A strong Keynesian argument that speaks to the American people

I don't know. It was just a snippet from Rational Wiki. They also pointed out: cartels became extremely powerful, and the country took on massive amounts of debt in the form of loans from the IMF. Not to mention the human rights violations.

The so-called Miracle of Chile, is hailed by Milton Friedman—an authority on Chicago economics—as a success of libertarian Right-wing economics, and derided by others as an autocratic system put into place by a dictator, which made a small few rich and the vast majority destitute.

I, personally, don't know enough to tell which side is right, in this case...

Sounds like they're both right. Chicago economics is right in that it's a triumph of an economics system ... that makes a very select few very very rich.

Keynesians are right that it made a bunch of other people very very poor.

See? No contradiction.

To answer USAF's earlier question, government spending is not blanket spending, as any economist knows, but by necessity targeted. These targets can be economic (specific industries or companies) or geographic (specific cities or regions).

When government spending occurs, there tends to be a capital flight towards the target of the spending. The result is an economic "hot spot", which almost always results in a boom for the given target.

Of course, capital flight has to come from somewhere else. This somewhere else then suffers as a result of losing the capital and resources it once had. Given the ease of modern transportation, capital flight these days is very easy - a lot easier than it was back in the days of Keynes. Hence why he didn't quite understand this, as he had no way of knowing about our transportation.

The result is an uneven economy, with some areas booming and others being economically weak. This becomes even more problematic when an economy is very diverse, which means targeted spending affects a smaller percentage of it. Again, Keynes had no way to foresee the vast number of products available today. Economies back in his day were a lot more localized. Again, modern transportation.

In order for Keynesian economics to work, the targeted effect of government spending has to be very broad relative to the total population. There are a number of ways to approach this. The simplest one is finding a common good that everyone consumes, then funding money into that. Another approach in ensuring your economy/society is of a small enough scale any government funding is guaranteed to reach the majority regardless of where it goes.

This is why I tend to look at trickle-down theory and Keynesian theory as very similar: both, in ideal execution, involve the same concept, just with different parties doing the actual impetus spending. The former fails because of economic diversity, of course. The latter...well, see above.

Yeah... I don't think artificially allowing a handful to be the richest is a good outcome.

Now, you said that, as a sociologist-prone person, I should theoretically be Austrian. This assumes that all sociologists agree with the ideas likely espoused by Austrian economics. I, for one, can say I don't, because, if nothing else, creating a small privileged class and a mass oppressed class is very bad for society.

Like, "revolution-inducing" bad...

The "government investment in a field causes other fields to become restricted" is only true when you're not in a liquidity trap.

That's why I keep pointing out that MODERN Keynesian economics has addressed this issue.

Under normal circumstances, government spending results in crowding out. But that isn't the case here.

You're forgetting one factor: the economy is now global, so Keynesian policy is no good if implemented in one country if another country is better off. Country boundaries don't count nearly as much anymore.

Look at the bank behavior described near the bottom of the third section.

But nations are selfish, so people don't give a shit if we're stealing jobs from Europe.

The goal of domestic economic policy is not to raise the world, it's to raise the country.

As for the bank thing mentioned, I'm talking about actual stimulus-spending on programs-which isn't what the Fed deals with. Fiscal policy considerations.

edited 7th Oct '11 10:52:27 PM by TheyCallMeTomu

Putting this here so that A) I don't forget it and B) someone more awake can look into this stuff:

It was the “Gramm-Leach-Bliley Act” which gutted the “Glass-Steagall Act”, which had kept the American banking system solvent since the end of the Great Depression. It was Phil Gramm’s “Commodities Futures Modernization Act” which created the Enron Loophole, deregulating credit default swaps. It was the 2003 “American Dream Downpayment Act” which pushed banks and Fannie and Freddie to make loans to people they knew could not afford them. From trickle-down deregulation came the 2004 SEC “Rule Change” which deregulated bank-required 12:1 debt-to-capital ratios, allowing banks to risk 30 times what they held in reserve, putting the entire banking system at risk of default.

Granted, this is much more a regulatory or banking thing but we haven't had a topic about those since the Budget bullshit died down.

Thread hopped.

Well, I think it was Milton Friedman who said that stated that economic theories are to be judged by their predictive power.

So, let's see how many Keynesian economists successfully predicted the 2008 recession. Among them, Paul Krugman and Nouriel Roubini. For a mainstream position, this is not enough.

On the other hand, a lot Austrian economists have successfully predicted the housing crash. Among them: Mark Thornton, Frank Shostak,Stefan Karlsson, Peter Schiff, Robert Wenzel, Hans F. Sennholz, Jim Rogers, Thorsten Polleit, H.A. Scott Trask, Doug French, Eric Englund, Ron Paul (who isn't an economist) and Robert Blumen.

In general, Austrian economics has a great record at predicting disasters. The Great Depression? FA Hayek predicted that. On contrast, Keynesian economics have a gravely insufficient record.

Just my opinion, though.

Keynes has managed to actually adjust and accumulate new data. Austrian economics hasn't.

The irony is that the lesser depression of today looks far more like the Great Depression than anyone-Chicago or Austrians-are willing to admit. So it seems that the Keynesians have learned from their mistakes, but no one has learned from the Keynesians' mistakes.

Wait, am I supposed to post counter arguments on this thread or the Keynesian Economics thread? What's the difference between the two threads?

Focus on the other thread.

I don't know if this speaks to the American people, but it's a Keynesian argument.

edited 11th Oct '11 12:44:54 PM by TheyCallMeTomu

If austerity measures go far enough, the argument may write itself in lieu of the alternative.

Austerity has failed States like Michigan, who labor under record unemployment, and suffer under the failed policy of stealing out-of-State jobs via tax cuts.

Oppose Austerity. Oppose the United Failed States of America.

edited 13th Oct '11 11:31:44 AM by Ratix