Economics

[jasonnfree]

Anybody here an economist? I've read a lot of opinions here and just wondering, that's all. I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades. Peter Ferrara could give a pretty good anti argument, but what nations can he give a working example of that were successful under his brand of economics.

 

[eflatminor]

I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades.

Which is akin to living on credit cards. You'd live pretty well for a while...until you can no longer make the minimum payments. Then the shit hits the fan.

The Keynesian idea of stimulating the economy is like me robbing the local grocery store of its till, keeping some of the money for my efforts, then giving the rest to a bum....then, when that bum goes into that grocery store to buy beer, we call it stimulus.

Worth reading:

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis | 9781604190441 | Paperback | Barnes & Noble

 

[Foxfyre]

There is no empirical evidence that Keynesian economics has been truly successful anywhere it has been tried.

In our own history, the first effort at using Keynesian economics was FDR's "New Deal" that most credible historians now credit with actually prolonging the Great Depression. And its legacy is not pretty either:

By the 1970s, Keynesian policies had produced double digit unemployment, double digit inflation, and double digit interest rates, all at the same time, along with four successive worsening recessions from 1969 to 1982. Keynesian monetary policy involves running up the money supply to increase demand, with artificially lowered interest rates promoting more spending. That is where the inflation came from.

While Reagan's return to supply sided economics boosted job creation, halted and reversed runaway inflation, and ushered in a sustained period of economic growth. The U.S. economic growth between 2002 and 2007 exceeded the entire economy of China.

We call this period, 1982-2007, the twenty-five year boom – the greatest period of wealth creation in the history of the planet. In 1980, the net worth – assets minus liabilities – of all U.S.households and business…was $25 trillion in today’s dollars. By 2007, …net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.”

Obamanomics: The Final Nail In the Discredited Keynesian Coffin - Forbes

Those who see government as the lawful master of the people and the role of the people is to serve government will generally embrace the bastardized version of Keynesian economics that says we can spend ourselves into prosperity. (Keynes himself would never have advocated Keynesian economics as the U.S. has embraced it.)

Freedom loving people who see the role of government as serving the people, will reject Keynesian economics every time.

 

[jasonnfree]

There is no empirical evidence that Keynesian economics has been truly successful anywhere it has been tried.

In our own history, the first effort at using Keynesian economics was FDR's "New Deal" that most credible historians now credit with actually prolonging the Great Depression. And its legacy is not pretty either:

By the 1970s, Keynesian policies had produced double digit unemployment, double digit inflation, and double digit interest rates, all at the same time, along with four successive worsening recessions from 1969 to 1982. Keynesian monetary policy involves running up the money supply to increase demand, with artificially lowered interest rates promoting more spending. That is where the inflation came from.

While Reagan's return to supply sided economics boosted job creation, halted and reversed runaway inflation, and ushered in a sustained period of economic growth. The U.S. economic growth between 2002 and 2007 exceeded the entire economy of China.

We call this period, 1982-2007, the twenty-five year boom – the greatest period of wealth creation in the history of the planet. In 1980, the net worth – assets minus liabilities – of all U.S.households and business…was $25 trillion in today’s dollars. By 2007, …net worth was just shy of $57 trillion. Adjusting for inflation, more wealth was created in America in the twenty-five year boom than in the previous two hundred years.”

Obamanomics: The Final Nail In the Discredited Keynesian Coffin - Forbes

Those who see government as the lawful master of the people and the role of the people is to serve government will generally embrace the bastardized version of Keynesian economics that says we can spend ourselves into prosperity. (Keynes himself would never have advocated Keynesian economics as the U.S. has embraced it.)

Freedom loving people who see the role of government as serving the people, will reject Keynesian economics every time.

I always see reagan heralded as a great man that gave America hope, sent us on a decades long boom etc. But he did basically what FDR did. Increased deficit drastically. FDR had a really drastically disabled economy on his hands and then a major war afterwards to explain his deficit. He also managed to do something for the working class on the way. Social security, fair labor acts, price supports for farms, on and on including electrification of rural america. Arguments could be made that his policies destroyed America, but I just don't buy that argument as someone coming of age in the early 60's. Too many oldsters I knew that loved FDR. "He saved our farm" was a typical one and there was a hatred for hoover and repubs in general although Ike did get the white house in '52, being a war hero and all. Reagan drastically increased the debt and for what? Fight the cold war? That's a pretty subjective argument that could go on forever, but FDR's war was for real. What's the republican plan for the rest of us? Race to the bottom for wages, roll back regulations and tax cuts for the rich. What else? My opinion but I'm open to criticism or even scorn. Trying to sort things out.

