We ended up with “new economics” — fiat money, inflation, and “stimulus” spending — because that was what Washington wanted to hear:
The case is the same today: Barack Obama’s “stimulus” proposal involves doubling Federal discretionary spending, ie everyone’s budget. Obviously, this makes quite a few people very happy. And it probably spreads the loot around a little better than if we were just to give it all, up front, to Tony Rezko.Hence the death of orthodox economics. The orthodox economists of the 19th century, the believers in sound money, were not in general policymakers. They viewed their task as one of describing the economy, not controlling it. But in the ’20s and ’30s, when university men started to move into government, politically palatable solutions were needed. The Austrians and other orthodox historians had nothing of the sort. So they were left out of the pie when all the power got distributed, and today they have no government jobs and only a few marginal academic ones.