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Thread: Keynsian Economics

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    Keynsian Economics

    [url]http://online.wsj.com/article/SB10001424053111903596904576514552877388610.html[/url]


    Christina Romer, the University of California at Berkeley economics professor and President Obama's first chief economist, once relayed the old joke that "there are two kinds of students: those who hate economics and those who really hate economics." She doesn't believe that, but it's true. I'm surprised how many students tell me economics is their least favorite subject. Why? Because too often economic theories defy common sense. Alas, the policies of this administration haven't boosted the profession's reputation.

    Consider what happened last week when Laura Meckler of this newspaper dared to ask White House Press Secretary Jay Carney how increasing unemployment insurance "creates jobs." She received this slap down: "I would expect a reporter from The Wall Street Journal would know this as part of the entrance exam just to get on the paper."

    Mr. Carney explained that unemployment insurance "is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring."

    That's a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this.

    I have two teenage sons. One worked all summer and the other sat on his duff. To stimulate the economy, the White House wants to take more money from the son who works and give it to the one who doesn't work. I can say with 100% certainty as a parent that in the Moore household this will lead to less work.

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    Associated Press
    White House Spokesman Jay Carney

    Economic bimboism is rampant in Washington. The Center for American Progress held a forum earlier this summer arguing that raising the minimum wage would create more jobs. For this to be true, you have to believe that the more it costs a business to hire a worker, the more workers companies will want to hire.

    A few months ago Mr. Obama blamed high unemployment on businesses becoming "more efficient with a lot fewer workers," and he mentioned ATMs and airport kiosks. The Luddites are back raging against the machine. If Mr. Obama really wants to get to full employment, why not ban farm equipment?

    Or consider the biggest whopper: Mr. Obama's thoroughly discredited $830 billion stimulus bill. We were promised $1.50 or even up to $3 of economic benefit—the mythical "multiplier"—from every dollar the government spent. There was never any acknowledgment that for the government to spend a dollar, it has to take it from the private economy that is then supposed to create jobs. The multiplier theory only works if you believe there's a fairy passing out free dollars.

    How did modern economics fly off the rails? The answer is that the "invisible hand" of the free enterprise system, first explained in 1776 by Adam Smith, got tossed aside for the new "macroeconomics," a witchcraft that began to flourish in the 1930s during the rise of Keynes. Macroeconomics simply took basic laws of economics we know to be true for the firm or family—i.e., that demand curves are downward sloping; that when you tax something, you get less of it; that debts have to be repaid—and turned them on their head as national policy.

    As Donald Boudreaux, professor of economics at George Mason University and author of the invaluable blog Cafe Hayek, puts it: "Macroeconomics was nothing more than a dismissal of the rules of economics." Over the years, this has led to some horrific blunders, such as the New Deal decision to pay farmers to burn crops and slaughter livestock to keep food prices high: To encourage food production, destroy it.

    The grand pursuit of economics is to overcome scarcity and increase the production of goods and services. Keynesians believe that the economic problem is abundance: too much production and goods on the shelf and too few consumers. Consumers lined up for blocks to buy things in empty stores in communist Russia, but that never sparked production. In macroeconomics today, there is a fatal disregard for the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy. "All economic problems are about removing impediments to supply, not demand," Arthur Laffer reminds us.

    So here we are, three years of mostly impotent stimulus experiments and the economy still hobbled. Keynesians would be expected to be second-guessing the wisdom of their theories. Instead, Prof. Romer recently complained that the political system will not allow Mr. Obama to "go back and ask for more" stimulus.

    And that is why Americans hate economics.

  2. #2
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    George Bush's entire Presidency was an example of an economy run on stimulus. It worked until the bubble burst.

    Of course when the economy fails into the crappier unemployment benifits have to be paid out without them families would be forced into poverty and businesses would go without customers.

