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The General Economics Thread:

There was talk about renaming the Krugman thread for this purpose, but that seems to be going nowhere. Besides which, I feel the Krugman thread should be left to discuss Krugman while this thread can be used for more general economic discussion.

Discuss:
  • The merits of competing theories.
  • The role of the government in managing the economy.
  • The causes of and solutions to our current economic woes.
  • Comparisons between the economic systems of different countries.
  • Theoretical and existing alternatives to our current market system.

edited 17th Dec '12 10:58:52 AM by Topazan

Unchanging Avatar.
To any economics majors out there:

Why is it that there's no unified consensus among economists about dealing with recession?

It's been almost a hundred years since the Depression, and it seems like your science has made little to no progress.

If economics is a science, why is there not an answer?

edited 17th Dec '12 2:00:43 PM by Ultrayellow

Except for 4/1/2011. That day lingers in my memory like...metaphor here...I should go.
Pronounced YAK-you-luss
Because macroeconomics works very slowly on an enormous scale with hundreds (if not thousands) of difficult-to-isolate variables. That, and if an experiment doesn't work out, people starve to death.

It can be a real bugger to research.
Freedom of speech includes the freedom for other people to call you out on your bullshit.
 4 Ekuran, Mon, 17th Dec '12 2:26:47 PM from somewhere. Relationship Status: watch?v=dQw4w9WgXcQ
Hi.
[up][up]We have an answer. It's called Keynesian economics.

You can argue the specifics of it, of course, but the general consensus among actual economists is that it works. The problem is that it's not beneficial to super-rich assholes, so they get bought out economists and politicians to spin economic bullshit to the pubic so they can keep on hoarding the vast amounts of wealth they don't really need.
[Insert seemingly profound or amusing phrase here.]
I think that a field is only as scientific as its claims are falsifiable. In economics, whenever a prediction turns out to be false, the economists who made the prediction have some alternative explanation. Since you cannot isolate an economic experiment from all the confounding factors, you're never really forced to question the basic assumptions of a theory, so I don't consider it a hard science.

It seems more like the field I studied, anthropology. Qualitative methods are used where it's appropriate, but other things can only be understood by observations and case studies. Frankly, I think we might be in a better position if there was more understanding of the limits of economics before people put so much faith in it.

[up]Justify this claim please. Keynesian predictions have frequently been flat-out wrong, just like the others.

edited 17th Dec '12 2:51:16 PM by Topazan

 6 Ekuran, Mon, 17th Dec '12 2:56:39 PM from somewhere. Relationship Status: watch?v=dQw4w9WgXcQ
Hi.
You can argue the specifics of it

As in, there are several related schools of economic thought (like Post-Keynesian, Neo-Keynesian, and most forms of Economic Socialism), and while there probably isn't one specific silver bullet of economic thought that can account for everything (so yes, Keynesian predictions can be "flat-out wrong", even though unrelated schools tend to be wrong far more often), in general they have consistently shown to be far superior to alternative practices when we compare the nations that do practice them to the nations that don't.

edited 17th Dec '12 2:59:39 PM by Ekuran

[Insert seemingly profound or amusing phrase here.]
[up]Can you back up that claim? Let's start by hearing a list the countries you believe don't practice Keynesian economics.

I think there's a common misconception on these forums that the Republican party favors classical economics, but they don't. Also, do you really think there isn't any special interest money in the Keynesian sphere?

edited 17th Dec '12 3:21:55 PM by Topazan

Of course there is, but unlike the Chicago and Austrian schools, Keynesian economics is supported by large amounts of hard evidence. Also, you know, logic.

"Job creators" have more money than ever, and yet they're not hiring. So it's not an issue of them not having enough. If they can save money without a loss in earnings by cutting back on employees or outsourcing, they're incentivized to do that no matter how much they have. The lower classes spend a much larger percentage of their money, putting it back into the economy. Historically and globally, there is a much more positive correlation between high taxes and social spending with economic prosperity than there is for the opposite.

These aren't opinions or theories, they are facts. And while they aren't conclusive proof, they are much more solid than any evidence for what conservatives are asking for.

edited 17th Dec '12 3:50:47 PM by RTaco

 9 Ekuran, Mon, 17th Dec '12 4:00:45 PM from somewhere. Relationship Status: watch?v=dQw4w9WgXcQ
Hi.
Binary answers are for children. Keynesian practices are based on a scale, not "this nation does or does not practice it." But, there isn't really anyway to deny that the economies of nations that mostly practice actual leftist economics (i.e, the Keynesian/Socialist/"Liberal" sphere) are by far superior to those that mostly operate under other economic principles (all else being equal).

