Monday, January 06, 2014

Why Keynesianism is Like Al Bundy

Al Bundy, if you don't know, is a character from the show "Married with Children."  He was the father of a lower-middle income family that was the epitome of the 90's ghetto/trailer/exurbanite trash that was becoming mainstream at the time.  One of his defining traits was when he would wax poetically about a football game his played in high school where he scored several touchdowns and threw for several more.  It was a mockery of himself as it showed his pinnacle, his peak, was when he was 17.  And the remaining 60 years of his life would be as a shoe salesman. 

But while I was deadheading a car down to Florida and listening to a discussion Stefan Molyneux was having with an economist about Keynesianism, it dawned on me that Keynes and Keynesianism AND Keynesian economists have something very much in common with Al Bundy.

They can only point to ONE instances in history that gives them any validation.

In Al Bundy's case it was that mythical high school football game back in the (presumed) 70's.

And in the Keynesian's case it was that one big, blockbuster of a government stimulus - WWII.

However, like Al Bundy, Keynesians are equally pathetic.

They have never had a repeat.  They have never had more than one instance or datapoint in their lives.  They have only that ONE SAD PATHETIC thing to point to that grants them (only in their own minds and the minds of academians) a morsel of validation.

What I don't get is how the entire western world, which accounts for 75% of global GDP and presumably has the smartest people on the planet let such an unvalidated and pathetic economic model govern their government's fiscal and monetary policies.

I mean, can we give it up already with the Keynesian bullshit? 

It worked ONCE.  And every since then the economy has been growing slower, recessions have been taking longer to recover from, and (if there is any glaring empirical data or proof against Keynesianism) they still can't get it up with $17 trillion in deficit spending.

So I'm done.  I'm done granting the Keynesians, the Krugmanuats, and the other idiots any credit or cache.

Your economic model doesn't work.  It isn't working. And it never really did work.  We've done it your way, especially with the past 6 years of Obama, and you still can't get the bleeping GDP to grow more than 2%, nor get unemployment below 7%.

Of course, deep down inside they know this.  But then they'd have to admit they're not economists, but rather politicians and thieves, thinking they're being as clever as Hans Gruber posing as economists.

Unfortunately, you have some of those John McClane economists running around.

20 comments:

Eric B said...

Did it really even work that time? The rationing during WWII made life suck. Even then, the economy didn't really get back to what it was until several years after the war after government spending was massively reduced.

RobertW said...

There is only one reason for the love of Keynesianism by the political class - it keeps them in power. Whether it works or doesn't work for the economy is totally immaterial to them.

FSK said...

What do you mean? Kenyesianism still works. It's a great excuse for pork projects and transferring wealth to insiders.

The purpose of mainstream economics is not to do what's best for everyone. It's propaganda.

Keynesianism is still great propaganda. Therefore it still works.

Anonymous said...

I wouldn't even concede this one example. Calling WWII a mere "stimulus" ignores the fact that the money was spent on physically destroying the productive capacity of our competitors.

Al Bundy said...

I scored 4 touchdowns in the Chicago City championship game as I led Polk High to their only title.

After that, I met a redhead and the rest is just a blur...

Anonymous said...

The key wasn't the spending. The key was that all the spending was used to physically destroy the competition's physical plant and kill their labor force utilizing what was essentially slave labor (a drafted military.) Simultaneously the competition willingly destroyed each other while leaving our own physical plant and labor force intact. Somehow I suspect Keynesians don't really want to repeat that success.

Dave said...

The Great Depression ended on April 12, 1945. On that auspicious day, the man who for twelve long years had thwarting the economy's natural healing processes, died of a brain hemorrhage. His party was routed in the 1946 midterms, and the nation began a spectacular recovery.

Without WW2, Roosevelt probably would have been voted out in 1940, ending the Depression four years sooner.

Kristophr said...

It didn't really work at all.

Unemployment went down because most of the workers were in uniform and getting shot at.

The boom of the '50s and 60's happened because the US was the last nation left standing, and the administrations after WWII had the good sense to immediately end rationing and price controls.

Countries that had not practiced Keynesian-ism had recovered from the Great Depression by the mid 1930s, as noted by Herbert Hoover in his book, Freedom Betrayed.

( Hoover WAS a Keynesian, BTW ... it was one of the reasons Coolidge completely ignored his recommendations as Commerce Secretary. Hoover recanted Keynesian-ism after watching European states recover from the Depression in five years by instituting austerity measures instead of spendthrift insanity.

xsplat said...

My take is that money is an illusion. The only "thing" that matters is motivation. It doesn't much matter what the motivation is - the "money" can be nothing but deficit or nothing but social capital.

At the same time the money supply can be controlled and constricted and capital can be allocated. The system of motivation is detailed.

But I see the fundamental issue is that people don't like to work, and that only very few people are capable or interested in starting and running companies, and that the lazy masses are motivated through this system of rewards. The system isn't designed for the mass of people to gain the bulk of their labours in improved lifestyle - it's designed as motivation so that the elites can get more power. For instance banks sometimes collude to constrict the money supply deliberately so that they can foreclose on indebted property holders. From the bankers point of view, that's not a flaw in the system - it's how they designed the system.

I have no way of knowing what drives economic policy, but I suspect that there is less accident and mistake involved than we are told. It's more likely that the "problems" are design features, not flaws. Designed to funnel money to the designers.

And so economic policy is not really a matter of public discussion. That's like having an opinion on oil policy. So what? Big oil is too powerful to be influenced by public opinion - and the public's opinion can usually be purchased with the amount of power that big oil wields.

