I am hoping this is going to be one of the few "original observations" or epiphanies about economics I came up with and hasn't been discovered by some long-ago economist or philosopher in the 1700's. I also hope Mr. Fuller doesn't come screaming in like an F-15 Eagle strike to deliver the bad news that, yes, indeed, somebody else has already realized what you did.
Keynesian economics, among other things, relies on what I like to call "black magic." We can try to articulate or summarize it, but in essence, I don't believe/criticize these "black magic" aspects of Keynesianism as such:
1. The government should have any kind of say or any care as to whether or not the economy grows or shrinks. It is not the government's business. The government should let people and companies rot if they fail, and they should not be in the business of anything, but merely protecting the people from foreign invaders, from criminals within, and beyond that, stay the hell out of their business. The arrogant assumption Ivy League brats can somehow "fine-tune" the economy is arguably the biggest failure of Keynesian economics.
2. Your obsession with "aggregate demand" is laughable. Especially given a discipline or variant of economics that only existed since the 1930's with Keynes. You have no empirical data it works. You just have John Maynard Keynes' book. It was theory. Not practice.
3. The belief just "moving things around" in the economy or "priming the pump" to ensure that all important aggregate demand curve up is.
There are more, but of all of them, #3 is the one I believe is key to the Keynesian economic philosophy and the one I think I have found an explanation as to why it is flawed.
If you believe in things like "multiplier effects," "aggregate demand curves," "government stimulus," and unicorns, it all make sense. Government merely spends more money, either borrowed or stolen from other people, it "mixes things up," and "POOF! Economic growth.
But the problem is what constitutes economic growth. That is PRODUCTION. Meaning something is produced and our standards of living increase because there is now more wealth for the population to consume.
Most Keynesian stimulus today is in the form of wealth transfers. And in being wealth transfers, that means there is no production.
I like to call this the "efficiency loss" of Keynesian economics.
ANYTIME there is a transaction of money, there usually is production on the other end. For example, if you were to give me $500, you would probably want something in return. THis requires I expend labor on my part and create something of value. Production. Economic growth. Wealth.
But with wealth transfers there is no compensatory production. It is just "Here, have money!" The welfare bum/parasite just takes it and then spends it.
It is here that a Keynesian or a socialist would trip over themselves to say, "MULTIPLIER EFFECT, MULTIPLIER EFFECT!!!'
But that is not the target of my criticism. My target is the transaction that just took place. That was an efficiency or potential production loss. The government could have spent that money and got something out of it (a plane, roads, etc.) Instead we wasted it. There was no production for that transaction. We had an opportunity to demand production and we did not take it. People slaved and worked hard to transform their labor into those dollar bills, and the government just POOF, wasted those people's labor.
It now becomes an issue of velocity (if you believe in that). Leftists, Keynesians would claim "so what, the efficiency loss of that one transaction won't matter as long as future transactions result in production. And since we're just trying to "prime the pump" it shouldn't matter in the long run.
My concern is what if 4 in 10 transactions are wealth transfers which would be a rough estimate based on government spending as a percent of GDP. We're wasting 4 transactions requiring no production on the other end.
In the end, it isn't to say our GDP isn't $15 trillion or whatever it is. This isn't even a broken window fallacy argument. IT's an issue of lost potential. It's analogous to a partially engaged clutch. If the clutch is only engaged say 60%, then only 60% of the gas you put into the engine via the throttle will translate into speed or movement. The clutch needs to be fully engaged to result in the maximum amount of efficiency and output. Merely transferring other people's wealth/time to the unproductive people destroys the potential that currency had to demand or call for future economic production. And you all wonder why blowing trillions on "stimulus" in this Keynesian nightmare isn't translating into genuine economic growth.
Oh well, not my concern. I'm just here, enjoying the decline.
Sounds a bit (but not exactly) like the discussion regarding pareto optimality and Pareto efficiency.
Basically, if a transaction is volountary (i.e. not wealth transfer) we know that both parts are better off, since they did the whole thing volountarily.
In the case of a wealth transfer it COULD, theoretically, be more positive for the party robbed than the party receiving them money, but since interpersonal value comparisons are in reality impossible (thanks Mises for that one), we can't ever know. What we CAN know, is that there are a lot of situations where a wealth transfer does in fact make everyone worse off - since the dependancy on transfered wealth is proven to be detrimental to peoples ability to take care of themselves. Thus, unless our target is to make as many people as possible welfare drones, a welfare transfer will NEVER be as efficient or "useful" as a volountary economic exchange.
And thus, I suspect we get to your reasoning. Since a welfare transfer does not in fact lead to the producing of something that someone is willing or able to pay for themselves, it is a loss-situation vis-a-vis a situation where someone would have saved or invested the money according to their own wants and wishes.
