When Keynesians say that deficit government spending during an economic downturn can help diminish the effects of the recession, they are absolutely right. When Austrians say that Keynesian policies in practice have actually exacerbated the business cycle and created artificial bubbles, they are also absolutely right.
We don't need a bunch of absolutist "us vs. them" economic bickering in here. There is sense on both sides, if you look in the right places.
Paraleluniverse: "Jobs create by stimulus has more value than no jobs at all.
I honestly don't understand why you keep repeating this, as you haven't even tried dismiss the problem of "aggregate sizes". Some how you still think 900 haircutters creates wealth, when the society only needs 500.
Your example is completely divorced from reality.
In reality, the government can borrow at negative real interest rates (i.e. inflation is higher than the rate government needs to repay on debt). In reality, there is idle resources, people sitting around doing nothing and wanting to work.
Society needs less teachers? Less investments in infrastructure? Less investments in research? Less manufacturing?
You're argument is that unemployment is good, and that it's good for the economy that resources are not put to use.
Glad for your answer:
1) The rate of interest rates doesn't make the example unrealistic (you can assume that government could borrow money for free to make the fiscal policiy. Wouldn't really change the point I am trying to make with the problem of aggregate numbers.
2) I actually assumed there were idle ressoruces (50 people unemployed in my example. 25 of them got a job becasue of fiscal policy).
3) I only used 2 different industries to make the example less complicated. Adding 10 more industrys wouldn't change the principle. Too many people still work in the haircut industry and need to be fired and then employed to the other industries before the economy gets healthy.
4) As I somehwat understand your logic you agree with me that the ratio needs to be 500/500 (agree?), but your convinced that fiscal policiy makes more people be employed in the machine industry.
But how? Where do these people come from? According to my logic they should come from the haircut industry (where they get fired). Where should they come from according to your logic? (The unemployed?). But if they are to build this bridge, obv. there will be less people for the machine sector ti hire. And because aggregate spendings increases (compared to if there were 0 fiscal policies) the haircut indsutry can afford to slow down the "firing rate" (agree?).
And this means (according to my logic), that it will take more time before we get to the 500/500 ratio, and until then the economy will never be healthy. It will be in a constant recession (or perhaps it will just has indebted it self before we get there).
What matters is that what you assume has no resemblance to reality, so your example cannot be taken seriously.
There are idle resources and you imply that it is better that they stay idle instead of letting the government pay them to build a bridge. Thus your argument is that unemployment is good, i.e. it's better that some people do nothing for society, than it is for them to contribute to society.
Your argument hinges on the fact that if the government did nothing, the system would move to the "optimal" 500-500 split. But that isn't what would happen in reality. In reality, the crash that led to people being fired in the haircut sector would create a vicious cycle of falling employment, which causes falling demand, which causes falling employment, and so on. The 500-500 split that you assumed where supply equals demand at the start no longer applies, because demand is not the same, demand has fallen. And without government intervention, there will either be no recovery or a very slow recovery.
You also assume that if the government did nothing, the economy would move to the 500-500 split, i.e. employment in the haircut sector would fall, and unemployment in the other sector would rise. This is not how the real world works. This is empirically false, and it shows how divorced from reality your example is. In a real recession, in the real world, employment falls in essentially every sector. Workers are not transferred from a suboptimal allocation to a more optical one, they are simply fired.
The point of fiscal policy is to get idle workers to do work. Not to reach some abstract and imaginary 500-500 equilibrium that you concocted. There is nothing to suggest that the free market would magically hit the optimal way to allocate resources in an economy during a recession, in fact what is more likely to happen is that the negative feedback loop would reinforce and the downward spiral towards mass unemployment would continue.