 

[Foxfyre]

No Reagan did not create the deficit. Reagan didn't spend a dime. He did agree to raise some taxes in return for a Congressional promise to reduce spending by $2 for every $1 in new revenue. His successor, George H.W. Bush did the same. We got the new taxes but no reduction in spending. No matter how much the revenues are--and they went up remarkably in Reagan's tenure--if Congress spends a bunch more than it receives, we will have deficits. Spending and Keynesian economics are not necessarily the same thing however.

Now you were being honest with your OP that you wanted to discuss the effectiveness of Keynesian economics, or your real motive is to smear Reagan or any other President who didn't embrace Keynesian economics--I didn't bring up the cold war at all, nor did you in the OP. Which is it?

 

[Luissa]

No Reagan did not create the deficit. Reagan didn't spend a dime. He did agree to raise some taxes in return for a Congressional promise to reduce spending by $2 for every $1 in new revenue. His successor, George H.W. Bush did the same. We got the new taxes but no reduction in spending. No matter how much the revenues are--and they went up remarkably in Reagan's tenure--if Congress spends a bunch more than it receives, we will have deficits. Spending and Keynesian economics are not necessarily the same thing however.

Now you were being honest with your OP that you wanted to discuss the effectiveness of Keynesian economics, or your real motive is to smear Reagan or any other President who didn't embrace Keynesian economics--I didn't bring up the cold war at all, nor did you in the OP. Which is it?

Reagan didn't spend a dime? Proof of that statement?

 

[Foxfyre]

Okay good point. Reagan did not spend a dime that Congress did not authorize for the Executive Branch to spend. Better?

 

[eflatminor]

Reagan didn't spend a dime? Proof of that statement?

Congress holds the purse strings, not the President.

 

[Rshermr]

No Reagan did not create the deficit. Reagan didn't spend a dime. He did agree to raise some taxes in return for a Congressional promise to reduce spending by $2 for every $1 in new revenue. His successor, George H.W. Bush did the same. We got the new taxes but no reduction in spending. No matter how much the revenues are--and they went up remarkably in Reagan's tenure--if Congress spends a bunch more than it receives, we will have deficits. Spending and Keynesian economics are not necessarily the same thing however.

Now you were being honest with your OP that you wanted to discuss the effectiveness of Keynesian economics, or your real motive is to smear Reagan or any other President who didn't embrace Keynesian economics--I didn't bring up the cold war at all, nor did you in the OP. Which is it?

Uh, me boy, how about just the facts. Reagan came in with an unemployment rate of about 7.4% and it was declining. He passed his tax decreases under the concept of supply side economics, and the ue rate went to 10.8%. Highest at any time in our history, except for the great depression beginning in 1929. He then raised taxes 11 times, and borrowed more than all the preceding presidents combined. Tripled the national debt.
The economy did not get cooking for reagan until he spent, like a drunken sailor, on stimulus related projects. Rather Keynesian, indeed. If you believe that supply side economics worked, you have to find an actual case where it DID.
Where, in a bad economy, did reductions in gov spending and income tax decreases across the income spectrum ever help?
Under fdr, the ue rate declined in all but one year. And that was the year that he decided to decrease gov spending. After that, he spent stimulatively, and the ue continued to go down.

Who ARE those impartial historians you refer too??

 

[oldfart]

Anybody here an economist? I've read a lot of opinions here and just wondering, that's all. I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades. Peter Ferrara could give a pretty good anti argument, but what nations can he give a working example of that were successful under his brand of economics.

You asked an honest straight question and got a lot of responses spinning off into ideologies. That tells you a lot about the board.

To answer your question, there are at least five college economics teachers who post at least occasionally here (but no one very frequently!). As soon as one of them does they are deluged with people questioning their credentials unless they fawn on Rothbard. There are perhaps another dozen posters who have a good grasp of economics and are willing to actually look up statistics at their sources and read papers rather than simply quote political blogs. That's pretty much it.

