Growth or austerity? That's the choice facing Europe these days—or so the Keynesian consensus keeps saying. According to this view, which has dominated world economic councils since the 2008 crisis began, "growth" is mainly a function of government spending.

Spend more and you're for growth, even if a country raises taxes to pay for the spending. But dare to cut spending as the Germans suggest, and you're for austerity and thus opposed to growth.

This...