Why Keynesian economics don't work

Discussion in 'Economy' started by Wiseacre, Apr 16, 2011.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    I've seen it written around here that Reaganomics is wrong and that everyone knows that if the gov't gives money to the low income people, they'll spend it, thereby increasing demand which leads to more jobs. "Priming the pump" it's called, to get the money flowing and the economy moving. Sounds great, so why doesn't it work? Bush43 gave out a couple of tax rebate checks, neither of which helped. Japan tried 10 different stimulus packages, that didn't work. And of course Obama tried a couple of stimulus packages that didn't work too well either. So why weren't those efforts more successful?


    I think it's mostly because people don't see the permanence of it. They don't need a check for a couple hundred bucks, they need a job. There needs to be reasons why people believe the future looks better financially, and indeed in every other way too. A stimulus program doesn't cut it, not by itself. You need a change of policy that is significant enough and logical enough to convince the public that we're on the right track. Have you sen the latest poll numbers, 69% think we're on the wrong track in this country. I think we need substance over smoke and mirrors.


    Paul Krugman and others on the left think that we need to double down, more stimulus money to the low income people. Raise taxes on the rich to pay for it? But that's not really an increase in spending, but rather just a different group of people doing the spending. Saving money in a bank, or investing in a company has the same effect on a macrolevel because that money finds it's way into the system too. Borrow money internally within the gov't or with US citizens? Same deal, there's no real net increase in consumption if you take a dollar from here and give it to someone over there. How about printing more money? Then the value if your currency goes down and you eventually end up with inflation.


    History tells us that increased gov't spending doesn't help your economy get out of a financial hole. That's why every other country in financial trouble is reducing their spending. Keynes' model was designed for a closed authoritarian economy, and maybe it would help in some circumstances. But I'm not seeing it for us, we'd be just adding more debt and getting nowhere.
     
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  2. Defiant1
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    Defiant1 Gold Member

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    It keeps the crack dealers and whores in business.
     
  3. xsited1
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  4. psikeyhackr
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    psikeyhackr VIP Member

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    The problem is we have a cash flow economy instead of a NET WORTH economy.

    If everybody concentrated on NET WORTH instead of JOBS what would happen. Get a job and somebody gives you a good credit rating and trying to get you to go into debt for some BULLSHIT.

    People concentrating on NET WORTH would not buy the bullshit.

    So we have had 60 years of STUPID CONSUMERISM and not they want to know what is wrong. Keynes died in 1946. He never saw an economy like the 1960s. He probably never saw a television commercial. But NO, we are supposed to believe in the ideas of a man born in 1883. When did Keynes expect the Moon landing to occur?

    Like his ideas can be applied to a global computerized economy. The first electronic computer, the ENIAC, was one year old when Keynes died. This repeated hearing of Adam Smith and John Maynard Keynes just shows how dumb economists are.

    psik
     
  5. Modbert
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    Modbert Daydream Believer Supporting Member

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    The OP doesn't seem to have much of an understanding of Keynesian economics. Keynesian economics actually believes there is such a thing as uncertainty and not that all risk can be given some sort of value. Keynes was also very skeptical of mathematical formulas if I recall correctly, and it was the harebrained math that help get us into the hole that was the 2008 Global recession/depression. One of the major problems with the philosophy of the Washington Consensus is they built their math around their ideas, and not the other way around.

    Ideas such as the Efficient Market theory, The Great Moderation, the Dynamic Stochastic General Equilibrium, and Privatization of everything are ideas that were not valid and were certainly discredited completely after the 2008 crash. However, you'll certainly still see people go about talking about these ideas as if they are creditable. Especially when they make their living off selling these ideas.

    As Upton Sinclair once said, "It is difficult to get a man to understand something when his salary depends on his not understanding it."
     
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  6. Modbert
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    Modbert Daydream Believer Supporting Member

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    Also, the OP is seemingly against tax increases and yet ignores how over 35% of the Stimulus was in fact tax cuts.

    American Recovery and Reinvestment Act of 2009 - Wikipedia, the free encyclopedia

    While Keynes was also a Liberal, he is in fact not a hardcore socialist or a socialist at all like some make him out to be. A great line I read that describes him is in Keynes: Return of the Master by Robert Skidelsky was that "he came to critique Capitalism, not bury it."
     
  7. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Don't know what anything of what you said has to do with what I wrote in the OP, maybe you could dumb it down a little. Not being a smartass either, I'm not talking about what got us into the recession but the failures to get us out. Keynesian economics was the model Obama used, and while you could say we didn't drive off the cliff , we also didn't get the ordinary rebound either.
     
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  8. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Never said anything about tax increases, maybe you should watch those assumptions. I do know that about a third of the Obama Stimulus was tax cuts, for the lower and middle classes. Was supposed to stimulate demand and growth, and we were supposed to get unemployment down to below 8%, you remember that? Another example of how Keynesian economics did not work.


    FWIW, I think we should increase the $106,800 ceiling on FICA taxable income, and I think the tax code should be scrubbed to eliminate or reduce deductions, loopholes, breaks, and credits that are obsolete, ineffective, or otherwise undesirealbe. Most of these things benefit the wealthy, but in any case revenue would go up.

    Other than that, I would continue the Bush tax custs until the economy is on solid footing and unemployment has dropped below 7% or so.
     
  9. rdean
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    rdean rddean

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    doesn't
     
  10. psikeyhackr
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    psikeyhackr VIP Member

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    Give pseudo-intellectuals some new knowledge and they will come up with more complicated ways of being stupid.

    psik
     
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