The oil companies and banks own the government, and will continue to drive economic policies, and it's unlikely we'll be privy to their reasoning. But my feeling is that they do reason. Government debts move money towards the groups of people who design government policies.

Therefore the individual can be an entrepreneur and get off the grid. But to do so will require him to discover his own continual motivation - the economic system of working in corporations within the capitalist system is a good motivator. The entrepreneur has to invent ways of his own to replace that motivation.

What matters is if people are motivated to work or not. That is a true insight. The fact that debts allocate funds towards an elite instead of allowing individuals to retain untaxed earnings is not a flaw - it's a deliberate feature.

Anonymous said...

Firstly, it didn't actually work during WW2, as many of the New Deal regs were junked when the war started.

Secondly, I'm a little iffy about Stefan Molyneux now. I haven't watched it, but he made a video about "resource based economy", and that stuck in my brain.

My problem is, the last time I heard that term was when I was reading the FAQ page of "The Venus Project", and there it was basically a vaguely worded series of Marxist notions watered down by the lack of content.

I have no idea what the term means, but right now it screams Marxism to me.

Anonymous said...

Me again. Google search gives the Venus Project as the second result, which makes me suspicious.

Wikipedia says it's a national economy where the majority of GDP is created in natural resource development, such as mining, drilling, timber-cutting, etc.

What's weird about this whole thing is that there isn't any kind of specific reason to WANT this. Capital markets and marketing firms and banks and manufacturing and such get shit on all the time and for good reason, but frankly these things are just as important as the resource production itself. The issue is the political involvement, not a lack of genuine ROI.

AuricTech said...

And in the Keynesian's case it was that one big, blockbuster of a government stimulus - WWII.

Of course, the fact that pretty much every industrialized nation other than the USA had seen its industrial plant enjoy the salutary effects of strategic bombing, building-to-building fighting, expropriation by foreign occupiers, or some combination of these factors had absolutely nothing to do with post-war prosperity in the USA. It was clearly all Keynes, all the time, baby!

Richard said...

If I remember correctly, your constitution used to have a requirement that only property owners could vote. The repeal of that requirement allowed the parasites to have a vote on their own entitlements and the subsequent downward spiral began... Now you have a society where 50+% of voters understand that they can vote themselves entitlements at the expense of the other 49-%... The smarter politicians saw this coming and began to pander to the parasites.

It's that simple.

Anonymous said...

WWII didn't help the economy. It took care of unemployment because millions of men where drafted and got to go overseas to be shot at, and the old and women had to take over the jobs in the factories back home. The signs of an improving economy is a higher standard of living for the people. I don't think dodging tiger tanks in some bombed out city is an improvement in the standard of living. Also, the things being produced where not consumer goods but weapons and ammo that where sent overseas to be blown up or shot down. If WWII helped the economy, then today we should spend trillions of dollars and trillions of man hours to build a huge fleet of the most advanced ships ever seen, then take them out to the middle of the sea and sink them all. Then we can be happy at how rich we now are.....

Ending WWII, with the huge cuts in government spending and layoffs of government workers was what helped the economy. Our factories stopped building bombs and tanks to be blown up over seas and instead started building cars, TVs, radios, washing machines and other things that lead to people's material well-being.

Before WWII ended the Keynesian economists said that the end of the war would lead to an economic depression. The free-market economists said it would lead to strong economic growth and an improvement in the people's standards of living. Who was right?

Paul, Dammit! said...

Cap, I get that with the loss of competition in manufacturing after WWII (Europe and Japan were rubble, and their skilled workforce fertilizing the cemetery lawns), competition wasn't a factor in economic growth in manufacturing until the 70's for the US. Do the Keynesians account for that in their dated workers' paradise model?
(showing off my ignorance here, I guess, but I'm curious...)

Morgan said...

hey we can do it anytime again, all we have to do is lay absolute waste to any possible industrial competition and enjoy a decade or two of big growth. and then for fifty years pretend it was the keynesianism, not the fact that the rest of the world was in shambles, that did it.

Pax Empyrean said...

I wouldn't say that WW2 vindicates Keynesian economics. For one, all throughout the war material goods were harder to come by than they were even during the Great Depression. For another, after the war the government cut spending and paid down the debt from a little over 120% of GDP in 1946 to a little over 90% of GDP in 1949. It was down to 80% by 1951, and 60% by 1957.

The Keynesians love their fiscal multiplier fantasies, but if GDP grows for several dollars for every dollar of deficit spending, then surely it must shrink an equal amount when spending is cut. If the fiscal multiplier were anything like what the Keynesians believe it to be, the economy would have imploded in the wake of WW2.

wulfscott said...

WWII spending did not turn the economy around, it was bringing down the deficit and rolling back the New Deal regulations after the war. I will look for the study on that looked at this. Basically the Keynesians are claiming credit for something that they did not do. It may be mentioned in Amity Shlaes' book.

JoeAmerica said...

I would like to point out on thing on Keynes's arguments, Keynes's was talking about an America of the 1930's. His experience's of America was from 1900's-1920's His ideas worked because of the very rapid technologic innovation and growth (all done by men) of the 1930's. America of the 2010's is very socially different. Frist we certainty are not suffering from "the paradox of thrift" we are socially the exact opposite. I think it is very unlikely he would come to the same conclusion for today. There is no new growth to pay off this new accumulation of debt and this will lead to a very different result.

Kristophr said...

JoeAmerica:

Keynes ideas did not work in the 1930s, period.

Read my comment above.

Britain and the US implemented Keynesian spending programs and wallowed in depression until after WWII was over.

European countries that instituted anti-Keynesian austerity measures completely recovered by the mid-1930s.

Keynesianism was a complete fail, even in 1930.