Economics

[editec]

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.

Well done, sir.

These people truly do imagine that an economy is a machine that nver changes therefore a single specificx set of behaviors is all that is necessary to make it run smoothy.

How one even begins to break though such a ignorant mindset as that (especially when they keep hearing such nonsense reinforced by talking heads who likewise know nothing about MACRO) I cannot say.

What I know and I suspect many reading this will ALSO know is that we have not really seen a KEYNESIAN policy put into place post the 2007=08 meltdown.


I honestly do not know what to call what Bush II and ten Obama did.

But it sure in hell was not Austrian policy (which would have let the banks FAIL) neither was it Keynesian (which would have given huge amounts of aid to the people)

Basically I think KLEPTOCRATS bailed out the banks and said to hell with the rest of the country.

 

[AmazonTania]

A simple way to think about the Keynesian model is that economic downturns are essentially cause by a shortfall of aggregate demand. Aggregate demand you can think of very simply as spending.

Aggregate Demand = Consumption + Investment + Government Spending​

Very similar to GDP, think of Aggregate Demand as a flow of funds to producers of goods and services. If aggregate demand falls, this means that the flow of revenue to producers of goods and services is also falling (which means it's lower than previously points or lower than economist want it to be). This creates a period of economic adjustment. The question is how well can the economy handle this period of economic adjustment (or an equilibrium). The theory has become counter initiative to deflation. Although spending is down, cost and expensive are down and businesses can continue to produce what they've already produced before the economic downturn, thus keeping output at it's previous level.

Although there is a possible equilibrium, very often this isn't want happens. This is generally called Price and Wage stickiness. Wage stickiness involves cost falling for a business. For many of these companies, the main cost at the margin are labour cost. If your revenue is falling and you want to keep the same level of profits, a very possible solution is to cut the wages of your workers, although this is normally not a very popular solution. This leads to employers laying off some sectors of their business, which leads to increased unemployment. This contracts revenue streams in many other parts of the economy at once and you end up with a progressive downturn in the economy.

Strengths:

A good strength of the Keynesian model is that it explains a good deal of real world business fluctuation. If you look at economic history, you will find many examples where a major problem is a shortfall of aggregate demand. The Great Depression is a major example.

Failures:

The problem is that not all economic downturns are caused by a shortfall in aggregate demand. The current global economic crisis is an example of this. The main failure of the Keynesian model is that it's only really useful as a diagnosis rather than an actual cure. Keynesian will usually advocate very mundane monetary and fiscal policy, but there are many examples in history (distance and modern) where this doesn't work very well.

 

[oldfart]

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?

It surprises me that you would ask when Reagan or Bush cut taxes. Besides being the centerpiece of rightwing propaganda and the signature achievement of their presidencies, this is a matter of public record. Try 1981 and 2001 & 2003.

Now if you plan to whine that we were not near full employment in 1981 and 2001, I suggest you review the arguments for them at the time. If these tax cuts were anti-cyclical, then they would have been cheerfully abandoned after a year or so. But they were proclaimed as permanent cuts in the case of Reagan, or treated as permanent in the case of Bush. Supply-side economics claims that tax cuts are always a good idea, in good times or bad, regardless of the deficit. It wants to cut taxes when times are good rather than reduce the debt, and cut taxes when times are bad to be anti-cyclical. In your universe, when are taxes ever to be raised for any purpose?

As for supply-side theory of tax cuts being self-funding, if you want me to prove this to you, you clearly have not been listening to the debate.

This kind of argument is what I have been railing against. You are so intent on trying to score debating points that you are making ludicrous arguments and destroying the very positions you defend. Thanks for making my point for me.

 

[boedicca]

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.

You're historical ignorance and faulty reasoning abilities are truly impressive.

Reagan curbed inflation and ignited two decades of impressive economic growth which created millions of jobs. His winning of the Cold War enabled the "peace dividend" that benefited the economy in the 90s. He did not implement wage controls and massive entitlement programs as did FDR.

 

[boedicca]

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?

Faulty reasoning. Government has expanded greatly by spending the additional tax receipts and more. We have a more intrusive government now than ever, spending an enormous amount of money. Out government lacks the discipline to not spend the additional funding that comes from growth.

 

[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?

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!

I also brought up FDR who introduced Keynesian economics, American style, to our great detriment, and brought up Reagan as the administration who went back to more of a concept of supply side. I took the member to task for immediately grasping the name to divert the thread from a discussion of economic principles to still one more Reagan (or pick a Republican of choice) bashing thread. My context was historical. His was partisan.

I also cited the source for my comments re both administrations.

