongly determined by prevailing wages and changes in general prices, wages, and output rates. The third chapter closely fits the theory with data from multiple sources over the entire century, among them Christina Romer, P-BO’s new Chair of the Council of Economic Advisors. The authors then substantiate their case with nine chapters, roughly decade by decade, of economic data and graphical analysis, coupled with a synthetic view of historical and policy developments. They conclude with four chapters (”The Natural Rate of Unemployment”, “Who Bears the Burden of Unemployment”, “Unemployment and the State”, and “Afterword”) of informed analysis and sound (supply-side) policy recommendations.

Ebeling supplemented his review of the the 1993 Edition with some poignant early-Depression era observations by Edwin Canaan on “The Demand for Labor”. Time will tell.

*Mentioned by Rush Limbaugh on 2009/02/09 and on Munger’s own blog.