    The problem is we had 8 years of stimulus while the economy was decent and fought 2 wars off budget. Now when we need the government to step into the void left by businesses and individuals deleveraging the government is tapped out. That's why we have a soveriegn debt crisis spreading around the world.

    The problem is we have overspent during relatively good times for the private sector.

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    keynes is why we only had relatively minor recessions since 1930. before keynes there were wild booms and depressions every 20 years or so.

    if the Gov't didn't step in (keynes style) with TARP it would have been a global depression instead of a credit crunch, and yes there is a big difference.

    people bash Keynes but they don't all understand him. the old way (what exactly is that? Adam Smith-ism?) is gone and not coming back. We are all better off living in a world with Keynes than without him.

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    [QUOTE=bitonti;4109368]keynes is why we only had relatively minor recessions since 1930. before keynes there were wild booms and depressions every 20 years or so.

    if the Gov't didn't step in (keynes style) with TARP it would have been a global depression instead of a credit crunch, and yes there is a big difference.

    people bash Keynes but they don't all understand him. the old way (what exactly is that? Adam Smith-ism?) is gone and not coming back. We are all better off living in a world with Keynes than without him.[/QUOTE]

    My Macro economics classes are a while ago but I REALLY enjoyed macro. I studies more than a casual student although it was not my major. That said... The current environment is an INSULT to Keynes. Keynes made it clear, that government had a place where the private sector did not make sense.

    He never intended to make the poor indentured slaves of the left, create a civil service that crowds out the private sector with benefits and salary that NO private company could pay. No where in his work , does he mention unfettered deficit spending yet he clearly mentions deficits and paying it back when times are good.
    Last edited by southparkcpa; 08-19-2011 at 10:35 AM.

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    Modern Liberalism is Social Welfare Collectivism when it comes to economics, pure and simple.

    Individual liberty is secondary in all ways to the power and authority of the State, and the greater goal of enforced equallity of economic outcomes, regardless of differing level and quality of inputs.

    A modern American Liberal would be happiest in a system of one-party rule, with a weak rubber-stamp legislature, very strong (almost Dictator-like) Executive, 75-95%+ taxation on the top 40%, with almost no taxation of the bottom 60%, enforced Union Membership for all workers and mandatory party membership to the one-party rulers for all Union memebrs, and a total system of social welfare without limits on duration and qualification.

    That is the economic utopia modern American liberals believe in. The individual is evil, the State is rightious, and all wealth should be redistibuted equally among all people, by force of the State.
    Last edited by Warfish; 08-19-2011 at 10:44 AM.

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    [QUOTE=southparkcpa;4109378] That said... The current environment is an INSULT to Keynes. Keynes made it clear, that government had a place where the private sector did not make sense.

    He never intended to make the poor indentured slaves of the left, create a civil service that crowds out the private sector with benefits and salary that NO private company could pay. No where in his work , does he mention unfettered deficit spending yet he clearly mentions deficits and paying it back when times are good.[/QUOTE]

    I can appreciate a comment like this, coming from a position of understanding, and making a critique of how Keynesian policies are implemented. Certainly things aren't perfect.

    I cannot appreciate people who say Keynes has failed and things were better when we were all pooping in holes in outhouses. there is no alternative to Keynes. Supply side is dead.

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    [QUOTE=Warfish;4109386]

    That is the economic utopia modern American liberals believe in. The individual is evil, the State is rightious, and all wealth should be redistibuted equally among all people, by force of the State.[/QUOTE]

    story time is fun.

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    [QUOTE=bitonti;4109395]story time is fun.[/QUOTE]

    So, apparently, is dishonesty.

    Spending "Cuts", right?

    Immigrants, not Illegals, right?

    "Fairness" not confiscation and redistribution, right?

    "Equallity", not affirmative action preferantial treatment, right?

    "Revenue" not taxation, right?

    "Shared Sacrifice", not a system where 50%+ pay no income taxes, right?

    etc...

    etc..

    etc.