Don't know if this ruined your day, since the reasoning isn't exactly the same, just similar....
That article sounds like someone she lost the alpha she wanted to a girl who was more slender with bigger boobs.
The analogy that I have heard is: stimulus spending is like trying to raise the water level of a pool, by taking buckets of water out of one end, carrying it around to the other side, while losing some to spillage, and pouring it in the other side.
Don't forget the 'animal spirits'!!!
Try telling to this to any Keynesian on the internet and they'll accuse you of trying to make some straw man argument sadly or they'll think you're dismissing the concept of aggregate demand entirely. Right now, I'm trying to get through The General Theory just so I understand all of the concepts and clear up any misconceptions that I have about what the theory was advocating, even though the macro textbook I read last year pretty much summarized much of it already without the difficult to understand language that Keynes wrote in. I often hear that Friedrich Hayek in his non Road to Serfdom stuff was "unreadable" to certain people.
Whatever you do, Captain, never call them "statists" because you won't get anywhere in an argument with them, especially the well read ones. Assume that they are trying to discover economic truth but are going about it the wrong way.
I think it's simpler than that. It's about a flawed approach to a flawed metric.
GDP is a misleading metric because it's an aggregate of three very unlike dimensions that happen to all be denominated in dollars. It may be useful as an instant snapshot of how much is going on in an economy, but it has zero predictive value and is too subject to manipulation in all the wrong ways.
As you say, productivity is the only sustainable way to increase GDP without corresponding thievery from future generations. So let's break it down:
I: this is where sustainable increases in GDP come from. ROI is critical to how much of this happens.
C(-Im+Ex): the everyday transactions where people get what they are willing to pay for; can lead to retained profits that can be subsequently invested.
G: the stuff nobody pays for willingly, and capable of actively retarding future growth through things like EPA investigations, tax collectors, and diversity monitors.
So, driving C without also allowing it to collect as profit and subsequently be invested is (pardon my language) pissing in the wind, especially when C is known to be manipulated through transfer programs.
Driving G is creating constraints on future production for the sake of the illusion of recovery.
On top of the flaws in the metric, our academic economists have failed us. They view Keynes and Samuelson's subsequent codification of his work as a set of formulas view it not as a rough model of reality that needs to be refined and infused with real-world meaning, but instead as a simple optimization game based on those established formulas. That's where the constant push to maintain and raise GDP through G and transfer-driven C comes from - that is the most exploitable loophole in the "rules of the game" laid down by the Keynesian strain of academics, and those academics now prefer to play arithmetic games that make them feel like sci-fi heroes and "psychohistorians" rather than quest for useful truths in an ugly and inelegantly complex world.
Yes, eventually wealth redistribution transactions will result in a "productive" transaction, but this happens when the money reaches the person from whom the wealth was taken by the government in the first place. The loss of value is simply represented by all the transactions that happened before the first "productive" transaction.
Your idea is similar to other criticisms of the multiplier effect. If government spending has a multiplier effect, then government taxation should have a negative multiplier effect.
Makes sense to me. If t1 is the 1st transaction, m is the multiplier, and m (t1) = Σ(t1 + t2 + t3...)
and if government reduces each transaction by 40%, then
Σ(60%t1 + 60%t2 + 60%t3...) = 60%Σ (t1 + t2 + t3...)
In other words, they've just reduced the whole multiplier by 40%, m(gov) = 60% m(private)
I'm not an economist, but this is basic math despite the infinite series stuff.
Here is another reason we are in such a mess.
How on earth can quantify and/or predict human with regards to finance and economics?
Taxing people has a nasty negative multiplier effect, but that's for the peasants to worry about. Offshore and "charity" trusts keep the wealth safe for the elites.
You are correct, the transaction between Govt and welfare recipient is production-less, UNLESS you look at it from the Govt perspective. Keeping those drones alive and from rioting is the "productive benefit" they seek.
Fact is, there is no real production for the Welfare drones to achieve anyway.
Money moving without work being done is analogous to Hysteresis in electricity. Energy moves, heat is created, but mo work is done.
I am making fighter jet noises as I type this comment.
Your criticisms of Keynesian economics are fairly standard, and I believe they have merit. Keynesian economics is, in a word, bullshit.
Where I disagree is in your final analysis, where government spending would have resulted in some sort of production (a plane, roads, etc) but when given to somebody else it is "wasted."
My objection is that there is not a finite number of transactions that could take place, so we really don't need to worry about money transfers that don't have a corresponding exchange of actual wealth in the form of goods or services. The recipients of that money transfer will still spend that money. In the end, the difference is in what they spend it on, and that's the real kicker.
If you leave the money with the taxpayer (typically a rich person, as they pay the overwhelming majority of our total taxes) they will spend some of it but invest a greater share than anyone else would. They start or expand businesses, smooth out price volatility in commodities by investing in futures, or give more of it to private charities. Production is directed toward these purposes.