Furthermore, you have made a strawman argument against fiscal policy. Even if the economy is most efficient with a particular yet unknowable distribution of workers in each sector, analogous to the 500-500 split, there is no reason why government stimulus can't be targeted towards moving to this point more quickly. In your example, this could include the government investing in the machine making industry to give them more capacity, so that they can hire more workers, and to subsidize their pay in order to attract people from the haircutting industry to move over more quickly. In the real world, this would be analogous to the examples I gave in the above post, the government investing in areas that would better society, things that we need more of: teachers, clean energy, better and upgraded infrastructure, research, etc. To suggest that it's better for people to stay unemployed and useless to society, than it is for them to help build a bridge, is utterly absurd. To add to this, there is never been a better time for the government to invest, because interest rates are at record lows. If the government decided to invest when the economy is better and the debt is much lower, then it would be far more expensive for them, and it would reinforce the business cycle, the opposite of what government spending should be, i.e. countercyclical.
The problem with Austrian economics is that it rejects empiricism and it rejects the scientific method (http://en.wikipedia.org/wiki/Austrian_School), no wonder your example has no basis in reality. No wonder Austrian economics is on the fringe of economics academia. In fact, it flies in the face of a century of real economic observations.
Before I answer your post, I would like to see how you can disprove the austrian schools theory based on empiric evidence. I mean in the last century has there ever been a period where a government led the free market try to work things out?
Hider, here is a very good criticism of praxeology, complete with informative discussion. http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-praxeology-critique.html Keep in mind, since you do not believe in empirical evidence, you cannot ask people to prove you wrong via empirical evidence. And since you reject empirical evidence based on your faith in praxeology (despite Mises's admittedly making assumptions based on empirical evidence) I feel it's important you take a look at some the serious problems with your view. Typical Austrian economics suffer the same criticism of assuming too much without considering the real world. At the very least, this criticism highlights the absurdity of ignoring empirical evidence.
Paraleluniverse: "Jobs create by stimulus has more value than no jobs at all.
I honestly don't understand why you keep repeating this, as you haven't even tried dismiss the problem of "aggregate sizes". Some how you still think 900 haircutters creates wealth, when the society only needs 500.
Your example is completely divorced from reality.
In reality, the government can borrow at negative real interest rates (i.e. inflation is higher than the rate government needs to repay on debt). In reality, there is idle resources, people sitting around doing nothing and wanting to work.
Society needs less teachers? Less investments in infrastructure? Less investments in research? Less manufacturing?
You're argument is that unemployment is good, and that it's good for the economy that resources are not put to use.
Glad for your answer:
1) The rate of interest rates doesn't make the example unrealistic (you can assume that government could borrow money for free to make the fiscal policiy. Wouldn't really change the point I am trying to make with the problem of aggregate numbers.
2) I actually assumed there were idle ressoruces (50 people unemployed in my example. 25 of them got a job becasue of fiscal policy).
3) I only used 2 different industries to make the example less complicated. Adding 10 more industrys wouldn't change the principle. Too many people still work in the haircut industry and need to be fired and then employed to the other industries before the economy gets healthy.
4) As I somehwat understand your logic you agree with me that the ratio needs to be 500/500 (agree?), but your convinced that fiscal policiy makes more people be employed in the machine industry.
But how? Where do these people come from? According to my logic they should come from the haircut industry (where they get fired). Where should they come from according to your logic? (The unemployed?). But if they are to build this bridge, obv. there will be less people for the machine sector ti hire. And because aggregate spendings increases (compared to if there were 0 fiscal policies) the haircut indsutry can afford to slow down the "firing rate" (agree?).
And this means (according to my logic), that it will take more time before we get to the 500/500 ratio, and until then the economy will never be healthy. It will be in a constant recession (or perhaps it will just has indebted it self before we get there).
What matters is that what you assume has no resemblance to reality, so your example cannot be taken seriously.
There are idle resources and you imply that it is better that they stay idle instead of letting the government pay them to build a bridge. Thus your argument is that unemployment is good, i.e. it's better that some people do nothing for society, than it is for them to contribute to society.
Your argument hinges on the fact that if the government did nothing, the system would move to the "optimal" 500-500 split. But that isn't what would happen in reality. In reality, the crash that led to people being fired in the haircut sector would create a vicious cycle of falling employment, which causes falling demand, which causes falling employment, and so on. The 500-500 split that you assumed where supply equals demand at the start no longer applies, because demand is not the same, demand has fallen. And without government intervention, there will either be no recovery or a very slow recovery.