    You've been telling stories for years here Bit, of course you love story time. And yes, I have no doubt whatsoever you'd prefer the system detailed above to our current system. No doubt in my mind whatsoever.

    For the record, if it's a "Story", by all means, feel free to descrivbe in detail your personal preference for Economcis/Taxation/Fiscal Policy for your dream version of the United States. Hell, I wrote a few thousand words the other day, you're certainly capable fo doing the same. So if I got you wrong, then explain in detail to us what IS your favored economic system (in detail) yourself, for the record.
    Last edited by Warfish; 08-19-2011 at 10:52 AM.

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    [QUOTE=bitonti;4109393]I can appreciate a comment like this, coming from a position of understanding, and making a critique of how Keynesian policies are implimented.

    [B]I cannot appreciate people who say Keynes has failed and things were better when we were all pooping in holes in outhouses[/B].[/QUOTE]

    Bit..

    No one hear (I don't believe) has said that, but let's not denegrade a great economist like Keynes, Who did a lot of terrific research.

    The environment we are in, especially the spending under BUSH and Obama, would make Keynes roll over and puke in his coffin.

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    [QUOTE=Warfish;4109403]feel free to descrivbe in detail your personal preference for Economcis/Taxation/Fiscal Policy for your dream version of the United States. Hell, I wrote a few thousand words the other day, you're certainly capable fo doing the same. So if I got you wrong, then explain in detail to us what IS your favored economic system (in detail) yourself, for the record.[/QUOTE]


    can I take a crack at this?


    it won't be as detailed and well thought out as what you wrote, but I know you throw me in the far left liberal/socialist group, so I thought it would be interesting to see if you think what I would do is socialist/liberal.




    I think everyone should pay the same percentage on income. I would be open to lowering that percentage only for the truly poor, like household income under 20,000 or so.

    I would combine a lower tax rate (say for arguments sake 20%) with a 10% or so consumption tax similar to what you detailed (excluding food, clothing, maybe throw school supplies in there, medication, you get the idea).

    I think welfare and food stamps should continue under different circumstances. We don't seem to have any incentive to get people to work and we don't seem to have a system that even addresses that issue. I think welfare should be seen as a loan, one which has to be paid back once employment is reached through a separate tax taken out of former welfare recipients checks.

    I don't think anyone who has a job should also get a check from the gov't but I don't have a problem with food stamps or vouchers or whatever you would want to call them. I would also be ok with gov't programs that provide school supplies or lunches for poor children.

    I think we should close tax loopholes for businesses and create new tax incentives for businesses to train and hire. I think you could figure out how to re-educate the unemployed in fields that are hiring and incentivize companies to do that training.

    Not every person is going to have a great job, so if you elect to collect welfare, you are going to get whatever job is presented to you. If not, you don't get the checks anymore or you start performing 8 hour a day "community service" type work until you do take a job. I think a month of picking up trash or cleaning up graffiti may incentivize you to take that job.

    I think our economy can be a hybrid of private sector and gov't, I think gov't should be sort of a incentive program to business to grow and train and hire.

    Is it perfect, I don't know, and could it have problems or be tweaked, probably.

    I also think we need to cut spending. I think we could live with a 25% cut across the board on everything, eliminate most of our overseas aid (I don't mind food banks and helping with basic necessities, but money we hand over to foreign gov'ts should stop.) Eliminate spending on programs with no real value and clean up corruption, over-billing, and redundancy.

    I don't know who to trust with a job as big as cleaning up the budget. It is obvious the people in power now really don't have a great incentive to cut programs that waste money or get a quality deal for what we do need to spend money on.

    Here is what I do know, I bet if Warfish and I were given a weekend to clean up the budget and go through the books we could get it done faster than congress.

    Heck, as ideologically opposed to each other as they are Fish and Bit could probably do a quicker and better job.

