Econ 101: Keynesian Economics Is Wrong...

[Chris]

Keynesian Economics Is Wrong: Economic Growth Causes Consumer Spending, Not the Other Way


http://www.youtube.com/watch?v=D9kfMx8Llcc&feature=related

[Mister D]

Our economy is heavily dependent on consumer spending, correct? That's what I often hear.

[MMC]

Keynesian Economics Wrong.....uhm thats a bit of an understatement. :wink: :laugh:

[Conley]

Government spending is also part of GDP. So an increase in GDP isn't always a good thing. I don't think your average person on the street has any idea that government spending factors into the equation.

[Chris]

Keynesian Economics Wrong.....uhm thats a bit of an understatement. http://thepoliticalforums.com/images/smilies/newsmilies/wink.gif http://thepoliticalforums.com/images/smilies/newsmilies/laugh.gif
Yes, but it sounds better when she says it. :laugh:

[Conley]

It's good to see the knuckleheads come around to discussing economics. Apparently they like the Econ 101 gals better than Dr. Pirie. Well done Chris! :grin:

[Chris]

Government spending is also part of GDP. So an increase in GDP isn't always a good thing. I don't think your average person on the street has any idea that government spending factors into the equation.
Right, because government spending doesn't generally generate wealth. It takes from some and gives to others the hope being those others will consume enough to stimulate growth but that discounts the taking from others who are likely better at knowing how to spend or invest their money, discounts interest and other facts mentioned in the video. The Keynesian argument is stimuli have a multiplier effect but this is difficult to argue (see Ramey on Stimulus and Multipliers (http://www.econtalk.org/archives/2011/10/ramey_on_stimul.html)).

[Peter1469]

Yes, it is. But all things in moderation. A strong savings rate is very healthy as well.

[Mister D]

Yes, it is. But all things in moderation. A strong savings rate is very healthy as well.

We always have those stories around Christmas time about consumer spending. A high consumption rate just doesn't seem to be something we would want to rely on but I'm not all that familiar with the topic.

[Peter1469]

Government spending is also part of GDP. So an increase in GDP isn't always a good thing. I don't think your average person on the street has any idea that government spending factors into the equation.

https://en.wikipedia.org/wiki/Gross_domestic_product

GDP = private consumption (https://en.wikipedia.org/wiki/Consumption_(economics)) + gross investment (https://en.wikipedia.org/wiki/Gross_private_domestic_investment) + government spending (https://en.wikipedia.org/wiki/Government_spending) + (exports (https://en.wikipedia.org/wiki/Export) − imports (https://en.wikipedia.org/wiki/Import))
https://upload.wikimedia.org/wikipedia/en/math/e/3/c/e3cb2605a39e6608ee35c95e285b30a7.pngThe flaw with this is the government spending input. I would correct this by separating government spending into two groups. The first would be government spending from revenue; the second would be government spending from deficit spending.

I would change G to Gs and Gd.

GDP=C+I+Gs+(X-M-Gd)

Run our last 3 years of GDP and see what you come up with!

[Conley]

https://en.wikipedia.org/wiki/Gross_domestic_product

GDP = private consumption (https://en.wikipedia.org/wiki/Consumption_(economics)) + gross investment (https://en.wikipedia.org/wiki/Gross_private_domestic_investment) + government spending (https://en.wikipedia.org/wiki/Government_spending) + (exports (https://en.wikipedia.org/wiki/Export) − imports (https://en.wikipedia.org/wiki/Import))
https://upload.wikimedia.org/wikipedia/en/math/e/3/c/e3cb2605a39e6608ee35c95e285b30a7.pngThe flaw with this is the government spending input. I would correct this by separating government spending into two groups. The first would be government spending from revenue; the second would be government spending from deficit spending.

I would change G to Gs and Gd.

GDP=C+I+Gs+(X-M-Gd)

Run our last 3 years of GDP and see what you come up with!

Yes, yes, a thousand times yes. If I were Congress I could increase GDP (and "economic growth") every year. Just don't ask me questions about the debt. :rollseyes: GDP as it is currently calculated is largely useless. The video also make a good point about merely shifting the dollars around, for example when the government had the Cash for Cars bs going around.

[Chris]

Best way for government to increase growth would be to leave it the hell alone.



I've seen Peter's formula before and it's right on. Run the numbers and your run into pending disaster.

[Peter1469]

Best way for government to increase growth would be to leave it the hell alone.

My modification of GDP would give them the incentive to leave it alone.

[Chris]

My modification of GDP would give them the incentive to leave it alone.
If government but had a brain.