You also assume that if the government did nothing, the economy would move to the 500-500 split, i.e. employment in the haircut sector would fall, and unemployment in the other sector would rise. This is not how the real world works. This is empirically false, and it shows how divorced from reality your example is. In a real recession, in the real world, employment falls in essentially every sector. Workers are not transferred from a suboptimal allocation to a more optical one, they are simply fired.
The point of fiscal policy is to get idle workers to do work. Not to reach some abstract and imaginary 500-500 equilibrium that you concocted. There is nothing to suggest that the free market would magically hit the optimal way to allocate resources in an economy during a recession, in fact what is more likely to happen is that the negative feedback loop would reinforce and the downward spiral towards mass unemployment would continue.
Furthermore, you have made a strawman argument against fiscal policy. Even if the economy is most efficient with a particular yet unknowable distribution of workers in each sector, analogous to the 500-500 split, there is no reason why government stimulus can't be targeted towards moving to this point more quickly. In your example, this could include the government investing in the machine making industry to give them more capacity, so that they can hire more workers, and to subsidize their pay in order to attract people from the haircutting industry to move over more quickly. In the real world, this would be analogous to the examples I gave in the above post, the government investing in areas that would better society, things that we need more of: teachers, clean energy, better and upgraded infrastructure, research, etc. To suggest that it's better for people to stay unemployed and useless to society, than it is for them to help build a bridge, is utterly absurd. To add to this, there is never been a better time for the government to invest, because interest rates are at record lows. If the government decided to invest when the economy is better and the debt is much lower, then it would be far more expensive for them, and it would reinforce the business cycle, the opposite of what government spending should be, i.e. countercyclical.
The problem with Austrian economics is that it rejects empiricism and it rejects the scientific method (http://en.wikipedia.org/wiki/Austrian_School), no wonder your example has no basis in reality. No wonder Austrian economics is on the fringe of economics academia. In fact, it flies in the face of a century of real economic observations.
Before I answer your post, I would like to see how you can disprove the austrian schools theory based on empiric evidence. I mean in the last century has there ever been a period where a government led the free market try to work things out?
Hider, here is a very good criticism of praxeology, complete with informative discussion. http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-praxeology-critique.html Keep in mind, since you do not believe in empirical evidence, you cannot ask people to prove you wrong via empirical evidence. And since you reject empirical evidence based on your faith in praxeology (despite Mises's admittedly making assumptions based on empirical evidence) I feel it's important you take a look at some the serious problems with your view. Typical Austrian economics suffer the same criticism of assuming too much without considering the real world. At the very least, this criticism highlights the absurdity of ignoring empirical evidence.
That is the most hilarious argument hider has got. He´s got some points from time to time, but this statement puts him right into the corner of a fundamentalist Christian/Muslim/Jew/whatever.
Paraleluniverse: "Jobs create by stimulus has more value than no jobs at all.
I honestly don't understand why you keep repeating this, as you haven't even tried dismiss the problem of "aggregate sizes". Some how you still think 900 haircutters creates wealth, when the society only needs 500.
Your example is completely divorced from reality.
In reality, the government can borrow at negative real interest rates (i.e. inflation is higher than the rate government needs to repay on debt). In reality, there is idle resources, people sitting around doing nothing and wanting to work.
Society needs less teachers? Less investments in infrastructure? Less investments in research? Less manufacturing?
You're argument is that unemployment is good, and that it's good for the economy that resources are not put to use.
Glad for your answer:
1) The rate of interest rates doesn't make the example unrealistic (you can assume that government could borrow money for free to make the fiscal policiy. Wouldn't really change the point I am trying to make with the problem of aggregate numbers.
2) I actually assumed there were idle ressoruces (50 people unemployed in my example. 25 of them got a job becasue of fiscal policy).
3) I only used 2 different industries to make the example less complicated. Adding 10 more industrys wouldn't change the principle. Too many people still work in the haircut industry and need to be fired and then employed to the other industries before the economy gets healthy.
4) As I somehwat understand your logic you agree with me that the ratio needs to be 500/500 (agree?), but your convinced that fiscal policiy makes more people be employed in the machine industry.