If the government taxes it and spends it, you get roads, NASA, wars, basic research, and a whole lot of pork on top of the 43% or so (as of 2011) that goes out to Medicare, Medicaid, and Social Security.
If the government taxes it and then gives it away, then production is directed according to the spending of the recipients. Beneficiaries of government largesse are typically the poor and uneducated, or politically connected companies. In the case of the former, they invest very little of this money in anything, so instead of accumulating capital we have a greater percentage of it being spent on stupid shit like lottery tickets, drugs, or the latest fashion trends designed to imitate the lifestyles of celebrities. In the case of politically connected companies, they give some of that money back to politicians' reelection campaigns (natch) and the rest of it gets blown on whatever harebrained scheme the company came up with but couldn't actually pay for by providing some valuable good or service. (Green energy!)
Keynesians love the poor, since the poor have a very high marginal propensity to consume. This is pretty obvious since a high marginal propensity to consume will reduce you to poverty in a hurry, and a low marginal propensity to consume will lift you out of it (or at least let you work a lot less while remaining poor). To the Keynesians, all that matters is trying to make the economy healthy by diverting more resources to those who are categorically the worst at any sort of planning for the future.
That's one of the most annoying aspects of the Keynesian mindset. "In the long run we're all dead" is true, but nearly all of us will outlive the short run, so MAYBE we should be more concerned with the future than just trying to get an uptick in this quarter's consumer spending by throwing money at poor people who immediately blow almost all of it.
A market oriented system will tend to reward those who make wise decisions by granting them greater power over production in the future. This is why wise investors become rich, and also why we are better off when wise investors have greater financial influence than unwise investors. The government does everything it can to short circuit this process by offering increased purchasing power to those who tend to make the most unwise decisions.
I believe that recent economic 'research' has found that the government multiplier is approximately...1.
That's right, 1. Meaning that for every dollar the government spends, GDP increases by one dollar. Of course, the academic economists ignore the face that government has to steal...urm, tax someone to get that dollar.
Tim, you forgot the part where the kids watching you are supposed to cheer everytime you dip the bucket into the water and pour the bucket out.
Keynes' intent was to destroy western civilization so it could be replaced by some form of collectivism.
If you can accept that, his General Theory & everything that has come from it makes perfect sense.
As a bonus, since you no longer have to waste any cycles thinking about or explaining whatever about Keynesian economics not matching reality or being unworkable, you have that much more time & energy available to enjoy the decline.
I don't comment much.
Your micro stuff is superb, your macro stuff however, not so.
"Government has no role in business expanding or contracting."
Government is everyone except you. Consensus, for better or for worse, has the role of protecting people from harm.
In an economic sense that is to diminsh the downside (bust), and we recognise that the best way to do that should be to also inhibit the upside(boom).
Smoothing the economic cycle.
The 1930's debt-deflation showed the impacts of letting a bust go unheeded.
So either we go back to an inherantly deflationary gold-standard to curb excess marginal growth in the monetary supply, or we attempt to figure out better methods.
2) "Aggregate Demand is laughable"
Aggregate demand is another name for spending.
_ALL_ spending is another party's revenue/income. That means jobs.
More spending means more jobs, it is that simple.
How spending is funded is what you should examine.
I suggest you look at wage share vs profit share throughout the western world for the past 30 years since NAIRU has been policy de jure.
3) "Pump priming"
This doesn't automatically equate to diminishing production.
Taxation of itself is a wealth redistribution scheme. If you seek to boost production by designing your policies that way, you'll get the reverseof what your prescribe.
An example would be the land taxes subscribed by Henry George, where production facilities are capital additions and should not be taxed, nor the production that results from it.
But an idle block of land the same size of the production facility would incur the same tax.
If your land tax replaced tax on profit for example, you would boost production, and diminsh speculation on the price of land.
Doubting "Money Multiplier"... come-on, this isn't even that well thought out.
You obviously subscribe to the Quantity Theory of Money.
Money multiplier is velocity in the equation.
This one... "But with wealth transfers there is no compensatory production. It is just "Here, have money!" The welfare bum/parasite just takes it and then spends it."
You've been sold a lie by rich people, you need to re-examine your critical thinking here.
The amounts people receive on welfare are tiny, they are not acquiring a surplus off them.
The money received from welfare is to ensure they demand production of food, water, shelter.
They ensures the producers of food, water, shelter.... expunge all their inventory.
In the absence of the demand for the prudct they supply, the will reduce production.
I'd rather people be given a job so they can afford to demand this type of product, but policies such as NAIRU ensure... and I say it again, ensure.... NAIRU is designed to ensure a certain number of peole are involutarily unemployed.
