Did FDR's policies help us get out of the Great Depression?

[mash107]

Actually, after WWII, in 1946, we went right back into the depression. Unemployment SKYROCKETED to almost 20%. Truman quickly pressed congress to gut the New Deal leaving only Social Security and that, along with the Cold War Defense expenditures, essentially changed America into it's post-war economic system, briefly returning to New Deal style policies under Johnson, which lead to a 15 year stagnation only to finally be fully gutted by Reagan, and supported by Clinton to lead to a 25 year run of unbridled growth.

Absolutely not. 1946 was a time of tremendous prosperity. Where on earth are you getting your revisionist unemployment figure? GNP figures, ignoring government spending on the military, rose tremendously in 1946. Total GNP figures declined due to military spending, but that matters not. Unemployment rose slightly in 1946, when the million of men that were drafted returned home, but only to 2.6%. All empirical data was obtained from Robert Higg's study:

Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s: Newsroom: The Independent Institute

This flies right in the face of Keynesians, like Paul Krugman, who says war is good for the economy. I hope no one actually listens to him, lest WWIII is started.

 

[PubliusInfinitum]

Should chill a bit, PI.

If demand is coming from the government, and money certainly doesn't come from nowhere, isn't that just redistributing where the consumption is happening? Since you're either borrowing, taxing or printing for all government spending, isn't that just taking money away from the consumer, and just consuming on behalf of the government, netting no true net gain in aggregate demand? Or much worse, isn't that taking away from capital that would have been saved and invested in production.. and since production = income, aren't Keynesians, like FDR, taking away from our productivity or income in the long run, for a short term boost in GDP? It's more likely than not a combination of the two, and that's definitely why, despite Bush's tax cuts, we had not seen any spur in economic growth. The money was being siphoned away on the Iraq war. It's like the government said, "Here, have some money back.... oh wait, can I borrow that money back, and some more, for the Iraq war? I'll pay you back, promise!"

Again, one can't see, empirically, what and how severe these opportunity costs would be, but if one studies the inefficiency that reigns supreme in government (DoD, Fema, TVA, etc), one can safely conclude the money would be better off in the hands of the people, if time after time government just fails at doing anything efficiently.

I'm not saying FDR caused the Depression; he just didn't allow the economy to recover as efficiently as it would with the free market. The bottom line, though, is that economists today should not be repeating FDR's experiment that resulted in a longer depression than otherwise.



So be it.. I'm not going to harp on whether one calls me liberal or conservative, it's the freedom of markets I'm an advocate for. My contention is that by harming productivity of the private markets in any way, you're hurting the average person's income, since production = income. Free markets see to it that the distribution of income is always fair. It's when Hoover messed with this that trouble began.

FYI, I hadn't studied macroecon in college, tbh, just microecon. It might've been my life's calling instead of engineering. All in all, enjoyable debates!

LOL.. Ok...

I just have no time or patients for these people... You're exactly right however, government spending would register as production and thus would also add to the graphed lies... also, the destruction of millions of acres of ag products and millions of head of livestock would also chart to consumption...

And there can be no doubt that the war has cost the US BIG in terms of production... consuming massive amounts of cash and driving all manner of prices off the chart... not the least is petroleum products... particularly kerosene and gasoline... they use it up by the boat load as a matter of course.

Ok... Toro... Get up and clean this place up... you've got your damn crayons all over the damn place...

 

[PubliusInfinitum]

absolutely Not. 1946 Was A Time Of Tremendous Prosperity. Where On Earth Are You Getting Your Revisionist Unemployment Figure? Gnp Figures, Ignoring Government Spending On The Military, Rose Tremendously In 1946. Total Gnp Figures Declined Due To Military Spending, But That Matters Not. Unemployment Rose Slightly In 1946, When The Million Of Men That Were Drafted Returned Home, But Only To 2.6%. All Empirical Data Was Obtained From Robert Higg's Study:

wartime Prosperity? A Reassessment Of The U.s. Economy In The 1940s: Newsroom: The Independent Institute

This Flies Right In The Face Of Keynesians, Like Paul Krugman, Who Says War Is Good For The Economy. I Hope No One Actually Listens To Him, Lest Wwiii Is Started.

A-freakin-men!