But how? Where do these people come from? According to my logic they should come from the haircut industry (where they get fired). Where should they come from according to your logic? (The unemployed?). But if they are to build this bridge, obv. there will be less people for the machine sector ti hire. And because aggregate spendings increases (compared to if there were 0 fiscal policies) the haircut indsutry can afford to slow down the "firing rate" (agree?).
And this means (according to my logic), that it will take more time before we get to the 500/500 ratio, and until then the economy will never be healthy. It will be in a constant recession (or perhaps it will just has indebted it self before we get there).
What matters is that what you assume has no resemblance to reality, so your example cannot be taken seriously.
There are idle resources and you imply that it is better that they stay idle instead of letting the government pay them to build a bridge. Thus your argument is that unemployment is good, i.e. it's better that some people do nothing for society, than it is for them to contribute to society.
Your argument hinges on the fact that if the government did nothing, the system would move to the "optimal" 500-500 split. But that isn't what would happen in reality. In reality, the crash that led to people being fired in the haircut sector would create a vicious cycle of falling employment, which causes falling demand, which causes falling employment, and so on. The 500-500 split that you assumed where supply equals demand at the start no longer applies, because demand is not the same, demand has fallen. And without government intervention, there will either be no recovery or a very slow recovery.
You also assume that if the government did nothing, the economy would move to the 500-500 split, i.e. employment in the haircut sector would fall, and unemployment in the other sector would rise. This is not how the real world works. This is empirically false, and it shows how divorced from reality your example is. In a real recession, in the real world, employment falls in essentially every sector. Workers are not transferred from a suboptimal allocation to a more optical one, they are simply fired.
The point of fiscal policy is to get idle workers to do work. Not to reach some abstract and imaginary 500-500 equilibrium that you concocted. There is nothing to suggest that the free market would magically hit the optimal way to allocate resources in an economy during a recession, in fact what is more likely to happen is that the negative feedback loop would reinforce and the downward spiral towards mass unemployment would continue.
Furthermore, you have made a strawman argument against fiscal policy. Even if the economy is most efficient with a particular yet unknowable distribution of workers in each sector, analogous to the 500-500 split, there is no reason why government stimulus can't be targeted towards moving to this point more quickly. In your example, this could include the government investing in the machine making industry to give them more capacity, so that they can hire more workers, and to subsidize their pay in order to attract people from the haircutting industry to move over more quickly. In the real world, this would be analogous to the examples I gave in the above post, the government investing in areas that would better society, things that we need more of: teachers, clean energy, better and upgraded infrastructure, research, etc. To suggest that it's better for people to stay unemployed and useless to society, than it is for them to help build a bridge, is utterly absurd. To add to this, there is never been a better time for the government to invest, because interest rates are at record lows. If the government decided to invest when the economy is better and the debt is much lower, then it would be far more expensive for them, and it would reinforce the business cycle, the opposite of what government spending should be, i.e. countercyclical.
The problem with Austrian economics is that it rejects empiricism and it rejects the scientific method (http://en.wikipedia.org/wiki/Austrian_School), no wonder your example has no basis in reality. No wonder Austrian economics is on the fringe of economics academia. In fact, it flies in the face of a century of real economic observations.
Before I answer your post, I would like to see how you can disprove the austrian schools theory based on empiric evidence. I mean in the last century has there ever been a period where a government led the free market try to work things out?
Hider, here is a very good criticism of praxeology, complete with informative discussion. http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-praxeology-critique.html Keep in mind, since you do not believe in empirical evidence, you cannot ask people to prove you wrong via empirical evidence. And since you reject empirical evidence based on your faith in praxeology (despite Mises's admittedly making assumptions based on empirical evidence) I feel it's important you take a look at some the serious problems with your view. Typical Austrian economics suffer the same criticism of assuming too much without considering the real world. At the very least, this criticism highlights the absurdity of ignoring empirical evidence.
Hi Tor, I honestly just wondered if there actually was a empirical critic of the austrian school. Of course I don't think it can proove anything, but I would still be interest in reading it. Anyway I will read your link later when I have time.