I think there's a common misconception on these forums that the Republican party favors classical economics, but they don't.

Yeah, it's more like Plutocratic Feudalism, or Neo-Feudalism.

Also, do you really think there isn't any special interest money in the Keynesian sphere?

There will always be corruption when all needs and wants are not fulfilled. On the other hand, leftist economics supports regulations that reduce the influence of special interest money, so you're kind of backing yourself into a wall here.

Edit: Also, [up]that.

edited 17th Dec '12 4:03:13 PM by Ekuran

[Insert seemingly profound or amusing phrase here.]
 10 Trivialis, Mon, 17th Dec '12 4:04:29 PM from contemplation
Happiness
I think the thread would be more effective if the political adjectives were dropped, and we could just analyze the economics for what they are.

One question I always wondered was the micro-macro divide. Why is it so prevalent? How do we go from one to the other?
I don't need praise, I need help.
 11 Topazan, Mon, 17th Dec '12 4:15:42 PM from San Diego
@R Taco - Are you going to refute the methodological difficulties involved with economics and explain how Keynesianism alone is supported by evidence and logic, or are you just going to assume it is because it agrees with you politically?

It's a misrepresentation of Keynes in the first place. I don't fully understand his theory yet, but I do know it's more nuanced than "Whatever the liberals want, all the time."

I'm certainly not going to defend the economic policies of the Republicans, but I will point out that the justifications are more influenced by Keynes than you may think.

@Ekuran - Let me know when you have one iota of data to back you up, and that goes for R Taco as well.

edited 17th Dec '12 4:15:59 PM by Topazan

 12 Arkasas, Mon, 17th Dec '12 4:25:59 PM from Politics Relationship Status: Halfway to Pon Farr
Professor of Geekology
[up]Alright, here's a piece of evidence: Keynes advocated for government stimulus during a bust period. When FDR was elected, he started spending, which began to (very slowly, I admit) stimulate the economy. The reason that the economy practically rebounded overnight when WWII happened was because the government pumped so much money into the economy to get the tanks and ships and planes built, thus the factories needed more people to work in them, thus people made money, thus people bought things, thus the economy began to boom. Mind you, it was wartime, but the fact that the American economy kept up a boom for some number of years proves it had staying power.

Yeah, you're going to want Fighteer or Tomu to answer your question.
There is no 'n' in my name. Please take note.
 13 Trivialis, Mon, 17th Dec '12 4:27:20 PM from contemplation
Happiness
Can someone explain the structure of Keynesian theory, rather than just point out the successes? We've seen enough of the latter, but we need the former for anyone to really learn.
I don't need praise, I need help.
Here's some info:

edited 17th Dec '12 4:41:54 PM by RTaco

 15 Trivialis, Mon, 17th Dec '12 4:32:49 PM from contemplation
Happiness
...

Way to totally ignore my posts there.
I don't need praise, I need help.
Sorry, I started that one before I saw yours. I was responding to the request for evidence.

Keynesian economics essentially boils down to the government having a larger role in regulating the economy, rather than letting it run wild. That means higher taxes on the wealthy, more spending on social programs, and tighter business regulations. The idea is that you're steering the money towards people who are going to spend it, so that it doesn't accumulate at the top (money that goes unspent might as well not exist, so when the rich have a larger portion of the money the overall amount of wealth effectively decreases).

Conservative economics depends on people putting the best interest of everyone else before themselves, which fails for obvious reasons.

edited 17th Dec '12 4:40:20 PM by RTaco

 17 Trivialis, Mon, 17th Dec '12 4:42:37 PM from contemplation
Happiness
Regulate the economy, to do what exactly?

There's a distinction between an economic theory and using its results. A theory is supposed to say that inputs or given conditions will lead to certain results. It doesn't exactly tell you what to do. Applying a theory, in contrast, is to produce some desired outcome depending on what you need.
I don't need praise, I need help.
 18 Topazan, Mon, 17th Dec '12 4:42:47 PM from San Diego
See, I haven't been arguing against Keynesianism, I've been arguing against the view that economics is a hard science. It just so happens that people on these boards consider Keynesianism alone to be a science.

