A strong Keynesian argument that speaks to the American people

...because economics and sociology aren't the same thing?

Austrian school economics sounds more like socioeconomics mixed with an off-kilter form of symbolic-interactionism. It also seems like it skipped the part of economics schooling where you're supposed to base economics on the numbers, not what you assume people will do in reaction to certain things.

I mean, I guess Austrian economics could work if you were willing to bend over backwards for some serious social engineering, but...

Besides, the argument(s) given to me for Keynesian economics have been good, and the arguments given for Austrian economics have not been good. I haven't really heard anything from Chicago economics...

Well, at the risk of converting you to a faulty model, you my wanna get outside the echo chamber before making final judgment.

Well, I mean, think about it this way: I know more about Keynesian economics from history than I do from you.

Which is a testament more to my historical fetish and less to your lack of explanation skills.

Besides, when I introduce my knowledge of sociology to Austrian economics they fail anyhow. Supply-side economics, even if they might work in theory, fail in reality because they assume good faith on the part of people, and, well...

I'd argue that the reason supply-side economics fails has more to do with market power and barriers to entry than anything else. Good ol' fashioned Economics. ACTUAL economics. Without even doing any math.

As I stated before, the whole thing about Austrian economics ignoring mathematical-based models is intentional.

If you really want to know more, drop me a PM.

edited 7th Oct '11 9:08:00 PM by TotemicHero

The point I'm getting at is that some of their conclusions are idiotic even if you DO ignore math based models.

"For every complex real world problem, there is a simple solution-that doesn't work." It's the oversimplified models that act like that.

Well, let's look at my concept of the model (because it's always fun to be corrected by Tomu in an embarrassing fashion about economics):

Supply-side economics:

• Focuses on the "supply;" that is to say, those who are providers of means of production, or "capitalists" (to use the term provided by Marx).
• Theorizes that reducing barriers to the use of capital for production (regulation, taxes, etc.) will allow providers of means of production to create more jobs, as they will have more capital to hire and expand means of production.
• Decreased barriers to the capital available for direct use by providers of means of production facilitates certainty, which incentivizes investment.
• Increased hiring and production increases demand by cause-effect, which provides increased market for the new production, creating a net rise in economic situation as a generality.

Main, pressing issue with this, from a sociopolitical point of view:

Without regulation, there is little to no incentive to actually do any of that. You know, instead of just pocketing all that money you get from the lack of regulation and taxes as profits. So, instead of increasing demand as a side effect, it just increases the profits of the providers of the means of production.

Is that very basic, simplified version of it correct, or did I miss something obvious?

Economics says they want to maximize profits. In order to maximize profits, you expand. Or so the theory goes. The only time when people maximize profits without expanding is when they have market power. Under a perfectly competitive environment, firms don't have market power, so if they charge a higher price than the market sets, then their competitors (all infinity of them) charge 1 penny lower and the public, who sees the competitors as perfect substitutes for eachother, just buy from the cheaper of the producers.

Long story short, Supply Side Economics assumes firms are greedy just as much as sociology. It just happens to assume a whole shitload of other things about markets being perfect when, frankly, they're not.

edited 7th Oct '11 9:15:16 PM by TheyCallMeTomu

...what?

Is that an insult to sociology or an insult to them attempting to make an economic theory that's more sociology than economics?

edited 7th Oct '11 9:16:34 PM by USAF713

It's telling you that you're right in dismissing supply side economics, but right for the wrong reasons.

~cocks head~

Right for the Wrong Reasons?

Also, to be fair, this is my conceptualization of Keynesian economics:

Demand-side economics:

• Focuses on "demand;" or, those who use some form of currency with accepted value to obtain goods at a given price.
• Theorizes that, by maximizing the purchasing power of society through government spending and decreased taxes, demand will increase, thus allowing suppliers to operate at full capacity again.
• Increased demand and full capacity operation by suppliers puts more people to work, thus further increasing demand, and therefore pushing the net economy upwards.
• Government spending, to facilitate increased demand, creates sovereign debt, which, in the new economic rise, must be paid off by a trimming of the budget and increase in taxes. Thus, the classic "boom-bust" cycle is scrapped altogether, and instead becomes a mostly steady trend line upwards.

Honestly, besides the fact that this makes more sense, from a straight logic point of view, I like it because it alleviates social ills as well, as many—if not most—societal problems stem from classism and the damages of having an underclass...

edited 7th Oct '11 9:22:49 PM by USAF713

I've never really been big into macro, TBH.

My objection to supply-side economics has more to do with the aversion to a Consumer Protection Agency than anything else.

edited 7th Oct '11 9:24:52 PM by TheyCallMeTomu

@Tomu, I c wut u did thar.

...did Tomu just object to an economic system primarily based on morality?

Mind = blown. o_o

I agree Austrian economics is mostly wrong.

The one thing that does hold up, math models or none, is that their view that increasing the money supply in spurts does create problems. Not that their solution could work either for these problems, but then again, neither do Keynesian ideas.

What does "increasing the money supply in spurts" mean? Like, we should do something other than, when some crisis comes, we throw a wad of money at it the size of Texas?

No, I'm saying that if you have to fund such a Keynesian move, you have to do it via other methods than printing money. Like tax increases, but that raises its own set of issues...

It's a problem that Keynesian economics isn't really equipped to solve (which stems from the same root problem that led Austrian economics to reject math models).

Isn't the object supposed to be that you spend lots and lower taxes during bad times and raise taxes and spend little during good times, for a net effect of stabilized rising economic gain...?

Okay, I think there's a misunderstanding. Modern Keynesian theory doesn't say that you necessarily have to "print money." Indeed, if that was the solution, you don't actually get a deficit at all.

It's all about the government borrowing money. In normal times, this causes a spike in interest rates, but when you're in a liquidity trap, that doesn't happen.

That's about where my macro-econ knowledge runs out.

And I'm not sure what you're thinking about me objecting to a system of economics based primarily on morality or whatever. The reason I object to Supply Side Economics is because the assumptions made as part of the model are demonstrably wrong. As in, factually.

edited 7th Oct '11 9:44:48 PM by TheyCallMeTomu

That's the object. The problem is with how government spending actually tends to work out, which creates economic instability and inequality.

The source of the money isn't the main problem, the spending is. Printing money just happens to be even worse, due to making prices rise on top of the other issues caused.

edited 7th Oct '11 9:46:47 PM by TotemicHero

That's not the case when you're in a liquidity trap. Which is precisely what modern Keynesianism states. Which is precisely what's happening right now. Despite "massive borrowing" we haven't had substantial inflation, and we haven't had a rise in interest rates.

This strikes me as a moral objection more than an economic objection.

Anyhow, why does government spending cause that?

@USAF: since you enjoy reading history, you should look into the Pinochet rebellion in Chile. They brought in a few Chicago school trained people collectively called the "Chicago boys" to retool the economy, and it sounds like, while the economy did boom, so did poverty and wealth disparity.

Unless its a government monopoly, which causes them to scream their heads off.

edited 7th Oct '11 9:50:02 PM by Enkufka

The reason they object to the CPA is because they think it's not necessary.

To the best of my knowledge, even the Austrians don't think a monopoly is a good thing. They just close their eyes and plug their ears whenever you point out that firm X is in fact a monopoly.

Well... apparently, Chile is now the "best performing market in Latin America," as per Wikipedia. Are they still on the Chicago model?