So what does a mainstream economist bring to the table (or how can you spot someone with some training)?

1. Real economists have a familiarity with the history of economic thought. They know who physiocrats and mercantilists were and who Adam Smith, David Ricardo, and Thomas Malthus were. This is the Classical period of economic theory. They know who Alfred Marshall is. If they have not read Keynes, they are at least familiar with Hicks and Samuelson. For monetary economics they can discuss Irving Fisher and Milton Friedman. They know what general equilibrium theory is and who Leon Walras, Vilfredo Pareto, and Wassily Leontief were. If none of this rings a bell with someone, they have not read economics.

2. Real economists have learned the basic tools of the discipline. They have a little background in history and in mathematics. They are familiar with econometrics and intelligently discuss forecasting, multiple regression, correlation, and lagged variables.

3. Real economists use simple models but avoid simplistic answers. They know the assumptions they make in using simple models. They are aware of the gaps between data-based econometric models and theory-based models and try to understand how to narrow those gaps.

4. Good amateur economists understand this and are more interested in learning than in defending ideological positions or scoring points. It's the quality of thought that counts. They don't quote (even indirectly) works they have never read or do not understand and they like to look up data.

It goes without saying that people actually interested in economics as opposed to political or ideological flame wars will argue vigorously but refrain from personal attacks. It's hard to learn while you are shouting.

Also note that ideologues never concede a point and think they score victories if they can show someone has changed positions over time. Real economists understand that they can (rarely) be mistaken and that as the data change, institutions evolve, technology develops, and hopefully the state of the economic arts progresses, only fools insist on a rigid consistency.

Arguments are built on reasoning and information. In economics that reasoning includes the models and work of generations of other economists. The information comes from an intimate understanding of data gathering, statistical analysis, and a very large dose of history of both economic conditions and economic thought.

Real economists use these tools and methods to constantly contend and seek to understand what is going on. Poseurs look like they are doing the same in an effort to feel important or advance an ideological agenda.

 

[georgephillip]

In 1924 British engineer CH Douglas pioneered the Social Credit economic reform movement:

"Social credit is an interdisciplinary distributive philosophy developed by C. H. Douglas (1879–1952), a British engineer, who wrote a book by that name in 1924.

"It encompasses the fields of economics, political science, history, accounting, and physics.

"Its policies are designed, according to Douglas, to disperse economic and political power to individuals."

Douglas claimed there were three possible policy alternatives with respect to an economic system:

"1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action.

"2. The second alternative has a certain similarity to the first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment.

"3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services."

 

[oldfart]

I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades.

Which is akin to living on credit cards. You'd live pretty well for a while...until you can no longer make the minimum payments. Then the shit hits the fan.

The Keynesian idea of stimulating the economy is like me robbing the local grocery store of its till, keeping some of the money for my efforts, then giving the rest to a bum....then, when that bum goes into that grocery store to buy beer, we call it stimulus.

Worth reading:

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis | 9781604190441 | Paperback | Barnes & Noble

Just curious. Have you ever actually read anything actually written by Keynes? Have you ever read a biography of Keynes? Have you ever read a summary of Keynesian macrotheory written by someone other than a political blogger?

It sounds like you have not. I believe you have no conception of Keynes economic theory and if your life depended upon being able to identify it in a list of quotes, you would surely be dead.

If I'm wrong prove it by in your own words explaining:

1. Aggregate demand
2. Liquidity trap
3. Keynesian cross

Any body else feel free to join in.

 

[Luissa]

Reagan didn't spend a dime? Proof of that statement?

Congress holds the purse strings, not the President.

So you Blame congress for Obama's debt, right?

 

[regent]

I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades.

Which is akin to living on credit cards. You'd live pretty well for a while...until you can no longer make the minimum payments. Then the shit hits the fan.

The Keynesian idea of stimulating the economy is like me robbing the local grocery store of its till, keeping some of the money for my efforts, then giving the rest to a bum....then, when that bum goes into that grocery store to buy beer, we call it stimulus.

Worth reading:

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis | 9781604190441 | Paperback | Barnes & Noble

Just curious. Have you ever actually read anything actually written by Keynes? Have you ever read a biography of Keynes? Have you ever read a summary of Keynesian macrotheory written by someone other than a political blogger?