    I feel like there would be a lot of "we spend how much on that?!?"



    side note: I hate John Stossel, mainly because his cadence in very Mr Rogers and I feel like he thinks we are all children but I did stumble onto a piece he did about a program giving away bike helmets to people (adults and children) and I agreed with his basic premise which was "WTF?!?"

    I mean, you have money for a bike but not a helmet? Really?


    Then I remembered how I listened to Helmet when I was in high school. Then I felt old.

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    It's because Keynesian economics is a complete farce. The economists from the Austrian school of thought have gotten everything right including in the last ten years: [U]the tech bubble[/U], [U]the housing bubble[/U], [U]the collapse of the dollar[/U], [U]the prediction that the fed would continue to print money ad nauseum[/U], [U]the skyrocketing price of gold[/U] (and soon to come silver)...etc

    Want to know the truth about money and economics works? Check out guys like Tom Woods and Bob Murphy from the Ludwig Von Mises Institute.

    [url]http://mises.org/media/4328/Unemployment-The-1930s-and-Today[/url]

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    [QUOTE=Warfish;4109386]Modern Liberalism is Social Welfare Collectivism when it comes to economics, pure and simple.

    Individual liberty is secondary in all ways to the power and authority of the State, and the greater goal of enforced equallity of economic outcomes, regardless of differing level and quality of inputs.

    A modern American Liberal would be happiest in a system of one-party rule, with a weak rubber-stamp legislature, very strong (almost Dictator-like) Executive, 75-95%+ taxation on the top 40%, with almost no taxation of the bottom 60%, enforced Union Membership for all workers and mandatory party membership to the one-party rulers for all Union memebrs, and a total system of social welfare without limits on duration and qualification.

    That is the economic utopia modern American liberals believe in. [B]The individual is evil,[/B] the State is rightious, and all wealth should be redistibuted equally among all people, by force of the State.[/QUOTE]

    I am a modern American liberal and I can honestly say almost none of the above appeals to me.

    By the way, who is this 'individual' you speak of? As much as you rail against unions you fail to point out with the same zeal how corporate America in 2011 is far more of a threat to individual freedoms. Both entities circumvent democracy for their own interest. The difference is that unions make up 6% of the private workforce, its lowest number in decades. Meanwhile, corporate influence on our democracy has never been more prevalent.

    Modern American Capitalism is code for corporate welfare.
    Last edited by intelligentjetsfan; 08-20-2011 at 01:19 PM.

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    [QUOTE=intelligentjetsfan;4110672]I am a modern American liberal and I can honestly say almost none of the above appeals to me.

    By the way, who is this 'individual' you speak of? As much as you rail against unions you fail to point out with the same zeal how corporate America in 2011 is far more of a threat to individual freedoms. Both entities circumvent democracy for their own interest. The difference is that unions make up 6% of the private workforce, its lowest number in decades. Meanwhile, corporate influence on our democracy has never been more prevalent.

    Modern American Capitalism is code for corporate welfare.[/QUOTE]

    You are liberal because you have a relatively guaranteed source of income, summers off and little in the way of worries like a butcher, bake or candlestick maker. I wonder how liberal you would be if you taught at a private high school where results were measured and the well being of the economy actually affected you more directly.

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    [QUOTE=Jetlag;4110657]It's because Keynesian economics is a complete farce. The economists from the Austrian school of thought have gotten everything right including in the last ten years: [/QUOTE]

    no one can predict the future, but at least in a Keynesian system, you can do something about it when bad s--t happens.

    I don't see alot of alternatives. The other way isn't less control, it's more i.e. China's central gov't.

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    [QUOTE=southparkcpa;4110732]You are liberal because you have a relatively guaranteed source of income, summers off and little in the way of worries like a butcher, bake or candlestick maker. I wonder how liberal you would be if you taught at a private high school where results were measured and the well being of the economy actually affected you more directly.[/QUOTE]

    this is a pretty bulls--t comment attacking the source not the argument. I'm sure if we knew all your details we could suss out why you are the way you are. but What does that have to do with debate?