@Arkasas - What you have there is a single data-point, what would be considered anecdotal evidence in most contexts. In no way does it show that Keynesians practice a superior methodology or one that could in any way be considered scientific.

@R Taco - Same. And, again, Keynes was more nuanced than that.

We're looking for falsifiable claims here. Anything else is vulnerable to confirmation bias.

@Triv: Regulating the flow of money in a way that improves the spending power of the most people while causing the least harm. In general, that means encouraging more spending by everyone.

@Topazan: I already mentioned hard, non-subjective info that supports Keynesian policy in my first post.

edited 17th Dec '12 4:48:36 PM by RTaco

@Triv: the main thrust of Keynesian theory is to use the Government to smooth out the boom and bust cycle.

when the economy starts booming, raise taxes both to bring in more income to pay down debts, and to put a gentle brake on the economy so it doesnt accelerate into all out bubbles.

When the economy is in freefall, dump tons of stimulus money into the economy to make up for the buying private firms and consumers are not making to keep the economy from completely busting.

Going Forth!
 21 Trivialis, Mon, 17th Dec '12 4:57:18 PM from contemplation
Happiness
All right, I can understand that much. So Keynesian theory puts together the idea of a business cycle, with the idea that government is a control vault that affects the cycle and its impact.

Now what do some other theories say?

edited 17th Dec '12 4:57:36 PM by Trivialis

I don't need praise, I need help.
 22 Wicked 223, Mon, 17th Dec '12 5:04:54 PM from Death Star in the forest
Narayana Kocherlakota has a good (if a bit technical) summary of what the current models being used in macroeconomics are here.

also note that the descriptions of Keynesian economics here are missing a good deal of nuance, as Topazan says.

edited 17th Dec '12 5:05:10 PM by Wicked223

You can't even write racist abuse in excrement on somebody's car without the politically correct brigade jumping down your throat!
 23 chihuahua 0, Mon, 17th Dec '12 5:19:54 PM from Standoff, USA Relationship Status: I'm in love with my car
Writer's Welcome Wagon
It's funny how I did an entire project on fiscal policy, yet I've forgotten most of it. [lol]

Supply-side is a controversial one, right?

Hey, does anyone want to see the notes I made on fiscal policy back in 2011? Here's a sample that may or may not be right:

What is Fiscal Policy:
  • Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy.
    • In economics and political science, the use of government expenditure and revenue collection (taxation) to influence the economy.
    • Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy.
    • Effect of changes in government spending on national economy.
    • My definition: The government changes taxes to influence the economy. *
    • In Late February, President presents budget plan to Congress. Not finished until September.

edited 17th Dec '12 5:24:12 PM by chihuahua0

 24 Topazan, Mon, 17th Dec '12 5:39:24 PM from San Diego
All right, I can understand that much. So Keynesian theory puts together the idea of a business cycle, with the idea that government is a control vault that affects the cycle and its impact.

Now what do some other theories say?
In regards to the specific topic of business cycles, here are some other theories as I understand them. I know these are oversimplified, and correct me if I'm wrong.
  • Real Business Cycle Theory: Business cycles are caused by "technological shocks" that interfere with production in a tangible way. "Examples of such shocks include innovations, bad weather, imported oil price increase, stricter environmental and safety regulations, etc."
  • Austrian Theory: Interest rates made artificially low by policy creates the illusion of prosperity which deceives people into making unsustainable "malinvestments". Basically, speculative bubbles.
  • Georgism: Henry George believed that business cycles were caused by rising land values. During good times, speculation pushes land prices past the point at which labor and capital can afford to access it, and production breaks down.

edited 17th Dec '12 5:52:37 PM by Topazan

 25 Ramidel, Mon, 17th Dec '12 5:51:11 PM Relationship Status: Above such petty unnecessities
@R Taco: As a point of information, the Chicago School is a lot closer to Keynesianism than it is to the Austrian School. (Mostly because Chicago School economists and Keynesian economists actually talk to each other and compare data.) They just tend to focus on different tools; but, for example, the Austrian School likes to blame Alan Greenspan (a monetarist if there ever was one) for the housing bubble; Greenspan may have been an asshole, but that one wasn't his fault.

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