So how is that disingenuous?

 

[oldfart]

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'.

I stand corrected. Now I know that you can understand the literature and the reasoning, which will save us a lot of time.

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 - 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.

This is drivel from the right which reflects no understanding of the concepts involved. I have no doubt you have a graduate degree in economics, which is exceeding sad since you have not understood or learned anything from it. Nice try.

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

I have no doubt.

You sound like a central planner. Pass.

No, but I studied it when I had a NDEA Fellowship in the late 60's. You do realize that Oscar Lange taught at U of C don't you?

 

[AmazonTania]

What I know and I suspect many reading this will ALSO know is that we have not really seen a KEYNESIAN policy put into place post the 2007=08 meltdown.

Yes, you have. It's just implemented in different ways, that's all.

 

[oldfart]

How one even begins to break though such a ignorant mindset as that (especially when they keep hearing such nonsense reinforced by talking heads who likewise know nothing about MACRO) I cannot say.

We can only try. The true believers won't change their minds any more than some on the left clung to Soviet style planning into the early 90's. Your mention of talking heads reinforcing nonsense hits the nail on the head. There is an audience. To let such muddy thinking go unchallenged would be an epic mistake.

What I know and I suspect many reading this will ALSO know is that we have not really seen a KEYNESIAN policy put into place post the 2007=08 meltdown.

A Keynesian fiscal policy would have been Christine Romer's proposal. But we did have a Keynesian monetary policy, and in an experiment I would not like to see repeated, it proved that minimal stimulus combined with let-out-all-the-stops monetary policy can prevent a depression (barely, it was a close run thing!). This is not an insignificant piece of evidence (compare it to Andrew Mellon and the Fed of 1930).

I honestly do not know what to call what Bush II and then Obama did.

But it sure in hell was not Austrian policy (which would have let the banks FAIL) neither was it Keynesian (which would have given huge amounts of aid to the people)

Basically I think KLEPTOCRATS bailed out the banks and said to hell with the rest of the country.

That is the best description of policy circa 2008-9 I've heard!

 

[AmazonTania]

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.

Keynesians tend to believe that the economy should be centrally planned, regulated heavily or regulated to the degree that Depressions should not happen.

Sounds like they have an idea of how the economy 'ought to run' to me...

 

[jasonnfree]

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?

I didn't start a thread to smear reagan so lighten up. But a point I did make is fdr and reagan jacked up the debt in their time. FDR managed to fight the war of the century, a necessary thing forced on him. On the way he did what I think is a lot of good with his social programs. What did reagan do with tripling the debt (with the help of the congress if you want to be technical)? Huge increase in military spending. Tax cuts for the rich. Helped to destroy unions. The republican solution to all our woes.

 

[oldfart]

A simple way to think about the Keynesian model is that economic downturns are essentially cause by a shortfall of aggregate demand. Aggregate demand you can think of very simply as spending.

Aggregate Demand = Consumption + Investment + Government Spending​

Very similar to GDP, think of Aggregate Demand as a flow of funds to producers of goods and services. If aggregate demand falls, this means that the flow of revenue to producers of goods and services is also falling (which means it's lower than previously points or lower than economist want it to be). This creates a period of economic adjustment. The question is how well can the economy handle this period of economic adjustment (or an equilibrium). The theory has become counter initiative to deflation. Although spending is down, cost and expensive are down and businesses can continue to produce what they've already produced before the economic downturn, thus keeping output at it's previous level.

Although there is a possible equilibrium, very often this isn't want happens. This is generally called Price and Wage stickiness. Wage stickiness involves cost falling for a business. For many of these companies, the main cost at the margin are labour cost. If your revenue is falling and you want to keep the same level of profits, a very possible solution is to cut the wages of your workers, although this is normally not a very popular solution. This leads to employers laying off some sectors of their business, which leads to increased unemployment. This contracts revenue streams in many other parts of the economy at once and you end up with a progressive downturn in the economy.

Strengths:

A good strength of the Keynesian model is that it explains a good deal of real world business fluctuation. If you look at economic history, you will find many examples where a major problem is a shortfall of aggregate demand. The Great Depression is a major example.

Failures:

The problem is that not all economic downturns are caused by a shortfall in aggregate demand. The current global economic crisis is an example of this. The main failure of the Keynesian model is that it's only really useful as a diagnosis rather than an actual cure. Keynesian will usually advocate very mundane monetary and fiscal policy, but there are many examples in history (distance and modern) where this doesn't work very well.

A pretty good and fair statement of the classic Keynesian model. Congratulations!

 

[oldfart]

So how is that disingenuous?