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    [QUOTE=piney;4109770]I think welfare should be seen as a loan, one which has to be paid back once employment is reached through a separate tax taken out of former welfare recipients checks. [/QUOTE]


    it's a creative idea but now the gov't is basically entering people into bondage situations, indentured slavery.

    [QUOTE=piney;4109770]
    Here is what I do know, I bet if Warfish and I were given a weekend to clean up the budget and go through the books we could get it done faster than congress.

    Heck, as ideologically opposed to each other as they are Fish and Bit could probably do a quicker and better job.

    [/QUOTE]

    on this we agree

    by the way a 25% cut across the board would be a giant accomplishment, and gets 3.4T of spending to roughly 2.6T. still 400 billion short. taxes have to be adjusted after that point.
    Last edited by bitonti; 08-20-2011 at 02:10 PM.

  17. #17
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    [QUOTE=bitonti;4110749]this is a pretty bulls--t comment attacking the source not the argument. I'm sure if we knew all your details we could suss out why you are the way you are. but What does that have to do with debate?[/QUOTE]

    Disagree.. I believe firmly that many civil servants who rely on government throwing money at a problem are liberal because they benefit from liberalism. Most programs create a HUGE layer of civil servants with the problem remaining unchanged.

    I am the way I am because I grew up on welfare and food stamps and as a child I could see how "addictive" government handouts were and are.

    I mean no disrespect to IJF personally, he 's probably a pretty good guy.

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    [QUOTE=southparkcpa;4110732]You are liberal because you have a relatively guaranteed source of income, summers off and little in the way of worries like a butcher, bake or candlestick maker. I wonder how liberal you would be if you taught at a private high school where results were measured and the well being of the economy actually affected you more directly.[/QUOTE]

    I must have been absent from school the day we were taught that only private sector jobs were good and righteous. And that there was no room for public sector jobs in a mixed economy like ours. Because the answer to all ills in society is profit!

    And a teacher has little worries, certainly not like the butcher, baker and candlestick maker. See, the butcher, baker and candlestick maker goes to work and deals with gang violence and parents that don't care. The Butcher opens his shop and has to deal with suicide issues and drugs abuse before he can cut that meat. The baker has to call Child services because the kids have bruises and black and blue marks. And that candlestick maker cant make his candles because he has kids crying in the back of his office as another family member or friend was shot.


    Yes, "little" worries, certainly not like the butcher, baker and candlestick maker.....
    Last edited by intelligentjetsfan; 08-20-2011 at 10:30 PM.

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    [QUOTE=bitonti;4110753]it's a creative idea but now the gov't is basically entering people into bondage situations, indentured slavery.[/QUOTE]

    a little bit of hyperbole no? I see it as a contract.

    If you get a car loan is that a bondage situation?

    I have no problem with aiding the procurement of basic necessities, but supplemental income should come with strings.

  20. #20
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    [QUOTE=intelligentjetsfan;4111101]I must have been absent from school the day we were taught that only private sector jobs were good and righteous. And that there was no room for public sector jobs in a mixed economy like ours. Because the answer to all ills in society is profit!

    And a teacher has little worries, certainly not like the butcher, baker and candlestick maker. See, the butcher, baker and candlestick maker goes to work and deals with gang violence and parents that don't care. The Butcher opens his shop and has to deal with suicide issues and drugs abuse before he can cut that meat. The baker has to call Child services because the kids have bruises and black and blue marks. And that candlestick maker cant make his candles because he has kids crying in the back of his office as another family member or friend was shot.


    Yes, "little" worries, certainly not like the butcher, baker and candlestick maker.....[/QUOTE]

    My simple point is that those who receive income from government sources are more likely to believe in government spending. The private sector, like the 3,500 B of A employees here in Charlotte losing their jobs are not so fortunate. BTW... the homeless shelter is FULL of volunteers experiencing what you describe for no pay at all.

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