[quote]dhickey wrote:
katzenjammer wrote:
shookers wrote:
katzenjammer wrote:
Actually, I spent a lot of time with The General Theory in college, and I seem to remember that Keynes at the end of his life recanted much of the theory. Does anyone else remember something about this?
He recanted not because he thought his theory was wrong, more because he realized what evils his theory could be used to Justify.
Keynes wasn’t an advocate of big government (although he is today portrayed to be), he just thought fiscal policy was a powerful tool.
When he saw the excess spending held over from the New Deal, and others who abused his theory to advance their political ends, he regretted his effect on society.
I’m not sure you’re correct here - I believe he also had serious questions about multiplier effect and so on.
Nevertheless, you are correct that he came to see how demand management might be (and was) abused for political (and perhaps even evil) ends - and how, especially, it created the temptation to keep spending ever increasing amounts, and continue to do so even in good times, which would lead inexorably to increasing the size of government, and crowding out private investment.
Okay, so if this is what the author of the original theory came to fear, why shouldn’t we have serious reservations about what BO is embarking upon?
i think we should clairify what exactly is dangerous and incorrect. John Maynard is not dangerous. He has not been for some time. It is Keynesianism that is dangerous.
Regardless of what he may have thought throughout his life, the Keynesian principals as we know them are extremely dangerous.
Some may beleive Keynesianism to be an economic theory. If this were true nobody would be following it, as it has been proven incorrect or illogical decades ago.
The fact is Keynesianism is a means for political power and control that can conveniently called an economic philosophy. What Keynes intended is actually irrelavent.
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I agree completely with this ^^
I just thought it was worth pointing out that even Keynes perceived this danger wrt “keynesianism” - which, admittedly, is quite different from what he argued in The General Theory.
[quote]Bill Roberts wrote:
You mean (among other things) that the 40% of income earners who pay no income tax who will now be receiving an “income tax cut” --which translated to ordinary English means, a check which is money taken from other people and given to them by the IRS – might LIKE this and keep voting for it to continue or even expand?[/quote]
I just thought it was worth pointing out that even Keynes perceived this danger wrt “keynesianism” - which, admittedly, is quite different from what he argued in The General Theory.
[/quote]
yep, his mistake was devising a system that required men in power to act rationally and responsibly.
I doubt Hamilton had the current fed in mind when he created it.
I doubt any of the founding fathers had what we interpret as “necessary” or “general welfare” in mind when they put it in the constitution.
This is why the austrian theory is so attractive. The people hold complete power.
I just thought it was worth pointing out that even Keynes perceived this danger wrt “keynesianism” - which, admittedly, is quite different from what he argued in The General Theory.
yep, his mistake was devising a system that required men in power to act rationally and responsibly.
I doubt Hamilton had the current fed in mind when he created it.
I doubt any of the founding fathers had what we interpret as “necessary” or “general welfare” in mind when they put it in the constitution.
This is why the austrian theory is so attractive. The people hold complete power.[/quote]
yeah…I think another reason why Austrian theory is attractive is their recognition of the severe constraints on “what we can know” - with huge implications for public policy.
The epistemological arrogance of public officials - what Hayek calls “the fatal conceit” - should appall and alarm all thinking people.
How does the war translate into a booming economy?
Remember the spiral I described above…the same way, except in reverse.
Excess military capacity is converted to manufacturing goods. War time profits create extra demand, employment, consumption, investment etc. yada yada yada you get it.
No, I don´t-
I want you to describe the steps in between.
Maybe then you will get why it cannot be that way.
War is over.
Millions of soldiers lose their “job”.
All the factories are geared towards a war economy-
Now what?
…fine.
Due to the war, people are rich. Businesses have profited, people have saved money during the period and thus, investment is strong. When the war ends, everyone can now consume again! Because consumption is high, business on sum total, make a profit. When businesses are doing well, unemployment drops.
Military factories are converted into consumer goods factories. People spend their war savings (victory bonds), invest, consume etc.
Happy?[/quote]
Not really.
So people have saved and when the war was over they were ready to consume again.
How Austrian of you.
What role those the war play in all of this and how is it cheaper to change a war time industry into a peace time industry than not having a war time industry at all.
Also, what does it matter that people made money selling arms? Why do other make work programms not yield the same effect?