 

[Toro]

Of course it doesn't say what it is charting, does it? So there's no way to know what it actually means...

It is a statistical sample of all consumer spending in the economy. It charts consumption and demand. It means that demand began rising a few months after FDR became President. It means the Depression ended in March 1933.

It's not hard to understand.

 

[Toro]

I feel like I'm having a discussion about carbon dating with someone who thinks the world is 6000 years old.

ROFLMNAO... So you can't cite the specific fallacy to which your reasoning succumbed? LOL... SHOCKING! Which begs the question: "what color is the sky in your world?"

Its blue. That's probably different than yours, I'd bet.

I reject your graphs as you misrepresent the meaning of those graphs... I've laid out my reasoning time and again and your only response amounts to "nunht UH!"

You rejecting the meanings of these graphs is, well, meaningless because you don't even know what they mean. Here is what you said

But that is not a graph which charts demand... it is a graph which charts PRODUCTION...

You thought a graph of consumption was a graph of production.

And

Of course it doesn't say what it is charting, does it? So there's no way to know what it actually means... I mean it could be a chart of corn sales... people gotta eat.

You certainly do not know what it means, but those who have a basic training economics know what it means.

How can you possibly know if a graph misrepresents an argument if you don't even know what the graph represents?

As evidence of this YOU"VE BEEN DIRECTLY AND UNAMBIGUOUSLY CHALLENGED TO PROVIDE A INTELLECTUALLY SOUND REASON FOR WHY A POLICY DESIGNED TO PROP UP FALLING DEMAND SUCH AS PRICE, WAGE AND PRODUCTION FREEZES WOULD BE NECESSARY WHERE DEMAND IS RISING... and you've failed to even address those demands, opting instead to re-post the same statstical misrepresentations via your sad little graphs...

Now Skippy... if you can't explain why FDR would institute policy designed to counteract soft demand in a period of rising demand... YOU ******* LOSE SIS! PERIOD. And it's no more complex than that...

To you, I'm sure nothing seems complex, though in this case, its pretty simple. Let's look at a real, live example. Here is the press release from the National Bureau of Economic Research.

Determination of the December 2007 Peak in Economic Activity

Version of December 11, 2008

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

http://www.nber.org/cycles/dec2008.html

The NBER officially dated the beginning of this current recession as December 2007. They did so in December 2008, a full year after the recession began. Why? Because it takes time to recognize a turn in the economy. Note that the NBER took a year to come to this conclusion, and this is during a time of the most sophisticated communication systems ever known. Why would you expect FDR to have real time information in 1933 if we don't have it 75 years later? Statistical data-gathering can be revised up to one year after the original data comes in.

So why would FDR implement his policies even though demand bottomed two months after he was sworn in? The answer is twofold. One, because they believed that demand was still falling, and two, to ensure that it would be supported after it bottomed.

If you had any practical knowledge of real-world economics, you would also know that policy makers will overshoot to ensure that the economy is moving again. The fact that FDR would continue his policies after demand bottomed would have been to ensure that the economy did not slip back into Depression. And you can hardly blame him, given that the Depression was the most traumatic economic event of their lifetimes.

You may conclude that all of this somehow represents a logical fallacy but that is because you are either ignoring the data, don't understand the data, or don't understand context in which it is set, instead basing your argument on "logic."

 

[Toro]

Should chill a bit, PI.

If demand is coming from the government, and money certainly doesn't come from nowhere, isn't that just redistributing where the consumption is happening? Since you're either borrowing, taxing or printing for all government spending, isn't that just taking money away from the consumer, and just consuming on behalf of the government, netting no true net gain in aggregate demand? Or much worse, isn't that taking away from capital that would have been saved and invested in production.. and since production = income, aren't Keynesians, like FDR, taking away from our productivity or income in the long run, for a short term boost in GDP? It's more likely than not a combination of the two, and that's definitely why, despite Bush's tax cuts, we had not seen any spur in economic growth. The money was being siphoned away on the Iraq war. It's like the government said, "Here, have some money back.... oh wait, can I borrow that money back, and some more, for the Iraq war? I'll pay you back, promise!"

The answer to your question is that the government should generally stay out of direct economic activity unless it is for the reasons I wrote about above - namely, 1. when markets fail, 2. when a good or service is deemed to important to be left to the market, and 3. as a counter-cyclical stabilizer.