It sounds like you have not. I believe you have no conception of Keynes economic theory and if your life depended upon being able to identify it in a list of quotes, you would surely be dead.

If I'm wrong prove it by in your own words explaining:

1. Aggregate demand
2. Liquidity trap
3. Keynesian cross

Any body else feel free to join in.

Keynes is tough reading, but so far, no one has come up with a better idea. One problem with the Keynes method is that the nation is supposed to pay back the borrowed money but never does. Another problem is that there are a number of component in an economy and changing one and having success does not mean changing that component each time will create success. For example, lowering taxes at one time may seem to improve the economy but lowering taxes at another time might make the situation worse. These simplistic solutions by politicians might be one cause of depressions.
Galbreath came up with the causes of the Great Depression but that does not mean those causes put together differently might produce different results.
Another example of the complexity of economics, our debt has only been paid off once and the surplus money given to the states and guess what, it caused a depression. So far, Keynes seems the only workable solution. Trying to balance the budget in a depression as FDR started to do one time seems so logical yet usually turns out to be sheer madness, but it sounds it sounds so good. Comparing the nation's budget to a family budget is a bad analogy.

 

[oldfart]

No Reagan did not create the deficit. Reagan didn't spend a dime. He did agree to raise some taxes in return for a Congressional promise to reduce spending by $2 for every $1 in new revenue. His successor, George H.W. Bush did the same. We got the new taxes but no reduction in spending. No matter how much the revenues are--and they went up remarkably in Reagan's tenure--if Congress spends a bunch more than it receives, we will have deficits. Spending and Keynesian economics are not necessarily the same thing however.

Now you were being honest with your OP that you wanted to discuss the effectiveness of Keynesian economics, or your real motive is to smear Reagan or any other President who didn't embrace Keynesian economics--I didn't bring up the cold war at all, nor did you in the OP. Which is it?

You are being disingenuous. You brought up Reagan in post #3. That makes it fair game. You have by questioning the motives of the original poster committed an ad hominem and done the same thing you accused the OP of doing.

If you want to leave Reagan out of this thread, stop bringing him up!

 

[oldfart]

First bear in mind that I will be excoriating positions which I think you do not hold (you seem to be too honest and reasonable to fall for the oompah). So I am responding, but not attacking you or any position you have made.

Keynes is tough reading, but so far, no one has come up with a better idea. One problem with the Keynes method is that the nation is supposed to pay back the borrowed money but never does.

This is a result of anti-Keynesians elevating logical inconsistency and misrepresentation to a theological level. Keynes in 1920 and consistently thereafter argued that austerity was a policy for near full employment, stimulus was the policy for depressions. All Keynesian economists follow the same reasoning, because this is the quintessential position that defines Keynes. Any representation to the contrary is a damnable lie. You can change your mind on this point, but at that point you cease to be Keynesian. A Keynesian policy in both downturns and near full employment will produce manageable debt. Remember that Keynes was the architect of the British Treasury's WWI financing and debt. Claiming that he of all people would ignore the dangers of deficits is a historical blunder of Titanic magnitude, but posters on this board seem to know even less history than they do economics.

We have the debt we do today because of "supply-side" theories, which are decidedly anti-Keynesian. We were told that cutting taxes at full employment would stimulate they economy and "pay for itself" thus not increasing the debt. Both Reagan and Bush 43 did this massively. It is the cornerstone of their economic policy. And it failed. Now you can argue supply-side economics. And you can deplore the deficit. But given the econometric evidence, to do both at the same time is intellectually dishonest. Pick one position or the other, but abandon the magical thinking.

Another problem is that there are a number of component in an economy and changing one and having success does not mean changing that component each time will create success. For example, lowering taxes at one time may seem to improve the economy but lowering taxes at another time might make the situation worse. These simplistic solutions by politicians might be one cause of depressions.

Good points all.

 

[Toddsterpatriot]

First bear in mind that I will be excoriating positions which I think you do not hold (you seem to be too honest and reasonable to fall for the oompah). So I am responding, but not attacking you or any position you have made.

Keynes is tough reading, but so far, no one has come up with a better idea. One problem with the Keynes method is that the nation is supposed to pay back the borrowed money but never does.

