Keynesianism is garbage. Kenyan Keynesianism is even worse.

It is like the sugar and fat diet. It sounds great, and feels good for a while.. Obviously people want to hear that they can lose weight eating candy and doughnuts whilst sitting on their ass all day, but sadly it doesn't work like that.

Keynesianism is great for politicians. Who doesn't like to make it rain? It justifies their worthless pet projects and they can give money to their constituents to buy vote.. When it all fails they blame the Constitution and Free Market Capitalism and get away scotch free with a lot of backroom money or their constitutions remain stupid and vote them back in. $174k a year + pension + healthcare + backroom deals + insider knowledge for trading. It's a great job.

Macroeconomic Effects from Government Spending and Taxation by Robert J. Barro and Charles J. Redlick.
"For U.S. annual data that include World War II, the estimated multiplier for temporary defense spending is 0.4–0.5 contemporaneously and 0.6–0.7 over 2 years. If the change in defense spending is “permanent” (gauged by Ramey's defense news variable), the multipliers are higher by 0.1–0.2. Since all estimated multipliers are significantly less than 1, greater spending crowds out other components of GDP, particularly investment."

The multiplier is a myth. The IS-LM model is absurdly simplistic and is contrary to reason. No single entity has enough timely knowledge to make better allocation decisions for the whole economy than the individual actors in that economy do. To pretend that your simple model means that you don't need information to make better decisions than all individual actors is the height of hubris.

Why do I always find these threads late on Sunday night?


Central banking and fiat currency FTW

Well, since I learned economics in college from Mises, Friedman, and Sennholz, I'm gonna admit that I am not a fan of Keynes.

One of my takeaways from Keynes is that supply does not drive demand.  If a country produced nothing but washing machines, there would be a boom time while washing machines were being produced and sold until almost everyone has a washing machine.  So you are left with this huge industrial complex geared towards making washing machines, and now the market is saturated and will never go back to the good old days.  There is going to be some pain for a lot of washing machine workers.  Making more washing machines is not the solution.  Making it easier and more profitable to make washing machines is not going to help.  

What is the solution?  Many think the best thing to do is cut the wages of the workers and cut government spending to zero and go into our turtle shells, and wait for someone to create the next 'washing machine.' which leaves us with what?  Thousands of idle workers.

Fiat currency isn't the problem. A central bank that does what the President wants is the problem.



There is a reason why the central bank is largely independent from the rest of the government.
 

As my former professor, Dr. Prescott once said, "Keynes was a great mathematician. He was a crappy economist." The economy is a dynamic system. There is an equilibrium, not unlike an equilibrium in the nature. There are shocks to this equilibrium. Bank crises, forest fires (in the case of nature) that shock the system away from the steady state. The system always returns to the carrying capacity determined by the parameters of the environment. If Keynesian economics is the style used by policy makers, then the parameters of the environment suck. And the state of the economy will reflect that. As it is right now.



The first bailout was passed because of significant research done on the great depression, that suggested that bank failures was the primary driver of the recession. I'm not saying it was right, but at least it was based on some kind of logic. Barack Obama ran with the idea of bailouts and went full on Keynes style retard, investing in pet projects and fucking over the tax payer in the process.





 

Smashing Bollocks and making a pie from said smashed bollocks....   You sick bastard.  

All true but how does that help us when the federal budget deficit cannot be borrowed? That "independence" only goes so far....

Taxation and inflation do the same thing. Any deliberate increase in inflation is identical to an equivalent tax increase, except for the fact that the effect of inflation will be more like a sales tax than an income tax.



You are right of course, but in an ideal world, the congress would legislate the fed out of existence in such a situation and take direct control, which would destroy faith in the dollar and cause severe belt cinching on the part of the federal government.



Either way, it is still better than the gold standard.



 

I doubt these poll results, considering how many Keynesians I've argued with here over the years.



It's probably another one of those "I support smaller government, but..." or "I'm pro-gun, but..." things here, where republicans try to have their cake and eat it too.




 

your former professor may have been a great economist, but he's a crappy ecologist.  steady state equilibrium has been pretty much exploded as a description of real ecosystems.  

 

Is fucktareded too strong of a  term to describe my view of Keynseian economics?

Keynesian economics works only in one's imagination. Unless the intended goal is to destroy economy and society.

I dont think the system itself is hurt or shocked, it is just set up to do the wrong thing.  Namely, produce loans to build houses.   At one time it was set up to make horse drawn carriages and typewriters, steam locomotives, etc.  There was a massive build up and (mal)investment to produce loans to build or buy houses that drove the entire economy, until now, there is no demand for the product.  So the economy winds down until the next economic driver is invested in... who knows what the hell that will be.  So the carrying capacity is not the issue, its the demand for what is being created.  The issue is what to do during the downtime?  Is it really useful to have hundreds of thousands or millions of people idle while the economy sits and spins and figures out what to do next?

Yup





 

Keynes boils down to  the idea that people wanting stuff creates wealth.
In reality, people making and doing stuff creates wealth.  

The only bit he got right is that group psychology can have real effects on their activity levels, and therefore on how much wealth they create.  Make them think times are good, and they'll keep working/investing/etc.............until the bubble you created pops and they realize they've been hanging over a cliff and they scurry back into their holes for years at a time........Sound familiar?

Bump.

In your example, supply IS driving demand initially.

It's not an all or nothing undertaking.
Supply CAN drive demand, but as demand begins to wane due to market saturation, supply needs to react (or better yet anticipate) the reduced demand and lower the rate of production.