The assumption to your argument is that markets always work. But they do not always work. There is market failure. We have market failure right now in the credit markets as markets have frozen due to fear. The valuation discrepancies one sees in say, the convertible bond market relative to investment grade corporate market, or of corporate bond yields and derivative indices, or in swap spreads, or in TED spreads, are off the charts, reaching levels they have never seen before. Pricing of collateralized mortgage backed securities structures of certain types of commercial real estate loans are implying astronomical levels of default much higher, even multiple times higher, than what occurred in the Depression, and that is after assuming very low recovery rates. In other words, the pricing system in the capital markets today - this very minute - is not working because pricing discrepancies make no sense. Markets aren't clearing. They aren't working in the manner that those who believe in efficacy of markets all the time should be working.

This is why the government is coming into the economy hard. Markets in some areas of the credit markets have begun to unfreeze, but only after the government came in to back them up. The government is coming in with a battering ram to unjam the credit markets.

So the answer to your question is, yes, in general, the government should stay out of the economy, all things being equal. But when markets fail, then the government should get involved.

Again, one can't see, empirically, what and how severe these opportunity costs would be, but if one studies the inefficiency that reigns supreme in government (DoD, Fema, TVA, etc), one can safely conclude the money would be better off in the hands of the people, if time after time government just fails at doing anything efficiently.

I'm not saying FDR caused the Depression; he just didn't allow the economy to recover as efficiently as it would with the free market. The bottom line, though, is that economists today should not be repeating FDR's experiment that resulted in a longer depression than otherwise.

Government is generally inefficient, because government is not designed to be maximize resources. However, it is wrong to assume that government is always inefficient. Do you think the Interstate highway system is bad? Have you ever seen the dikes in Holland?

So be it.. I'm not going to harp on whether one calls me liberal or conservative, it's the freedom of markets I'm an advocate for. My contention is that by harming productivity of the private markets in any way, you're hurting the average person's income, since production = income. Free markets see to it that the distribution of income is always fair. It's when Hoover messed with this that trouble began.

FYI, I hadn't studied macroecon in college, tbh, just microecon. It might've been my life's calling instead of engineering. All in all, enjoyable debates!

Trust me, you are better in engineering! We need more engineers!

 

[editec]

I feel like I'm having a discussion about carbon dating with someone who thinks the world is 6000 years old.

You are

You rejecting the meanings of these graphs is, well, meaningless because you don't even know what they mean. Here is what you said

He's flailing about for things to object to because he'd decided that you are some kind of liberal collectivist. This know-nothing anti-intellectualism you're facing isn't obvious to you, Toro.

How can you possibly know if a graph misrepresents an argument if you don't even know what the graph represents?

Graphs? We don need no stinkin' graphs! We read Atlas Shrugged!

 

[editec]

Trust me, you are better in engineering! We need more engineers!

What we who are bothering to read this exchange are experiencing is fairly typical.

Engineers OFTEN think that the economy works with the same kind of predictable precision as an engineering equasion. I see this confusion on boards like this all the time

My apologies to you engineering and hard science types who are not blinded like this.

But you have to admit that many of your peers really do think that an economy works is like an engine or some problem in physics, instead of understanding that economies really work like constantly evolving and changing organisms.

I'll just keep saying this until it sinks in.

If the markets were perfect, if the rules to how things worked were constant as newtonian physics, then there could be NO STOCK market, and the economy would ALWAYS respond in predictable ways that ALL of us could count on.

Look around you folks.

Is that how things economic work?

It is FAR easier to put manned space vehicle on the moon and get those boys back alive, that it is to tinker with the marco economy and understand what the long term effects will be on that SOCIAL ORGANISM.

I think you folks need to read more on CHOAS THEORY, because many of you are clueless about how impossible it really is to KNOW what going on in something so enormously complex as a macro-economy.

Really the fundamental difference between the hard sciences and social sciences is this: When you tinker with elements of a Society you cannot get anything like a completely PREDICTABLE OUTCOME.

There are no absolute rules in social sciences to guide social scientists like there are in the hard sciences.

For all it reliance on metrics, for all its apparent scientific dependence on hard math, ECONOMICS is STILL a social science with all the same problems that come from attempting to understand something so complex as the ecollective outcomes of the interactions of seven billion independent plays who do NOT all act with the predictibility of inantimate objects.