Scarecrow: I haven't got a brain... only straw.
Dorothy: How can you talk if you haven't got a brain?
Scarecrow: I don't know... But some people without brains do an awful lot of talking... don't they?
Dorothy: Yes, I guess you're right.

[Peter1469]

If government but had a brain.


Scarecrow: I haven't got a brain... only straw.
Dorothy: How can you talk if you haven't got a brain?
Scarecrow: I don't know... But some people without brains do an awful lot of talking... don't they?
Dorothy: Yes, I guess you're right.


The Government has the same brain that those contracting for services in an anarcho-capitalist commune would have.

[Chris]

The Government has the same brain that those contracting for services in an anarcho-capitalist commune would have.
And how does the government/state collective have a brain? Have you been reading Hegel?

[Peter1469]

And how does the government/state collective have a brain? Have you been reading Hegel?

The same people who enter into the contracts in an anarcho-capitalist system can be the people who run a government. My undergrad degree was in political theory so yes I did read Hegel.

[Chris]

The same people who enter into the contracts in an anarcho-capitalist system can be the people who run a government. My undergrad degree was in political theory so yes I did read Hegel.
And you see no difference between elite central planners making decisions everyone must comply with as opposed to individuals voluntarily contracting with each other?

[Peter1469]

And you see no difference between elite central planners making decisions everyone must comply with as opposed to individuals voluntarily contracting with each other?

In a small community yes, I see a difference. In a community that includes 320M, no I don't .

[Conley]

The individuals making these decisions have one priority. Reelection. Anything after that is an afterthought.

[wingrider]

the only thing I can add is someone made the point that government spending does not create wealth , I beg to differ, government spending creates wealth for everyone that is in government, ie, millionaire congressmen, senators, judges, etc etc etc.

[Chris]

In a small community yes, I see a difference. In a community that includes 320M, no I don't .
How does community size, at some arbitrary point, transform individuals voluntarily contracting with each other into elite central planners making decisions everyone must comply with?

[Chris]

the only thing I can add is someone made the point that government spending does not create wealth , I beg to differ, government spending creates wealth for everyone that is in government, ie, millionaire congressmen, senators, judges, etc etc etc.
That is true. But it's a drain on the economy, a big sink hole.

[Conley]

That is true. But it's a drain on the economy, a big sink hole.

Yes, and it's magnified by the thousands and thousands of government workers. For example, even the barbershop I posted about yesterday took 200k to keep it running, just to cut the Senate's hair. That kind of spending on a national scale is a killer.

[Peter1469]

How does community size, at some arbitrary point, transform individuals voluntarily contracting with each other into elite central planners making decisions everyone must comply with?

Because people will not get along.

[Chris]

Because people will not get along.
And government has solved that problem? I think it's made it worse.

[Peter1469]

And government has solved that problem? I think it's made it worse.

I disagree. As you often point out, government uses force to obtain compliance.

A libertarian society of 1000 people who believed almost the same things would be perfect. Add 300 million to that group; people who can't agree on much of anything, and the system falls apart.

[Chris]

I disagree. As you often point out, government uses force to obtain compliance. A libertarian society of 1000 people who believed almost the same things would be perfect. Add 300 million to that group; people who can't agree on much of anything, and the system falls apart.
"A libertarian society of 1000 people who believed almost the same things would be perfect."

Using coercive force is antithetical to libertarianism.

"Add 300 million to that group; people who can't agree on much of anything, and the system falls apart."

How many people in the world? All in one way or another trading and exchanging goods and services despite government interventions. Why? Governance without government. Seems to work quite well.Now would all of those people ever get together by means of the free market and decide to invade another group of people? Not likely. Would all those people by means of the free market get together a create social and corporate welfare? Not likely. Warfare and welfare are products of government.

[Peter1469]

"A libertarian society of 1000 people who believed almost the same things would be perfect."

Using coercive force is antithetical to libertarianism.

"Add 300 million to that group; people who can't agree on much of anything, and the system falls apart."

How many people in the world? All in one way or another trading and exchanging goods and services despite government interventions. Why? Governance without government. Seems to work quite well.Now would all of those people ever get together by means of the free market and decide to invade another group of people? Not likely. Would all those people by means of the free market get together a create social and corporate welfare? Not likely. Warfare and welfare are products of government.


So when are we going to get a real world example of 300 million people living anarcho-capitalist?

[Chris]

So when are we going to get a real world example of 300 million people living anarcho-capitalist?
I just gave you one. Or can you tell us what government controls international trade?