It supresses wages. When labour outnumbers jobs, employers can say 'take these wages and conditions or i can find someone else who will'
When jobs outnumber labour, such as the keynesian, full-employment policies for the 25 years after WWII, workers can say 'give me wages and conditions I want, or i will find someone else who will'
Completely different power dynamic.
Yet under this dynamic, we saw the greatest levels of growth of marginal wealth in the history of man, we saw more investment in technology, more people employed in STEM (government employees I know...) and all boats rising.
Nixon disrupted it greatly when he removed the gold exchange standard in 71, and Reagan killed it off all together with his Friedman-esque Randian nonsense.
I'm not disputing there are too many make-work jobs in government, particuarly for females.
I'm not disputing there are a gross number of transfer payments.
But follow the money trail, they overall tend to benefit those that are already rich, and then they have the temerity to call this 'proof the freemarket works'.
It would be so much easier if you would view money as what it is: a measure of economic power. It's decision-making authority.
Transfers have nothing to do with material production; they have everything to do with liberal philosophies of justice and welfare, which I don't think anyone here agrees with. The only effect on material production is to possibly increase demand for 'inferior goods' and commodities that the poor will likely buy in greater quantity, and to reduce investment to a slight degree; all in all, nothing major. The same thing could come from increased charity donations.
The effect on the perceived legitimacy of the state and the capitalist system, not to mention social standards of merit and community involvement, is much worse.
"The arrogant assumption Ivy League brats can somehow "fine-tune" the economy is arguably the biggest failure of Keynesian economics."
Too bad Hayek didn't write "The Fatal Conceit" until after Keynesianism became popular.
In defense of Keynes (I know, just bear with me) I think he was well aware of the points that you address. What I believe you are missing is the overall motivation of the gov't, which is self-preservation.
Austrian Econ suggests much like you that one should do nothing and let the economy work itself out. And while true in theory, in practice it can leave people starving and homeless. With the right population group (read: small and homogeneous) such a storm can be weathered.
I think the size and diversity of the U.S. makes such an approach untenable b/c large, armed groups of economically disenfranchised people typically are catalysts for regime change. In this light, it's easy to see why gov't choose to intervention.
What is always missing with bureaucratic action is the second recommendation from Keynes; that once the recovery is in full swing and the economy back on track, that the gov't investment be recouped via taxes or deflation. Unfortunately, no self-styled 'Keynesian' has ever successfully implemented that portion of the plan.
While your evaluation is correct, I think you can easily see why Keynesian theory prevailed when you take a look at it from the gov't perspective of self-preservation.
With Austrian Econ recommendation of non-intervention is correct, it has the potential to leave a lot of people hungry and homeless. With a small, homogeneous population group, such a storm can be weathered.
A large, diverse, armed and disenfranchised group of people on the other hand tend to spark regime change.
Ultimately, the choice of intervention wouldn't be so bad if the second part of Keynes' plan was actually implemented. Once the economy recovers, the gov't should recoup it's investment either via taxation or deflation.
"In the long run we are all dead." - John Maynard Keynes, 1923.
Well, the long run is here, and the people who took short-sighted actions are dead, leaving us to deal with the consequences. Thanks, assholes.
Cap, your argument can be folded into a larger one against coercive monetary transactions, in other words, government taxation and spending. The problem with such coerced transactions is primarily an information one, resulting in an aggregate efficiency loss. The "Broken Window" fallacy is analogous to your argument.
When you mandate spending, either to fix a window you just deliberately broke, or by demanding taxes to fund spending, you are taking an economic decision away from the person who would normally make it by himself and giving it to another agent, namely the gubmint. This, in aggregate, reduces efficiency, because the government or other agent does not have the same information available to base spending decisions on, and consequently runs a greater risk of making a sub-optimal decision.
Yes, some decisions made by the government are the optimal ones: to provide for defense, to establish a common currency &etc. But IN AGGREGATE you will make poorer decisions if you have less information. So Keynesian spending will always and everywhere reduce the overall efficiency of an economy.
The gov didn't get nothing for their expendatures. They got votes.
D'oh - commented in wrong thread. Sorry.
The mother of all currency debasements. Literally. A cool trillion for a single coin.
Putting A Trillion Dollars Of Platinum In Perspective
Just when you think the insanity can't get to 11...
Keynesians don't understand production, they only understand consumption. They are frankly stuck in a Hunter-Gatherer mindset. If a hunter-gatherer is hungry, and there's a bush with berries on it, he eats them. If there's no bush with berries, he goes looking for one. But it doesn't occur to him to plant his own berry bush. That's just not the way his brain naturally works.