 

[del]

The First Law of Economists: For every economist, there exists an equal and opposite economist.


The Second Law of Economists: They're both wrong.

 

[BaronVonBigmeat]

The answer to your question is that the government should generally stay out of direct economic activity unless it is for the reasons I wrote about above - namely, 1. when markets fail, 2. when a good or service is deemed to important to be left to the market, and 3. as a counter-cyclical stabilizer.

"Too important" should have nothing to do with it. There are few things more important than food, and we leave that (more or less) to the markets, and thank god, because we know what happens when we don't.

The only things we should have government doing are things that the markets simply cannot. And that's a list that's pretty short.

The assumption to your argument is that markets always work. But they do not always work. There is market failure. We have market failure right now in the credit markets as markets have frozen due to fear. The valuation discrepancies one sees in say, the convertible bond market relative to investment grade corporate market, or of corporate bond yields and derivative indices, or in swap spreads, or in TED spreads, are off the charts, reaching levels they have never seen before. Pricing of collateralized mortgage backed securities structures of certain types of commercial real estate loans are implying astronomical levels of default much higher, even multiple times higher, than what occurred in the Depression, and that is after assuming very low recovery rates. In other words, the pricing system in the capital markets today - this very minute - is not working because pricing discrepancies make no sense. Markets aren't clearing. They aren't working in the manner that those who believe in efficacy of markets all the time should be working.

Why do I get the sneaking suspicion that government entities are doing their damndest to stop them from clearing?

This is why the government is coming into the economy hard. Markets in some areas of the credit markets have begun to unfreeze, but only after the government came in to back them up. The government is coming in with a battering ram to unjam the credit markets.

So the answer to your question is, yes, in general, the government should stay out of the economy, all things being equal. But when markets fail, then the government should get involved.

Most of the market failures people discuss are either A) directly caused by bad government policy, or B) the markets are giving us a result we don't like (ie, gasoline priced at $4+ a gallon). Instead of saying "the market failed" with regards to the banks, we should be saying "the government failed, and as a result, the market gave us a response we didn't like". The response of course being the bankruptcy of Paulson's buddies. That's the real reason why government is getting involved.

And yes, for the record, the interstate highway system should not have been built, not by the federal government anyhow. If we had privatized roads, it would solve a lot of problems.

 

[Truthmatters]

Absolutely not. 1946 was a time of tremendous prosperity. Where on earth are you getting your revisionist unemployment figure? GNP figures, ignoring government spending on the military, rose tremendously in 1946. Total GNP figures declined due to military spending, but that matters not. Unemployment rose slightly in 1946, when the million of men that were drafted returned home, but only to 2.6%. All empirical data was obtained from Robert Higg's study:

Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s: Newsroom: The Independent Institute

This flies right in the face of Keynesians, like Paul Krugman, who says war is good for the economy. I hope no one actually listens to him, lest WWIII is started.

The patterns are really pretty plain to see.

Business Cycle

The market is cyclitic and war has always been a way to boost it as well as take the peoples minds off the economy. Can you really NOT know this? Maybe that is why it worked so well for Bush for so many damned years.

 

[Toro]

Some more

The most important thing to know about Roosevelt's economics is that, despite claims to the contrary, the economy recovered during the New Deal. During Roosevelt's first two terms, the U.S. economy grew at average annual growth rates of 9 percent to 10 percent, with the exception of the recession year of 1937-1938. As economist Christina Romer (now director-designate of the Council of Economic Advisers) writes, these rates were "spectacular, even for an economy pulling out of a severe recession."

"Spectacular growth" from the soon-to-be chair of the Council of Economic Advisors.

Oh, that's gotta hurt for the ideologues.

Thus, at the very least, the New Deal did not prevent a "spectacular" rate of recovery. More, we have reason to believe some of Roosevelt's policies enabled it.

For a start, New Deal intervention saved the banks. During Hoover's presidency, around 20 percent of American banks failed, and, without deposit insurance, one collapse prompted another as savers pulled their money out of the shaky system. When Roosevelt came into office, he ordered the banks closed and audited. A week later, authorities began reopening banks, and deposits returned to vaults.