Geoffrey Plauche wrote a very relevant paper on the role of a priori knowledge in praxeology. It's not for the faint of heart, but a good paper nonetheless:
"In this essay, I have attempted to show how praxeology, despite being an aprioristic discipline, can be given an explicitly Aristotelian foundation. Indeed, not only is this possible, but it provides praxeology a firmer philosophical and scientific ground upon which to stand while avoiding familiar pitfalls of modern philosophy of science: the untenable mechanism, atomism, and false dichotomies such as a priori/empirical, rationalist/empiricist, analytic/synthetic, impositionist/reflectionist, and formalist/herneneutic. Such a praxeology is an exact science of necessary and eternal laws of human action, but it is also fallibalistic owing to the multiple inductive and deductive processes it involves. To once again paraphrase Reinach, the a priori character of praxeology is nothing dark and mystical: a priori propositions refer to states of affairs that are general and necessary, to essential and intelligible structures in the world obtaining from the identities or natures of things and their relations."
Add to the fact that Romney is using a Democratic attack ad on Newt.
Newt Gingrich’s spokesman said they considered Mitt Romney’s tax return issue settled after he released his 2010 filing, but reported discrepancies are now giving Newt a chance to revive the issue.
“We’re going to be very explicit about his record and how can a guy that’s a great manager not file 23 foreign holdings last year when he filed,” Gingrich told CNN on Monday. “How can he have signed a document saying he provided services for paying part of his income tax when he told everybody he didn’t provide services for Bain? A lot of pieces of Mitt Romney don’t hold up once you start looking at them honestly.”
Gingrich was citing concerns raised by the LA Times in an analysis comparing Romney’s tax returns to his earlier financial disclosures. The Romney campaign dismissed the issues as “trivial.”
On January 31 2012 07:35 SoLaR[i.C] wrote: Good ol' {CC}StealthBlue. You are the sure tradewinds to our misguided boat.
For our sails were torn asunder, and we dove, like the Nautilus, into the great black maelstrom of economics & philosophy.
Yes yes. I'm very tired of this economics debate, it's getting nowhere. We'll see if the world was in a debt crisis soon enough, no point in arguing about it now.
Is Romney finally growing some balls and getting after Newt a bit?
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
I guess a despicable human is still a human...
No, the despicable human is the most human of them all.
Romney is pretty much a nexus-6 android whose hidden motivations are completely alien to us. Androids are not permitted to roam freely on this planet.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
I guess a despicable human is still a human...
No, the despicable human is the most human of them all.
Romney is pretty much a nexus-6 android whose hidden motivations are completely alien to us. Androids are not permitted to roam freely on this planet.
You know the rules.
But, if corporations are people, why not androids?
Why would I care what troops think? Honestly, I respect everything that troops do in terms of being courageous, but I'm not going to act like I think they are the most educated class of people. I trust physicists in physics, biologists in biology, etc. I trust a soldier in how to shoot a gun, but not how to choose a candidate.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
I think you forgot to add /S at the end of your sentence.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
I think you forgot to add /S at the end of your sentence.
I was being perfectly sincere. Most people realize that a race between Newt and Obama would be top-notch political theater.
But I'll go even further than that and say that even though I hugely respect Obama, a Newt Presidency would be the most glorious event of my life so far.
On January 31 2012 10:22 NoCatsCradle wrote: I want so badly for Newt to win the nomination
The guy is such an endearing chracter. Have you seen the man talk about elephants? Despite his massive personal flaws and general incompetance, he's the most 'human' of all the candidates.
I think you forgot to add /S at the end of your sentence.
I was being perfectly sincere. Most people realize that a race between Newt and Obama would be top-notch political theater.
But I'll go even further than that and say that even though I hugely respect Obama, a Newt Presidency would be the most glorious event of my life so far.
Moon-base or bust.
Newt Gingrich is a scumbag dude. He wanted a death penalty for pot heads even though he smoked marijuana before in his youth. What does that tell you about him? Oh, and he also said we should have another 9/11:
EPT
![[image loading]](http://i.imgur.com/nGtA8.jpg)