So to him, it's all about consumption. The universe provides whatever it provides, and the only question is who gets it first, and whether or not they share it. So H-G societies are very concerned with distribution, with slicing the pie, but they just don't consider production. In their minds, stuff is just there. Nobody made it show up, nobody is responsible for the production on the berry bush, God or Mother Nature or just plain Fate grew it. "You didn't built that." Maybe you've heard that before...
That's what Keynesians are. They're people who lack the ability to understand production, so they obsess about consumption.
T and A man needs a lesson. I'll have to split this into two parts to make it fit.
"Government is everyone except you."
Bullshit. This is a cognitive fuckup of the highest order. The government plays by a different set of rules than everyone else. I am not the government. You are not the government. The Captain is not the government. For your claim to be true, everyone would need to simultaneously be the government for other people and while not actually being the government when they are considered themselves. That's absurd.
"In an economic sense that is to diminsh the downside (bust), and we recognise that the best way to do that should be to also inhibit the upside(boom)."
And when was the last time a politician said that the current prosperity was just a bubble and everybody needs to calm down? This never happens. Instead, we get speeches about how our wise and judicious leaders have ushered in a new age of endless prosperity for all, despite the foul treachery of their political adversaries who hate you, America, and puppies.
"The 1930's debt-deflation showed the impacts of letting a bust go unheeded."
Are we just going to pretend the New Deal didn't happen? Or that FDR's call for "bold, persistent experimentation" was the 1930s equivalent of "hope and change"? They didn't let the bust go unheeded, they used it to dramatically increase the scope and power of the government through an alphabet soup of new federal agencies to solve the problems of mere mortals.
"So either we go back to an inherantly deflationary gold-standard to curb excess marginal growth in the monetary supply, or we attempt to figure out better methods."
People still buy computers and smart phones and all manner of consumer electronics that will cost half as much two years from now. The risks of deflation are overstated; a promise from the Fed to stop deflation once it starts would be more than sufficient to prevent a deflationary spiral. Throwing a trillion dollars a year into the money supply (which is Bernanke's latest brilliant idea, since all previous attempts at quantitative easing worked so great) purely out of fear that deflation might happen is just stupid.
"More spending means more jobs, it is that simple."
No, it isn't. If we play catch with a beachball full of cash, we can drive GDP sky high and not actually produce anything. Money spent on useless things (like green energy companies) is wasted, period. How many people work for Solyndra these days, huh?
"I suggest you look at wage share vs profit share throughout the western world for the past 30 years since NAIRU has been policy de jure."
I suggest you look at how many typical workers have a stake in profit share through their retirement accounts. Your flavor of class warfare bullshit ignores the reality that pretty much everyone is part of the bourgeoisie these days, simply because that's how everyone is trying to fund their retirement.
Continuing from before...
"An example would be the land taxes subscribed by Henry George"
Taxing only one specific thing means the narrowest possible tax base, with very high tax rates to compensate. This is pretty much the opposite of sane tax policy. The only advantage of Henry George's proposed tax scheme is that revenue is constant and you can't dodge such a simple tax except by abandoning your land. Predictable revenue is less of a concern now than it was in the 19th century since we're basically just floating in a sea of foreign lending anyway.
"Money multiplier is velocity in the equation."
Great. You've increased V, and it is matched with a proportionate increase in P. You're spinning your wheels, but sure as hell aren't going anywhere.
"You've been sold a lie by rich people, you need to re-examine your critical thinking here."
Now you sound like a fucking Marxist.
"The amounts people receive on welfare are tiny, they are not acquiring a surplus off them."
From the Senate Budget Committee last year: "If you divide total federal and state spending (on welfare) by the number of households with incomes below the poverty line, the average spending per household in poverty was $61,194 in 2011."
Comment in parenthesis mine, to clarify the context of the statement. So, $61,194... quite a bit more than the median household income in the United States.
"I'd rather people be given a job so they can afford to demand this type of product, but policies such as NAIRU ensure... and I say it again, ensure.... NAIRU is designed to ensure a certain number of peole are involutarily unemployed."
NAIRU is just a bunch of die-hard Keynesians humping the corpse of the Phillips Curve. If the relationship between inflation and unemployment is anywhere near as strong as they like to pretend it is, they wouldn't have had to rename the idea after the stagflation of the 70s made a fool out of all of them. You can't cause persistent unemployment simply by having a low rate of inflation. Cripes, that whole theory is retarded.
"It supresses wages. When labour outnumbers jobs, employers can say 'take these wages and conditions or i can find someone else who will'"
You know what actually suppresses wages? Global competition, which is there whether you like it or not. Another thing that I almost never see mentioned is how our tax policy makes it cheaper for employers to provide insurance than an equivalent dollar value in wages, which is why real wages have effectively stagnated for decades despite total compensation continuing to grow.