Congress also established the Federal Deposit Insurance Corporation, which, as economists Milton Friedman and Anna Jacobson Schwartz wrote, was "the structural change most conducive to monetary stability since ... the Civil War." After the creation of the FDIC, bank failures almost entirely disappeared. New Dealers also recapitalized banks by buying about a billion dollars of preferred stock.

John Maynard Keynes wrote to Roosevelt in 1938 that these actions were "a prior condition of recovery, since it is no use creating a demand for credit, if there is no supply." Thus, the New Deal made recovery possible. ...

Learning From the New Deal's Mistakes | The American Prospect

In other words, both Keynes AND Milton Friedman agreed that the New Deal FDIC was critical in restoring stability and confidence in the economy.

The reason why Ben Bernanke was appointed chairman of the Fed is because he is a world-renowned scholar. He is generally acclaimed as the foremost expert in his field of study. And in what area of study did he become world-renowned? Why, its the Great Depression!

So what does the Chairman say?

It was only with the passage of New Deal efforts--the SEC, the FDIC, the FSLIC--that the mechanisms of private capital began to kick back into gear. Don't take it from me. Take it from Federal Reserve Chairman Ben Bernanke, who wrote the following in Essays on the Great Depression: “Only with the New Deal’s rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression."

Daniel Gross: December 31, 2006 - January 06, 2007 Archives

Now add the world's foremost Depression scholar to Friedman and Keynes in seeing the benefits of the New Deal. Strike 3!

Ben Bernanke, BTW, is a Republican.

And finally, from Martin Wolff, who is generally known as a proponent of free markets.

The ghost of John Maynard Keynes, the father of macroeconomics, has returned to haunt us. With it has come that of his most interesting disciple, Hyman Minsky. We all now know of the “Minsky moment” – the point at which a financial mania turns into panic. ...

I see three broad lessons.

The first, which was taken forward by Minsky, is that we should not take the pretensions of financiers seriously. “A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.” Not for him, then, was the notion of “efficient markets”.

The second lesson is that the economy cannot be analysed in the same way as an individual business. For an individual company, it makes sense to cut costs. If the world tries to do so, it will merely shrink demand. An individual may not spend all his income. But the world must do so.

The third and most important lesson is that one should not treat the economy as a morality tale. In the 1930s, two opposing ideological visions were on offer: the Austrian; and the socialist. The Austrians – Ludwig von Mises and Friedrich von Hayek – argued that a purging of the excesses of the 1920s was required. Socialists argued that socialism needed to replace failed capitalism, outright. These views were grounded in alternative secular religions: the former in the view that individual self-seeking behaviour guaranteed a stable economic order; the latter in the idea that the identical motivation could lead only to exploitation, instability and crisis.

Keynes’s genius – a very English one – was to insist we should approach an economic system not as a morality play but as a technical challenge. He wished to preserve as much liberty as possible, while recognising that the minimum state was unacceptable to a democratic society with an urbanised economy. He wished to preserve a market economy, without believing that laisser faire makes everything for the best in the best of all possible worlds.

This same moralistic debate is with us, once again. Contemporary “liquidationists” insist that a collapse would lead to rebirth of a purified economy. Their leftwing opponents argue that the era of markets is over. And even I wish to see the punishment of financial alchemists who claimed that ever more debt turns economic lead into gold.

Yet Keynes would have insisted that such approaches are foolish. Markets are neither infallible nor dispensable. They are indeed the underpinnings of a productive economy and individual freedom. But they can also go seriously awry and so must be managed with care.

FT.com / Columnists / Martin Wolf - Keynes offers us the best way to think about the financial crisis

 

[PubliusInfinitum]

It is a statistical sample of all consumer spending in the economy. It charts consumption and demand. It means that demand began rising a few months after FDR became President. It means the Depression ended in March 1933.

It's not hard to understand.

Is it? Or is it a graph which charts DATA predicated upon ORDERS that are attributed to consumer spending; regarding the purchase of goods and services which were in this case being logged as 'purchased' by the consumer, but were in large measure, the net effect of government policy?