Look at the iPad.
Merely inventing the thing, creating a supply, produced a huge demand for it that did not previously exist.

Smashing Bollocks.

I voted smashing only because it is more fun to say than bollocks

When arguing with progressives about the Great Depression and Keynesian Economics, I 've replied that the reason we emerged from WWII as a economic superpower was not due to FDR's spending on a massive scale, but rather because every other country that was even close to our manufacturing level had been bombed back to the Stone Age. After the end of hostilities, we were the suppliers of the world.  



I'm not a college grad, and have never taken an Econ course, so I'm curious as to whether or not my little theory is worth the electrons it's printed with.  Comments?






 

Your explanation is a good explanation for why we were relatively more prosperous than everyone else. There was a big transfer of money from the places that could no longer produce as much to those who could continue to produce as they got back on their feet, which made us relatively much better off than much of the rest of the world. If the war had never happened and we'd just gone on trading (and not smashing everything to bits), things would've been even better, but what you posted does explain the post-war "boom".

Listen to this. It's freaking amazing. Peter Schiff, along with the Austrian School of Economics predicted the housing bubble and the ensuing crap long before it happend.

Peter is such a boss.


(THIS VIDEO HAS LITTLE TO DO WITH GLENN BECK SO PLEASE IGNORE THE COVER)

I've thought about that quite often.  The USA was the only major economy whose manufacturing infrastructure was still completely intact, and we had plenty of natural resources and manpower after the war (as opposed to the Soviets, Germans, Japanese, etc. etc.).  There's a lot to be said for being able to sell capital equipment to the rest of the world after much of their equipment and manpower has been destroyed.

Another factor to consider with respect to WWII and the end of the Great Depression is the role of rationing and wage and price controls in obscuring the true cost of the "stimulus" (WWII).  We have no way of knowing how much people would have paid for the goods and services that were rationed or price controlled.

Agreed.

I'm only saying the politicians (democrats w/ "stimulus") have a made a mockery of Fed independence (in effect turning the Fed Chief into their bagman).

Taxation moderates inflation. The largest effect seen in the income tax, as it is per unit of work, and a sales tax is consumption based.

Is Keynesian economics bad? Do you think vitamin C is bad? OK, how about if your doctor thinks the only medicine in the world is vitamin C and that it cures everything? How about if you are already eating a straight diet of lemons and oranges while snacking on chewable vitamin C tablets?

It’s sort of like that.

Here’s my reasoning, for what it’s worth. In theory human desires are infinite, but we all know that is not really the case exactly. Desires may technically be infinite but the strength of the desire drops off drastically as needs and wants are met.

As an example, imagine that you can get any car you want from any dealership in your area free of charge. Awesome!!!  (Bill Gates or someone else is paying for it because he likes you and the only catch is you can’t sell it. Insurance and registration is also paid for. ) So, you pick out your car and then get told you can pick out another car. “Awesome.”.

Then, the next day, you get to pick another car. “Cool.” And another car the day after that. “OK.” And yet another car the day after that, “yea, whatever…” At some point you aren’t really interested in another car. You have all the cars you really need, want, or can use. You might take it, but you aren’t going to do much work to get it. At some point, even if you have the room to park them, it’s not worth going to pick the free car up.

With this in mind, imagine a society with the bare minimum of government overhead and where everyone worked on productive jobs. Our GDP would probably be several times higher than it now which means we would be a far richer country. We would be producing so much stuff that there wouldn’t be a market for it all. Factories would close and people would be out of work. Or, wages would fall under the glut of workers.

So, it might make sense to tax people a little more and spend the money on projects that benefit the public but which the private sector can’t really fund. This adds inefficiencies in the economy but it employs some of the surplus labor. And if a society enters that kind of recession a good dose of Kensyan economics might help fix the problem. I say “might” because I’m not sold on that idea. Whenever it’s been tried to my knowledge it came in conjunction with other economic restrictions and regulations which generally screwed up the economy. So it’s hard to tell whether it can be beneficial or not based on history.

But what we are doing now is entirely different. Paying people to reforest land, build rockets, make warships, and build roads is entirely different from giving people a check not to work at all. And we are in a recession caused by excessive spending, not one caused by excessive production.

Works great in a vacuum.



In real science, it's easy to disprove.  In macroeconomics, you can float 10,000 reasons why it fails on a macro level and people still want to try it.



Because, you know... the crowd that hasn't been in charge to try it yet is always smarter than the ones that failed with it.




 

It won't. Recessions are a result of misallocations of resources, usually due to signals in the marketplace that are garbled either by novelty (e.g., when the people making investments don't fully understand what they're doing, as in various stock bubbles in the 19th century) or by design (e.g., when the government lends funds at a steep discount, sending the message that low interest rates mean there's lots of resources being saved, and therefore available for long-term investment, leading to a sudden increase in prices when entities with cheap money try to purchase capital). "Keynesian economics" tries to prevent the adjustment of the economy away from the malinvestments made. Consider how vigorously the government has tried to buoy home ownership and mortgages and new home purchases in the very face of powerful evidence that there's too many people buying houses they can't afford. Consider how vigorously the government has tried to keep afloat businesses that were failing –– those businesses were failing for a reason! By trying to continue the patterns of the boom which have led to the bust, the government continues to inflate the bubble, ensuring that the pain of the adjustment will be all the worse when it inevitably comes.

Everyone wants to shout "Yes, we can!" Nobody wants to shout "No, we can't." or "No, we mustn't."

The problem is convincing the politicians that the taxes are too high in a situation like we face now.....