On the morning of Sept. 29, the prevailing thought was that the government had no business in the private sector; by evening the plan was to invest $700 billion in finance, the most private of all sectors.

The fundamental shift that this and similar actions imply is of critical importance to understanding this crisis and the government’s response.

Any history of 20th century economics must center upon John Maynard Keynes and Milton Friedman. A light, effective course might consist solely of Keynes’ “The General Theory of Unemployment, Interest and Money” written in 1936 and Friedman’s 1980 manifesto, “Free to Choose: A Personal Statement.” Each written during what seemed, at the time, an absolute meltdown, they present starkly divergent views on what the government’s role in such a situation should be.

Their prescriptions have been ignored or revered as time and politics flow, but when one is in favor it can generally be assumed that the other is not.

In many ways, our crisis can be seen as Friedman’s last legacy. After all, it was in his name that the Senate deregulated the derivatives market, under his benediction that the Federal Reserve Board kept interest rates low and with his essays that our departed administration preached the gospel of the free market.

His views concerning deregulation have thoroughly revealed their flaws, but now even his remarks on privatization ring hollow. Reports of backdoor deals and pervasive graft in so-called “no-bid contracts,” which are quite common these days, throw fresh doubt on Friedman’s whole ideology.

Many economists are dusting old textbooks off and revisiting the works of Keynes as a result. Keynes prescribed the opposite response as Friedman: When private demand falls, the public sector (that is to say, the government) must pick up the slack.

It was in this spirit that the various New Deal programs were enacted. Deficit spending was quite alright with Keynes. In fact, he encouraged it along with the minimum wage, social security and in extreme cases, nationalization of industry. Friedman would have sooner shot himself than suggest such measures. Yet increasingly, it is to Keynes that we turn to solve these problems.

It has become the fashion, both on the left and right, to compare the administration’s recent actions to that of the New Deal. It is endlessly repeated that we are in “the largest economic crisis since the Great Depression,” and much of the recent legislation enacted to combat this disaster rather closely follows Keynes’ advice. The validity of this analysis is usually assumed and the argument instead revolves over whether or not the New Deal worked. The answer is “yes” if you are liberal and “no” if you are conservative.

But the comparison of our recent actions to the New Deal is fundamentally flawed. The Roosevelt administration funded those programs almost entirely at home. Our Treasury was flush with cash after World War I and still operated under the gold standard, two facts that certainly are not true today. If the New Deal worked (I personally think it did not), it wasn’t because the treasury printed trillions to distribute to the failing banks. Fiat currency and the magic to conjure vast sums did not yet exist.

There is much comfort that can be derived from historical analogy, and it is no surprise that in times of crisis we instinctively look to how similar problems were solved in the past. However, we must beware of relying on precedent. This crisis was produced via rules quite alien to Keynes, and it is dangerous to assume our problems, or their solutions, are the same as in his time.

What we need more than ever is a new philosophy of economics.

We are getting, instead, a nostalgic look back.

Pavan Vangipuram is a State News guest columnist and chemical engineering senior. Reach him at vangipu1@msu.edu.