But hey, you can ignore all that and treat jobs like they're a finite resource to be compared to a specific number of workers, and when one outnumbers the other that determines the fate of the country. That's all very dramatic, and convenient for galvanizing a bunch of idiots into voting for Democrats, but it's also stupid and wrong. If you're worried about unemployment, you should be less fixated on monetary policy and start looking at things like the minimum wage or mandatory employee insurance requirements. It is the government that keeps markets from clearing, otherwise the price of labor would adjust in the long run the same way the price of everything else does.
Hi Cap- I would also add that the fundamental failure of Keynesian economics is that it simply makes no damn sense. Literally. The General Theory was such a muddled mess of a book when it was written that when Henry Hazlitt went through it to pick it apart in writing The Failure of the New Economics, he found contradiction after contradiction and fallacy stacked upon falsehood. I distinctly remember this one great page from his book where he wrote that he might have been spared much dreary analysis if only Keynes had been clearer and more forthright in his writing.
Of course, this is also why Keynesians can get away with a great deal of nonsense. Because no layman would want to read the original work, and because the work itself is incredibly muddled, Keynesians can use a great deal of sleight-of-hand to disguise just how bad their ideas are by resorting to a lot of mathematical mummery and technical jargon. It doesn't matter how much evidence you show them to prove that their ideas don't work; they will go back to their mathematics and refuse to believe you, telling you to deny that which is real to your own eyes.
On a related note, I recently started up my own blog and just finished writing a post on why you shouldn't study economics in uni- check it out and let me know what you think.
Dear God! Ryan Fuller, take a seat, breath deeply. You have intriduced a whole world of fail.
"Bullshit. This is a cognitive fuckup of the highest order. The government plays by a different set of rules That's absurd."
No, you have failed to comprehend. it is observable that Austrian economics does tend to draw in those that know little about economics, and pretty much anything.
I'm not asserting that is a universal trait. Some are quite intelligent, though misguided, but the short-fuse dloons for some reason are drawn to Austrian economics.
Politics is everyone else except you because there needs to be a critical mass to support the actions of government.
Sure, current governments have overarching authority, often work against the best interest of the country and indulge themselves on an innative amount of perquisites. But each of those have been rationalised away by vested interests.
"And when was the last time a politician said that the current prosperity was just a bubble and everybody needs to calm down? This never happens"
It may not happen in the U.S., but it happens in other countries. If a plane crashes, that doesn't automcatically means it is the planes fault, particularly when other people can successfully manage to fly planes. I here wuold cite pilot error. The same applies to U.S. policy, which namely comes down to incentives and transparency.
"Are we just going to pretend the New Deal didn't happen?"
Erhh the New Deal was in response to debt-deflation. Get an education. Irving Fischer termed it long before the New Deal.
Debt deflation is important to heed because debt is nominal, not real.
It was the reason Galss-Steagal was introduced because of the counter-party risk inherant is debt, as well as any regulatory capture by debt merchants compromising debt repudiation.
"People still buy computers and smart phones and all manner of consumer electronics that will cost half as much two years from now. The risks of deflation are overstated"
That's not wealth deflation, that's productivity gains being passed onto the consumer. They are inherantly different, and again it demonstrates you are a long way off having the prerequisites knowledge to discuss such thing if you do not know the difference.
"No, it isn't. If we play catch with a beachball full of cash"
Yes it is, stop showing your willfull ignorance.
if the beachball passes on progressively, the number of people's hands it passes through divides the cash... in maths we call this a denominator... it's a ratio.
The the ratio gets too high, the proportion each person receives becomes too small, then can't demand anyway. I'm not, nor does anyone espouse passing the 'beach ball' on forever. It's a strawman argument. But my initial claim stands true.
All business activity involves convincing some other party to depart with their resources to acquire the product that business brings to market.
Spending equals someone elses income.
"I suggest you look at how many typical workers have a stake in profit share through their retirement accounts. Your flavor of class warfare bullshit ignores the reality that pretty much everyone is part of the bourgeoisie these days"
No, I haven't overlooked that.
In fact I endorse that, it's just in your froth-induced lunacy you've assigned some ill considered assumptions about me.
But again, my point still stands, it the proportion of GNI going towards wages was higher, where it used to be, and if that was a policy directive, then it is a message that the best way to succeed it work produce.
Likewise, the collective that all want to be bourgeoisie gets higher... well greater demand, static supply, means the price increases, or yield decreases. Yield would decrease if profit share was also constant.
"Taxing only one specific thing means the narrowest possible tax base, with very high tax rates to compensate."
I didn't phrase it as the sole tax, nor have I inferred it. My example was to demonstrate the extremes of each outcome.
We don't have a 'sole tax' on profit at this point in time, but taxes are also incentives, and Georgism has demonstated how the incentives in land favour the rich but unproductive.
"Now you sound like a fucking Marxist."