You are correct that we should keep the discussion on topic. So let's drop my "disingenuous" comment and your comment on motives of the OP and move on.

 

[Foxfyre]

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.



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.



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?

Faulty reasoning. Government has expanded greatly by spending the additional tax receipts and more. We have a more intrusive government now than ever, spending an enormous amount of money. Out government lacks the discipline to not spend the additional funding that comes from growth.

It is interesting to go back to an analysis of the U.S. budget, deficits, and effects of the economy at CATO in 1982--this was after the initial Reagan tax increases and before supply side went into effect:

NOTE: Again I am mentioning Reagan as the administration where supply side was reintroduced and NOT to encourage a discussion of Reagan himself.

Remember, this was written in 1982:

Today the situation continues to deteriorate. While the average American's standard of living has been dropping for the past five years, government spending in real terms is still growing. Budget plans proposed by the House and Senate Budget Committees call for even more revenue and expenditures than President Reagan's proposal.

Soaring military spending for overseas commitments and the refusal to make significant cuts in most major domestic programs have created the worst deficits in American history. The administration optimistically projects deficits of $104 billion in 1983 and $84 billion in 1984, allowing itself to at least claim to be "on the right track." The Congressional Budget Office offers a somewhat bleaker picture: deficits of $116 billion in 1983 and $105 billion in 1984. One of the most disturbing aspects of the situation, of course, is that the estimates are getting worse. Last September, for instance, the Office of Management and Budget predicted a 1983 deficit of $72 billion. Its April prediction was $102 billion. At the end of July Treasury Secretary Donald Regan offered a projection of $110-$114 billion. . . . .


. . . .Unfortunately for the White House, the public seems not to be buying its new arguments. Interest rates, which reflect the expectations of millions of borrowers and lenders, remain at historically high levels. The president misunderstands the nature of the economy when he appeals to a small number of "Wall Street leaders" to bring interest rates down. As long as those millions of borrowers and lenders anticipate that excessive deficits will lead either to the crowding out of private borrowers or to monetization and inflation, even dedicated Reagan supporters on Wall Street would not be able to force interest rates down. The stock market, which similarly reflects the expectations of millions of traders, has also been in the doldrums throughout the budget stalemate.

People around the country seem to understand what no one in Washington will admit: The budget is out of control. . . .
The Reagan Budget: The Deficit that Didn't Have to Be

By 1996 CATO published this re Reaganomics:

On 8 of the 10 key economic variables examined, the American economy performed better during the Reagan years than during the pre- and post-Reagan years.

•Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years.

•Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years.

•Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency.

•The only economic variable that was worse in the Reagan period than in both the pre- and post-Reagan years was the savings rate, which fell rapidly in the 1980s. The productivity rate was higher in the pre-Reagan years but much lower in the post-Reagan years.
Supply Tax Cuts And The Truth About The Reagan Economic Record

But then in 2013, backing up the Forbes report previously posted, the Laffer Center publishes:

The supply-side approach stands in sharp contrast to economic theories that held sway from the 1930s through the 1970s which were preoccupied with boosting demand, ideas most closely associated with economist John Maynard Keynes and his publication of The General Theory. These ideas enjoy a resurgence today as growth in spending, along with growing government involvement in the economy, has given new life to Keynesian ideas. Indeed, the idea of government spending as a stimulus to help boost demand and consumption, is rooted in quintessentially Keynesian ideas.

Yet in the roughly 30 years from the 1980s through the first decade of the new century, supply-side ideas contributed to the longest boom in United States history and an incredible transformation of the world economy.

According to the National Bureau of Economic Research, 1982-1999 was one continuous mega-economic expansion. In fact, as it stretched into 2007, this 25 Year Boom saw a tripling in the net wealth of U.S. households and businesses from $20 trillion in 1981 to $60 trillion by 2007. When adjusted for inflation, more wealth was created in this 25 year boom than in the previous 200 years.
Supply Side Economics Emphasizes Economic Growth

 

[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.

Keynesians tend to believe that the economy should be centrally planned, regulated heavily or regulated to the degree that Depressions should not happen.

Keynesians understand that the economy is already a HUMAN CONTRIVANCE , Amazon.

They understand that there is no such thing as a FREE MARKET.

So do the right wing masters, of course, but they will not admit it because they also know it is contrived for the benefit of capital (hence our system being "capitalist") but have duped so many of us into thinking that an economy operates like GRAVITY and would exist sans any overarching human control.

Its a preposterous POV, of course, but that BIG LIE works really well on the macro-economically ignorant.