Meaning if the government buys food, for example, tens of millions of acres of corn, wheat and so on... then destroys it to prevent that product from getting to market to discourage deflation... THAT would be charted as consumption... The same with millions of head of livestock, such as pigs and cattle... when the government bought them and destroyed them... THAT would be charted as consumption, wouldn't it? Only THE ORDER WAS NOT CONSUMER ORIENTED… simply meaning that the ordered goods didn’t get to the table of consumers… as you misrepresent the data to indicate.

The same with government buying up inventories of production that it legislated that could not be cut... THAT would be charted as consumption, wouldn’t it?

Now there is nothing wrong with a graph which charts this consumption UNTIL that data is used to show that the CONSUMPTION IS A FUNCTION OF WHAT? That the charted consumption is something that the data does not represent... which in THIS CASE IS YOU PROVIDING DATA OF CONSUMER DEMAND... CITIZENS consuming away at exceptional rates when in FACT the GRAPHED DATA THAT YOU’RE USING CHARTS TOTAL CONSUMPTION OF THE SYSTEM, wherein the majority or at least a large percentage of that consumption is NOT THE CONSUMER, but is that of the US GOVERNMENT; a government which is NOT OPERATING IN A TYPICAL WAY… but a government which is implementing extraordinary and erroneous policy to meet extraordinary circumstances; none of which is accounted for in your argument.

Again... this is now the 5th or 6th time I've advanced this challenge and it will no doubt be the most recent opportunity you take to avoid the direct and unambiguous challenge:

IF CONSUMER DEMAND WAS ON THE RISE IN 1933... WHAT WOULD BE THE RATIONALE FOR FDR TO IMPLEMENT POLICY DESIGNED TO STAVE OFF FALLING DEMAND? If people in the market are demanding FOOD PRODUCTS for instance... why would FDR implement a freeze on the price of FOOD products?

If demand was rising, why would FDR implement a policy which freezes wages to prevent the deflation of wages? Wouldn't the rising demand be influencing a rise in wages as the market attempts to meet this rising demand?

The answer is clearly YES... yet you continue to advance these graphed statistics as proof in the certainty that consumers were consumin' just fine in 1933 and you do so while blindly ignoring the absolute certainty that FDR policies of intense government intrusion into the markets was mired throughout your data; as the data is NOT representative of CONSUMER activity and at BEST this state corrupts your stats, rendering your argument moot; at worst it is evidence of you being a liar in the extreme, using data which you know to represent something wholly distinct from that which YOU represent ... Meaning that you're either just a fool who can't discern the distinction between massive government intrusion into the markets and the effect on key statistical indicators; that this intrusion MUST represent... that this distinction MUST skew the attributes of that data; meaning that the graphs do NOT show 'consumption by Mom and Pop American’ being on the rise, but the results of influences WHICH YOU DENY, from massive GOVERNEMNT CONSUMPTION.

Some might care which of the two potential states you represent; the fool or the liar... I personally find little distinction between the two... as both enable disastrous historical revision, promulgating the certainty that the SAME ERRORS WILL BE APPLIED AGAIN WITH THE SAME PREDICTABLE RESULTS… and BOTH do it under the colors of 'Education and enlightenment'... declaring yourself a 'empiricist' while rejecting soundly reasoned counter argument is absurd…
Plato referred to such people as ‘sophists;’ liars who use a swirling phalanx of information to sway their opposition or to gather support from the crowd; through the manipulation of facts and control of the argument timbre and pace, the sophist hopes to convince his audience that he is in control of the facts, depending upon their ignorance for the appeal.

We can be sure sis that you're decidedly not an empiricist... you're an ideologue whose purpose is to defend FDRs policies and you do so through the use of the sophists tools... lies, smoke and mirrors.

You see sis, an empiricist would have no problem admitting that she can't break out the data to determine what consumption in the graphs she presents is that spurred by government spending and that spurred by consumer spending... she would have no problem answering the challenge which seeks to determine a rationale for government implementation of price, wage and production freezes to quell the fall in value of those elements of the economy in the midst of an economy which their data implies that DEMAND WAS ON THE RISE... the empiricist is concerned with the empirical facts… or those facts which can be tested through observation. The sophist on the other hand seeks advantage only from that which can be observed and avoids the test, in that the test is dangerous to the required conclusion.

You’ve repeatedly fled the test sis… returning each time to project static observations; demanding that each be taken at face value.