The go-to catch cry for loons. Not everything is a dichotomy. I do not espouse, and have not espoused, any form of collectivism nor the denoucement of property rights.
"NAIRU is just a bunch of die-hard Keynesians humping the corpse of the Phillips Curve."
NAIRU isn't even part of the Keynesian school, and opposes the central tenant of Keynesian thought. Its a policy central to Friedman's neo-classical garbage out of Chicago.
"You know what actually suppresses wages? Global competition"
Not in isolation it doesn't. If wage remuneration is commensurate to productivity, it enhances job creation.
The world has a big problem with China sacrificing the living standards of its peasant via a pegged dollar and the supression of wages impacting everyone else that is trade exposed to China, but that's a different issue.
"treat jobs like they're a finite resource"
Erhh I don't treat jobs like a finite resource, Keynesian thought states the opposite. We effectively had fulle mployment during WWII, that even comprised of 6% of the population engaged in wealth destruction. EVERYONE can be doing something.
But labour is not a commodity, its part of the nonsense that economically illiterate state when attempting to make a clearance price part of Ricardian equivalence.
The minimum wage has been demonstrated to play little part in unemployment levels.
If you compare wage arbitrage for jobs going offshore, that is a currency issue, not a minimum wage issue.
Wages paid form the most substantial part in aggregate demand.
it also relates to your nonsen about keynesian ignoring production. They don't.
Production however does not occur, i.e. no producer is incentivised to produce, if the market can't afford to buy their product.
Following along on Ryan Fuller's lead:
"Consensus, for better or for worse, has the role of protecting people from harm."
The reality is that consensus has become indistinguishable from mob rule. Consensus deprives individuals of liberty. "Consensus" is what the constitution used to protect us from - the tyranny of the majority.
Consensus is worth shit in a world of universal suffrage.
I would argue otherwise about the denial of tyranny.
But my point address 'government has no place in building or contracting the economy", was that it does, because we put it there.
Whether it's the majority consensus due to universal sufferage, or protecting the interests of a rich few if government has an oligarhic nature, makes it a vairance of scale, not a variance of kind.
Government has never NOT played a role in business.
Government is economics is government. That is inescapable.
To think otherwise is to try and develop a model without gravity. Your model is to develop a a role for government that is favourable, and at the moment the reverse is happening, and condusive to that, it has a whole bunch of useful idiots from the neo-classical and austrian aschools maintaing that path.
The welfare recipient didn't lobby for Glass-Steagal to be removed.
The welfare recipient didn't lobby for the size of the U.S defence budget.
The welfare recipient didn't plan to have U.S jobs go offshore.
I can keep continuing. But the changes that have coruupted the U.S. have been by welfare recipients looking to increase the largese given to welfare recipients.
The post WWII era had plentiful jobs, more jobs than workers because of a pro-jobs policy framework, quite the opposite to NAIRU which ensures a shortage of jobs, mainly to increase profit share and suppress wages.
Welfare claims were tiny in the 25years post-WWII, even if available to claim.
So you can either claim generational superiority in regards to motives, or conclude there was something right about the policies in that period.
"No, you have failed to comprehend. it is observable that Austrian economics does tend to draw in those that know little about economics, and pretty much anything.
I'm not asserting that is a universal trait. Some are quite intelligent, though misguided, but the short-fuse dloons for some reason are drawn to Austrian economics."
Super. I am not an Austrian. I am familiar with their views, but disagree with them on some very fundamental points. Specifically the question of ordinal vs cardinal utility and whether empiricism has any place in economics.
They believe solely in ordinal utility while I believe that people made decisions based on an underlying cardinal utility function. Austrians also reject all forms of empiricism, while I believe that praxeology can only tell you if something is qualitatively significant but not whether it has any quantitative impact worth mentioning. That is what empiricism is for.
"Politics is everyone else except you because there needs to be a critical mass to support the actions of government."
That "critical mass" isn't even a majority. Remember how the Sunnis were ruling Iraq for decades with only about a third of the population? Apartheid had a fifth or less supporting the government. You've got a pretty flexible definition of "everyone."
"It may not happen in the U.S., but it happens in other countries. If a plane crashes, that doesn't automcatically means it is the planes fault, particularly when other people can successfully manage to fly planes. I here wuold cite pilot error. The same applies to U.S. policy, which namely comes down to incentives and transparency."
Oh, look, it's the "we just need to find the right person" theory of government failure. Right.
"Erhh the New Deal was in response to debt-deflation. Get an education. Irving Fischer termed it long before the New Deal."
If you're going to tell me to "get an education" you can at least spell Irving Fisher's name right. In any case, Fisher had basically zero credibility by the time the New Deal came around; he'd already spent far too long assuring people that the crash was a fluke and everything would recover. FDR was not trying to implement Fisher's policy suggestions. The New Deal was enacted in response to populist demands in general following the crash of 1929, but not debt deflation in particular. Just because you think that attacking the depression with fiscal policy rather than monetary policy was a bad idea doesn't mean that the bust went unheeded.