 

[AmazonTania]

Keynesians understand that the economy is already a HUMAN CONTRIVANCE , Amazon.

They understand that there is no such thing as a FREE MARKET.

So do the right wing masters, of course, but they will not admit it because they also know it is contrived for the benefit of capital (hence our system being "capitalist") but have duped so many of us into thinking that an economy operates like GRAVITY and would exist sans any overarching human control.

Its a preposterous POV, of course, but that BIG LIE works really well on the macro-economically ignorant.

If you are referring to Laissez-faire, then you are correct. But a Free-Market doesn't require Laissez-faire. It requires small government intervention or small to the extent where economic sectors are not heavily regulated by the Government. Hong Kong and Singapore are examples of a modern day Free Market economy. They're probably not as free as many Libertarians would like it to be, but that doesn't change the fact that they are the freest economies in the world right now.

If you want to see how the free market really works this is the place to come. - Milton Freedom discussing Hong Kong (Free To Choose, Volume 1 - The Power of the Market)

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true. Not in the case of the Great Depression or the Great Recession. The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand, but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

 

[boedicca]

And very importantly, a Free Market requires a Rule of Law that is applied equally and fairly to all.

 

[jasonnfree]

Pretty good answers and minimal bashing (which I'm guilty of sometimes). I took an economic class in the late 70's and most of the terms used in economics I forgot. Ten economists, ten different answers and solutions I was thinking at the time. Some popular ones then were j.k. galbraith and elliot janeway. The professor I had said I was throwing away my money buying krugerands. Luckily, I didn't take his advice even though I really didn't have a clue. Phd vs. working stiff, working stiff wins. I hope these economic conversations continue. Did reagan jack up spending like I say he did? I just remember (being almost 70) hearing - "too many foreign countries owe us money". After reagan, bush, clinton, the new complaint-- "we owe china all this money". So what maybe, where else is china going to invest? A symbiotic relationship I think. I liked it better when America made more of what we consumed, factory jobs being higher paid than service jobs I'm thinking. Shouldn't the ultimate goal be what's better for America and the average American also? It seems that repubs believe if those at the top are doing really well, the rest of us will do really well also. Simplistic sounding I know but I have to take in everything I read, weigh all the arguments, and come up with my own conclusion.

 

[Foxfyre]

Keynesians understand that the economy is already a HUMAN CONTRIVANCE , Amazon.

They understand that there is no such thing as a FREE MARKET.

So do the right wing masters, of course, but they will not admit it because they also know it is contrived for the benefit of capital (hence our system being "capitalist") but have duped so many of us into thinking that an economy operates like GRAVITY and would exist sans any overarching human control.

Its a preposterous POV, of course, but that BIG LIE works really well on the macro-economically ignorant.

If you are referring to Laissez-faire, then you are correct. But a Free-Market doesn't require Laissez-faire. It requires small government intervention or small to the extent where economic sectors are not heavily regulated by the Government. Hong Kong and Singapore are examples of a modern day Free Market economy. They're probably not as free as many Libertarians would like it to be, but that doesn't change the fact that they are the freest economies in the world right now.

If you want to see how the free market really works this is the place to come. - Milton Freedom discussing Hong Kong (Free To Choose, Volume 1 - The Power of the Market)

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true. Not in the case of the Great Depression or the Great Recession. The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand, but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

But then again, a free market cannot work without laizzez-faire ala Adam Smith's concept of that. Whenever government intercepts and presumes to manipulate or micro or macro manage the economy, components of the laizzez-faire principle are sidetracked with generally unpleasant and detrimental unintended consequences.

Going back to Walter Williams excellent illustration of laizzez-faire principles:

. . . .Our economic system consists of billions of different elements that include members of our population, businesses, schools, parcels of land and homes. A list of possible relationships defies imagination and even more so if we include international relationships. Miraculously, there is a tendency for all of these relationships to operate smoothly without congressional meddling. Let's think about it.

The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

The best thing government can do for us is to put just enough regulation into effect to prevent us from doing physical, economic, and/or environmental violence to each other, and then turn us loose to do what people do best--create wealth and prosperity. THAT, in a nutshell, is what supply sided economics is. It is not just keeping the taxes low so the people retain more of their money, but providing the necessary freedoms to use it for their best advantage.

It is the antithesis of Keynesian economics which suggests that government can manage the economy by taking the people's money and giving it back them in some form. Unfortunately a government operating under that system will become like ours--it siphons off 2/3rds of the money to feed itself.

 

[CrusaderFrank]

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.

FDR averaged 20% unemployment from his inauguration until Hitler conquered France 7 years later, whats so great about that? How did that help the middle class?