[quote]shookers wrote:
Sloth wrote:
Why is the answer always, always, that they just didn’t spend enough…
Look past the dogma and look at the data. Neither the great depression nor japan’s lost decade represented a major stimulus (FDR never stopped attempting to balance the budget - i.e. he raised taxes. read the chapter above for Japan info). The only time there was a huge stimulus (WWII), it worked. [/quote]
[quote]katzenjammer wrote:
Bill Roberts wrote:
You mean (among other things) that the 40% of income earners who pay no income tax who will now be receiving an “income tax cut” --which translated to ordinary English means, a check which is money taken from other people and given to them by the IRS – might LIKE this and keep voting for it to continue or even expand?
Well said. [/quote]
So?
That is classic Caesarianism.
The man at the top gains power by conspiring with the plebeians against those above them.
The link I posted was not for it’s content (I barely read it). It just has the sources at the end that you asked for. The article mentions the points you wanted to verify.
With regard to the spiral - I think you’re still misunderstanding me. When the economy experiences deflation and when savings is greater than consumption, on the SUM TOTAL businesses are losing money. Notice I didn’t say all, and I certainly didn’t say no one was spending money. I also didn’t say the economy would come to a permanent halt. I mean SUM TOTAL, the economy shrinks during deflationary periods - and the period may continue until an exogenous shock changes something because people have an incentive to save (this continuing the cycle)
The Savings = Investment argument
You claim state that people aren’t investing because of government actions, that’s simply not true. Investment was dropping fast before the bailout, the stimulus etc. Certainly the government can shake peoples willingness to invest, but blaming ALL the drop of investment on government is stupid. Especially, as I stated, investment always rises and falls with GDP - that is, when people have net savings INVESTMENT FALLS.
Credit Markets
You’d be surprised to know that lending standards aren’t nearly as tight as you think they are right now. In fact, most qualified people could go get a loan from the bank. The reason credit is not flowing is not because banks are “skittish” (hell, they have every guarantee possible from the Fed), it’s because NO ONE WANTS TO BORROW. When no one wants to invest and consume, obviously credit markets tighten. Again, this points to the whole exogenous shock argument.
The Multiplier
Without opening up my econ 101 textbook, I think its an understatement to say that the multiplier is a controversial issue that I know Austrians disagree with (although it has never been explained to me why). I think however we can agree that every time money is taken out of the economy (taxes), or put it (spending), the action IS multiplied by other people spending the same dollars.
You’re actually quite right about taxes, I read a study earlier that showed that on average, a 1% decrease in taxes (as a % of GDP) brings about a 3% rise in GDP. Similarly, a 1% increase in spending (as a % of GDP) will bring about a more than 1% rise in GDP. Both of these phenomena work in reverse as well. The proponents of stimulus would argue that by spending now and paying later, you can recoup your losses during boom time when the increased taxes have a smaller affect and the economy is functioning properly.
This stimulus can be achieved through tax cuts OR spending. Some think one has a higher multiplier than the other, and I would tend to side with the tax cuts - but that doesn’t mean the matter is not up for debate.
How does the war translate into a booming economy?
Remember the spiral I described above…the same way, except in reverse.
Excess military capacity is converted to manufacturing goods. War time profits create extra demand, employment, consumption, investment etc. yada yada yada you get it.
No, I don´t-
I want you to describe the steps in between.
Maybe then you will get why it cannot be that way.
War is over.
Millions of soldiers lose their “job”.
All the factories are geared towards a war economy-
Now what?
…fine.
Due to the war, people are rich. Businesses have profited, people have saved money during the period and thus, investment is strong. When the war ends, everyone can now consume again! Because consumption is high, business on sum total, make a profit. When businesses are doing well, unemployment drops.
Military factories are converted into consumer goods factories. People spend their war savings (victory bonds), invest, consume etc.
Happy?
Not really.
So people have saved and when the war was over they were ready to consume again.
How Austrian of you.
What role those the war play in all of this and how is it cheaper to change a war time industry into a peace time industry than not having a war time industry at all.
Also, what does it matter that people made money selling arms? Why do other make work programms not yield the same effect?
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What role does the war play? It gives people money to save
How is it cheaper to change a war time industry into a peace time industry?