Charts and graphs are not the basis of all that is 'intellectual' sis... and rejecting conclusions set upon skewed data is hardly the result of anti-intellectualism... in truth, such is quite to the contrary. But it is irrefutable that one who claims that rejecting their argument is indicative of an anti-intellectual is nothing short of an anti-intellectual posing behind the facade of an intellectual.

You're a classic leftists, cloaking yourself in the flowing robe of that most high of enlightened feelers... the sanctified moderate; who claims the high ground of the anointed 'education' and proves every time they trot it out that they're ignorance confuses such with indoctrination.
You're a copy and paste hack... a leftist posing as a moderate and a simple dumbass desperately needing to think of herself as an intellectual.

If you've paid for this would-be ‘education,’ I suggest you demand a refund...

 

[Toro]

"Too important" should have nothing to do with it. There are few things more important than food, and we leave that (more or less) to the markets, and thank god, because we know what happens when we don't.

We leave the production and wholesale distribution of food in the private sector because it is most efficient. But we certainly do not allow the private market to allocate all food distribution to the consumer because if we did, some would starve. The government provides social assistance to the neediest so they can eat. In this case, the government is a critical element in the distribution of food.

Why do I get the sneaking suspicion that government entities are doing their damndest to stop them from clearing?

Your sneaking suspicion is wrong. I work in markets. I see this every single day I am in front of my Bloomberg. Private markets are not clearing because the private market is not supplying liquidity. For certain, the government policy of setting interest rates, i.e. the Fed, is the primary cause of the bubble economy, but it is not the only cause for the seizure in the capital markets.

The utter collapse of Wall Street and much of the banking system has occurred not because of government action but because of de-regulation by the government. Why? Because financial institutions are highly levered institutions. The argument from the laissez-faire proponents was that banks would not take on excess risk because they would not imperil their own future, and they knew more about risk than the regulators. Thus, in 2004, the SEC allowed the five major brokerage firms to waive capital rules, which required that leverage be lifted from 12-15:1 debt to equity to as high as 40:1. When you go from 12:1 debt to equity to 40:1, as Bear Stearns did, the amount of equity to liability falls from 8% to 2.5%. What this means is that if your liabilities fall 3% and you have 2.5% equity, you are wiped out. If you have 8% equity, you are still solvent. Wall Street would still exist today had it not been for this rule change. The SEC allowed the brokers to regulate themselves and they wiped themselves out.

And don't get me started on the ratings agencies, which were basically whoring themselves out to rate structured products so they could hit their earnings targets and cash in their options, making the executives multi-millionaires.

Most of the market failures people discuss are either A) directly caused by bad government policy, or B) the markets are giving us a result we don't like (ie, gasoline priced at $4+ a gallon). Instead of saying "the market failed" with regards to the banks, we should be saying "the government failed, and as a result, the market gave us a response we didn't like". The response of course being the bankruptcy of Paulson's buddies. That's the real reason why government is getting involved.

I do agree that most - i.e. greater than 50% - of market failures are the result of government intervention. But greater than 50% is not 100%.

And yes, for the record, the interstate highway system should not have been built, not by the federal government anyhow. If we had privatized roads, it would solve a lot of problems.

Transportation infrastructure is critical to a productive economy. Travel the highways in China and in India and tell me that the transportation infrastructure isn't critical. That doesn't mean the government should re-pave the roads every year. But infrastructure that increases the flow of goods that will not be paid for by the private economy because of, for example, the free rider problem, is beneficial to aggregate output.

 

[Toro]

Is it? Or is it a graph which charts DATA predicated upon ORDERS that are attributed to consumer spending; ...

blah blah blah

Get a basic education. You clearly have no idea what you are talking about.

 

[Truthmatters]

The magic market.


Im so sick of the insane idea that the market will solve all problems for man. Where in history is there any example of an unfettered market fixing mans problems?

 

[PubliusInfinitum]

What we who are bothering to read this exchange are experiencing is fairly typical.

Engineers OFTEN think that the economy works with the same kind of predictable precision as an engineering equasion. I see this confusion on boards like this all the time

My apologies to you engineering and hard science types who are not blinded like this.

But you have to admit that many of your peers really do think that an economy works is like an engine or some problem in physics, instead of understanding that economies really work like constantly evolving and changing organisms.

I'll just keep saying this until it sinks in.