And we will see more of it when the government bubble bursts.


The government bubble (http://www.adamsmith.org/blog/economics/the-government-bubble)
Martin Hutchinson's Bear's Lair newsletter is always worth a read, but last week's was particularly good. Just as the housing bubble of the 2000s brought down the world economy, a government bubble is now growing and approaching bursting point. Artificially cheap credit, which led to massive malinvestment in the housing sector, is allowing profligate governments to spend far beyond their means...

[Peter1469]

International trade is governed by many national and international organizations. But even if it were not, I would not accept it as 300M people living together with anacho-capitalism, since all of those people engaging in international trade all live under governments.

[Chris]

Governments don't trade, only people do. Governments try to manage what is already happening and has been since th e dawn of history. Government's typical efforts intervene with tariffs and quotas and other protectionists schemes that create monopolies and force consumers to pay higher prices. Despite these effort to control trade, it goes on quite well.

[Peter1469]

You are correct. Governments try and often don't succeed. If the world was totally anarcho-capitalist what would be the controls on nuclear weapons, if any?

[Chris]

Are those the products of welfare and warfare governments?

The argument anarcho-capitalism would put forth is it would be regulated by insurance providers. Say you and I live in an anarcho-capitalist society, we would both insure ourselves as a protection against losses due to harm by force or fraud. In order to avoid paying for those insured losses our insurance company would restrict coverage to those who agreed to forego nukes, or if we were insured by different companies, it would be in their mutual interests to do the same. Adding more people and more insurance companies would only strengthen the system. And what about an outside who refused to comply, well, the insurance companies would simply stop him again because it would serve their interests in profiting from insurance over loss through pay outs. Of course the outsider could try to find an insurer against such action, but what insurer would find it in their interests to insure someone threatening to blow everyone to kingdom come.

That's just a brief outline, a hasty sketch of how it would work. Have you had a chance to read Robert P. Murphy's Chaos Theory? http://mises.org/document/3088

[Peter1469]

Are those the products of welfare and warfare governments?

The argument anarcho-capitalism would put forth is it would be regulated by insurance providers. Say you and I live in an anarcho-capitalist society, we would both insure ourselves as a protection against losses due to harm by force or fraud. In order to avoid paying for those insured losses our insurance company would restrict coverage to those who agreed to forego nukes, or if we were insured by different companies, it would be in their mutual interests to do the same. Adding more people and more insurance companies would only strengthen the system. And what about an outside who refused to comply, well, the insurance companies would simply stop him again because it would serve their interests in profiting from insurance over loss through pay outs. Of course the outsider could try to find an insurer against such action, but what insurer would find it in their interests to insure someone threatening to blow everyone to kingdom come.

That's just a brief outline, a hasty sketch of how it would work. Have you had a chance to read Robert P. Murphy's Chaos Theory? http://mises.org/document/3088

Yes.

Actually I doubt that an anarcho capitalist society would spend the money to make a nuke.

[Mister D]

What does an anarcho-capitalist society do about the threat of war?

[Peter1469]

What does an anarcho-capitalist society do about the threat of war?


Hire a private military company (PMC).

[Mister D]

Hire a private military company (PMC).

Relying on mercenaries isn't always a good option but I suppose there are no other options.

[Chris]

What does an anarcho-capitalist society do about the threat of war?
I tried to answer that with regards to how an a-c society would through insurance deal with an outside who refused to cooperate and threatened war. I wasn't specific the measures, but one would be to hire mercenaries.

Here is a longer defense of the idea: Private Defense (http://mises.org/media/4418/Private-Defense).

[Mister D]

I tried to answer that with regards to how an a-c society would through insurance deal with an outside who refused to cooperate and threatened war. I wasn't specific the measures, but one would be to hire mercenaries.

Here is a longer defense of the idea: Private Defense (http://mises.org/media/4418/Private-Defense).

Danke. I haven;t been to Mises in quite some time now. This may make good happy hour reading tomorrow. Short week for me.

[Chris]

Didn't monarchies hire armies? Couldn't afford to maintain a standing army. That came about only with the concept of nation.

[Mister D]

Didn't monarchies hire armies? Couldn't afford to maintain a standing army. That came about only with the concept of nation.

Standing or professional armies were extremely rare after the fall of the Roman Empire. I think you are correct that standing armies weren't a regularity until the early modern era. As for monarchies, they certainly did hire mercenaries but they also had feudal type forces that could be called out for a set period of time.

[Mister D]

of course they often had to make up shortfalls by hiring men at arms.