This is a result of anti-Keynesians elevating logical inconsistency and misrepresentation to a theological level. Keynes in 1920 and consistently thereafter argued that austerity was a policy for near full employment, stimulus was the policy for depressions. All Keynesian economists follow the same reasoning, because this is the quintessential position that defines Keynes. Any representation to the contrary is a damnable lie. You can change your mind on this point, but at that point you cease to be Keynesian. A Keynesian policy in both downturns and near full employment will produce manageable debt. Remember that Keynes was the architect of the British Treasury's WWI financing and debt. Claiming that he of all people would ignore the dangers of deficits is a historical blunder of Titanic magnitude, but posters on this board seem to know even less history than they do economics.

We have the debt we do today because of "supply-side" theories, which are decidedly anti-Keynesian. We were told that cutting taxes at full employment would stimulate they economy and "pay for itself" thus not increasing the debt. Both Reagan and Bush 43 did this massively. It is the cornerstone of their economic policy. And it failed. Now you can argue supply-side economics. And you can deplore the deficit. But given the econometric evidence, to do both at the same time is intellectually dishonest. Pick one position or the other, but abandon the magical thinking.

Another problem is that there are a number of component in an economy and changing one and having success does not mean changing that component each time will create success. For example, lowering taxes at one time may seem to improve the economy but lowering taxes at another time might make the situation worse. These simplistic solutions by politicians might be one cause of depressions.

Good points all.

We have the debt we do today because of "supply-side" theories, which are decidedly anti-Keynesian. We were told that cutting taxes at full employment would stimulate they economy and "pay for itself" thus not increasing the debt. Both Reagan and Bush 43 did this massively.

Reagan and Bush 43 cut taxes at full employment? When was that?

Where does "supply-side" theory say that tax cuts will pay for themselves?

 

[eflatminor]

Reagan didn't spend a dime? Proof of that statement?

Congress holds the purse strings, not the President.

So you Blame congress for Obama's debt, right?

If you're suggesting that I am a Republican, you couldn't be more wrong.

Congress holds the purse strings.

 

[eflatminor]

I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades.

Which is akin to living on credit cards. You'd live pretty well for a while...until you can no longer make the minimum payments. Then the shit hits the fan.

The Keynesian idea of stimulating the economy is like me robbing the local grocery store of its till, keeping some of the money for my efforts, then giving the rest to a bum....then, when that bum goes into that grocery store to buy beer, we call it stimulus.

Worth reading:

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis | 9781604190441 | Paperback | Barnes & Noble

Just curious. Have you ever actually read anything actually written by Keynes? Have you ever read a biography of Keynes? Have you ever read a summary of Keynesian macrotheory written by someone other than a political blogger?

I've not only read Keynes, I had it rammed down my throat by many professors during the course of obtaining an advanced degree in economics. I have no interest in 'bloggers'.

It sounds like you have not.

You'd be wrong.

I believe you have no conception of Keynes economic theory and if your life depended upon being able to identify it in a list of quotes, you would surely be dead.

What you believe is of no consequence. If I have no interest in bloggers, you think your opinions matter? Please.

If I'm wrong prove it by in your own words explaining:

1. Aggregate demand - We all understand that AD includes spending by consumers, companies and government. What you fail to understand is that government can't spend without first taking from consumers and companies...all under the false premise that government knows how to centrally control the economy at a given point in time. I reject that notion. So did Mises and Hayek and many others whose opinions I respect.

2. Liquidity trap - High interest and low savings can pose a challenge for the Fed. I do not believe in central price controls...not for milk or money. End the Fed.

3. Keynesian cross - A massively over-simplification of Keynes work. OF COURSE, there can be disequilibrium of capital. The question is, who should 'fix' that...a free market or central planners.

_______________________

I advocate the Chicago and Austrian school of economics, with a nod towards the latter.

You sound like a central planner. Pass.

 

[editec]

Anybody here an economist? I've read a lot of opinions here and just wondering, that's all. I hear a lot of bad opinions about Keynesianism, which I think has served us pretty well for decades. Peter Ferrara could give a pretty good anti argument, but what nations can he give a working example of that were successful under his brand of economics.

People speak of Keynesian or Austrian economic theories as though they were FORMULAS for how economies ought to be run in every circumstance.

Keynesianism is a proposed RESPONSE to a specific economic circumstance (deflationary depression), and NOT a formula for how an economy ought to run all the time.