If the markets were perfect, if the rules to how things worked were constant as newtonian physics, then there could be NO STOCK market, and the economy would ALWAYS respond in predictable ways that ALL of us could count on.

Look around you folks.

Is that how things economic work?

It is FAR easier to put manned space vehicle on the moon and get those boys back alive, that it is to tinker with the marco economy and understand what the long term effects will be on that SOCIAL ORGANISM.

I think you folks need to read more on CHOAS THEORY, because many of you are clueless about how impossible it really is to KNOW what going on in something so enormously complex as a macro-economy.

Really the fundamental difference between the hard sciences and social sciences is this: When you tinker with elements of a Society you cannot get anything like a completely PREDICTABLE OUTCOME.

There are no absolute rules in social sciences to guide social scientists like there are in the hard sciences.

For all it reliance on metrics, for all its apparent scientific dependence on hard math, ECONOMICS is STILL a social science with all the same problems that come from attempting to understand something so complex as the ecollective outcomes of the interactions of seven billion independent plays who do NOT all act with the predictibility of inantimate objects.

There are two distinct phases of your argument... I've highlighted each in distinct colors... Please be so kind as to identify those SPECIFIC participants to whom you refer in the blue phase and those to whom your refer in the red...

 

[editec]

The First Law of Economists: For every economist, there exists an equal and opposite economist.


The Second Law of Economists: They're both wrong.

LOL. Oh my god, del, that is absolutely brilliant.

You know how John Kenneth Galbraith defined an economist?

"An economist is a man with a phi beta kappa watch fob on one end of his watch chain but no watch on the other end."

 

[PubliusInfinitum]

It is a statistical sample of all consumer spending in the economy. It charts consumption and demand. It means that demand began rising a few months after FDR became President. It means the Depression ended in March 1933.

It's not hard to understand.

Is it? Or is it a graph which charts DATA predicated upon ORDERS that are attributed to consumer spending; regarding the purchase of goods and services which were in this case being logged as 'purchased' by the consumer, but were in large measure, the net effect of government policy? ...

Again... this is now the 5th or 6th time I've advanced this challenge and it will no doubt be the most recent opportunity you take to avoid the direct and unambiguous challenge:

IF CONSUMER DEMAND WAS ON THE RISE IN 1933... WHAT WOULD BE THE RATIONALE FOR FDR TO IMPLEMENT POLICY DESIGNED TO STAVE OFF FALLING DEMAND? If people in the market are demanding FOOD PRODUCTS for instance... why would FDR implement a freeze on the price of FOOD products?

If demand was rising, why would FDR implement a policy which freezes wages to prevent the deflation of wages? Wouldn't the rising demand be influencing a rise in wages as the market attempts to meet this rising demand?

Get a basic education. You clearly have no idea what you are talking about.

Ahh yes... the classic illustration wherein the educated empiricist rejects a simple query of the base elements of their argument as being the pure embodiment of abject ignorance...

My favorite part is where you ONCE AGAIN... REFUSE TO ADDRESS THE DIRECT, UNAMBIGUOUS CHALLENGE REPEATEDLY SET TO YOU; CRITICALLY EXPOSING YOU AS A FRAUD; RESULTING IN YOUR CONSESSION BY DEFAULT, WHICH IS DULY NOTED AND SUMMARILY ACCEPTED.

Your argument: FAILS

 

[editec]

"Too important" should have nothing to do with it. There are few things more important than food, and we leave that (more or less) to the markets, and thank god, because we know what happens when we don't.

You have been extremely misinformed.,BvB.

EWG || Farm Subsidy Database

The only things we should have government doing are things that the markets simply cannot. And that's a list that's pretty short.

Agreed.

And yes, for the record, the interstate highway system should not have been built, not by the federal government anyhow. If we had privatized roads, it would solve a lot of problems.

It wasn't built by the Federal government.

It was PAID FOR by the Federal and State governments

Where did the money come from? From revenues taken by taxing gasoline and diesel fuel.

And do you really think America would have been better served leaving the development and ownership of our road system to private companies?

There'd have been not a chance in hell we'd have developed anything remotely as useful as what we have now, had we left it to private capital to do that, Bar.

there's have been a few roads build, no doubt.

But nothing like the system we have today.

Or was that your point? That we overbuilt?