"That's not wealth deflation, that's productivity gains being passed onto the consumer. They are inherantly different, and again it demonstrates you are a long way off having the prerequisites knowledge to discuss such thing if you do not know the difference."
Nonsense. The key idea behind a deflationary spiral's impact on consumer behavior is that they will defer buying something in a deflationary environment because they could get more for their money if they wait to spend it. It is the anticipated increase in purchasing power that would cause people to wait, and whether it's because the basket of goods they're looking to purchase is getting nominally cheaper or *all* goods are getting nominally cheaper doesn't matter at all to the consumer. Whether it's monetary deflation or "wealth deflation" doesn't make a lick of difference to them.
"if the beachball passes on progressively, the number of people's hands it passes through divides the cash... in maths we call this a denominator... it's a ratio."
You seem to have completely missed the point of the example. You have a beachball full of cash. You don't take any money out. You throw it to me. I don't take any money out. I throw it back. Repeat until desired GDP is reached. No jobs are created, but look at all that money changing hands. Your claim that spending = jobs does not hold water. Hell, maybe more spending just means firms have the extra liquidity to automate more of their processes and we have *fewer* jobs at the end of the day? The "spending = jobs" theory is overly simplistic and stupid.
"No, I haven't overlooked that."
Your tired old class warfare bullshit about profit share vs wage share certainly doesn't show any sign of it. Your implicitly Marxist worldview demonstrates no trace of understanding just how meaningless the bourgeoisie/proletariat distinction has become.
"I didn't phrase it as the sole tax, nor have I inferred it. My example was to demonstrate the extremes of each outcome."
Henry George did, though. Otherwise tax revenue would still be subject to cyclic fluctuations, which was the whole point of taxing land exclusively.
"But again, my point still stands, it the proportion of GNI going towards wages was higher, where it used to be, and if that was a policy directive, then it is a message that the best way to succeed it work produce."
Of course the share going to wages was higher than it is today, we've incentivized non-monetary compensation for decades via asinine tax policy, and this has manifested in a growing share of non-wage compensation. Idiots (and intellectually dishonest leftists with an axe to grind) fixate on wages instead of total compensation because wages themselves comprise a smaller share of the total compensation package than they used to.
So, how does total compensation compare? Per the National Bureau of Economic Research, the share of total compensation that went to employees in the 1960s was 62%. It increased to 66% in the 1970s and 1980s, decreased to 65% in the 1990s, and stayed there through 2007. Source: http://www.nber.org/digest/oct08/w13953.html
In other words, your theory that employees were getting a bigger share that was eroded in the 70s and 80s is complete bullshit, and you were thrown off because you compared wages instead of total compensation.
I'm pretty sure there's nothing left of your claim that employees are getting the short end of the stick after the the 60s, so the rest of your argument is just trivial details elaborating on a central thesis that was just dragged out behind the woodshed and shot.
#1: Large changes in economic conditions lead to changes in political institutions. We have centuries and centuries of written history to indicate that is the case. Politics are inextricably linked to economics, so the government isn’t going to stay out of it.
When things start to deteriorate, it's always essentially the same, we saw it in the former USSR, and Somalia, we're seeing it in Mexico, in Greece, and some parts of South America....relatively family-centric and community-centric societies and relatively religious societies...so why is this happening? The legitimacy of nation state diminishes (and ours will too due to a financial insolvency, global shocks, and continued looting by a financial oligarchy). As that legitimacy weakens, people give their loyalty to groups that can protect them (might be anything from a gang, church, tribe). Often those groups are violent. The groups gain power and multiply in number. Society (political, social, et al) goes through a very inauspicious change during the course of this decline.
Above is the large picture, let’s look at a smaller one. Take the example of Boeing versus Airbus. A purist would argue we shouldn’t fund Boeing, and let the European and American companies duel it out on their respective merits. But a realist can easily observe that the competitor Airbus receives far heavier (in the order of three fold) subsidization from respective governments in order to compete. This isn’t a free market scenario. Pure free market scenarios on the global scale are among the rarest things on earth, and it’s a global economy.
Let’s offer a hypothetical and say ‘screw it, we won’t fund ours and they can fund theirs’. Eventually (pretty quickly, actually, because these are very expensive, highly leveraged industries) we become reliant. This is then a fundamental security concern because in the age of modern tech we cannot simply turn a sewing machine factory into an airplane factory virtually overnight. How many companies are capable of producing advanced jet aircraft? Precious few these days. It is already the case that our industrial production depends on parts made overseas that could be simply cut off.
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