Many new factories were built for the War, and others refurbished/opened to manufacture arms. It wasn’t difficult to re-tool the factories to make consumer goods. Note the war made it profitable to make the investments into new factories in the first place.
Why do other make work programms not yield the same effect?
Time will tell.
Please god don’t tell me you’re one of those that think the market recovered spontaneously at the exact time the war started and the government started spending.
The link I posted was not for it’s content (I barely read it). It just has the sources at the end that you asked for. The article mentions the points you wanted to verify.
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my problem is not with the article. It’s what you implied that prompted me to question my understanding of Friedman and request the source. I just didn’t that was intellectually honest.
I am not misunderstanding you. The last statement is the only one I have had issue with. It makes absolutely no logical sense. Go back and reread my comments with that last sentance as the frame of referense.
This does not mean it would have continued to drop. This does provide no proff that gov’t action has not made things worse. You have look beyond the obvious.
You cannot not look at particular action or result and offer this as proof of a specific action or non-action. There are too many variables in the economy. It cannot, and will never be a petri dish.
This is precisely why artificial stimulous and intervension can never be calculated. This is preciseley why we need to leave the market to it’s own devises. We’ve already covered why.
You have to attack the logic. If you cannot work through an argument with reason, we can’t really have a discussion.
BUT NOT FOREVER. The stimulous does not account for all the drop. I never said that. What I have said, and explained, on this forum several times over, is that general gov’t fuck-uppery is the very source of the boom (the problem) and the same fuck-uppery will slow and deepen the bust (the correction).
I can’t recall where I heard this analogy, but I think it sums it up pretty well. Would you trust the arson that just set your house on fire to put it out?
I am actually glad you said this. I too have not seen any evidense of tighter credit. This seems to be accepted dogma and I really didn’t want to argue this as it is irrellavent to discussion on gov’t intervention.
I again defer to my point that economic knowledge is distributed throughout the market, not concentrated in Washington. If the market is heading in a particular direction, maybe it needs to go in that direction. Washington does not know what’s best for the economy. For them to override market signals and knowledge is just plain illogical.
Forget what experts (participants) in their small portion of the economy say, we know better. Just plain silly. Please tell me how it is not.
For ever action is there is an opposite, but equal, reaction. I am paraphrasing but I hope you get my point. Money taken out of or put in has to come from somewhere. I don’t give a shit if multipliers exist or not. I don’t really care to argue if they do.
It drives absolutly bat shit crazy when people talk about multipliers for stimulous but do not talk about multipliers for paying it back, interest rates, and inflation. I think I have mentioned this a few times, yet no response to this.
It’s fine if you don’t want to get into it. Let’s just drop the whole idea of multipliers if you can’t or don’t want to work through the multipliers on the back end. The ones that will do damage.
so? We can’t cut taxes and increase spending for ever. this is why stats like this are almost worthless, even if they do support my arguement. The fact is you cannot rack up deficites forever. And all deficites must be paid back. A subject you seem unwilling to acknowledge or discuss.
Tax cuts without corrisponding reduction is not quite as bad as what they are doing know. Still not as effective of cutting spending and taxes.
Why is it better. Becuase of the fact that economic knowledge is distributed throughout the economy, not in concentrated in Washington.
There are certain economic truths that just don’t support the stimulous working for us in the long run.
So to sum up:
The spiral - it cannot go on forever. gov’t trying to reverse this at some artificial point is acting in complete defiance of economic knowledge.
Savings, Investment, and Spending - same thing.
The multiplier - forget whether is exsists or not. how can near term multipliers absorb long term mulitiplier that is an equal but in an opposite direction, interest rates, and inflation?
Taxes - Cutting taxes is better than increasing spending give the same deficite. Money is flowing through the source of real economic knowledge instead of politicians. No arguement.
Leaving taxes where they are and cutting spending would be even better in the long run.
Cutting taxes and spending even further would be the best.
We are not making much progress here. I feel like I am posting the same things over an over again.
[quote]shookers wrote:
I’m happy to leave it at that. I think we’ve identified the major differences between modern day macroeconomics and the Austrian school.[/quote]
That may be because if the problem is that someone has dumped 1 trillion pounds of crap on your lawn, that amount is the main point: not whether it is horse crap, cow crap, or buffalo crap.