The General Economics Thread

Oh, you mean that socialism wasn't discredited across the West, but mainly in the United States. Fair enough.

Large employers have been known to outsource their jobs to cheaper regions.

You can't exactly offshore cooking.

Besides, changes in currency valuations and other factors are eroding the trend of offshoring. We may see jobs start migrating back.

edited 28th Mar '14 2:37:31 PM by Fighteer

Aren't manufacturing jobs already coming back to the US?

Yes, but I don't have any stats immediately to hand.

Its perceptions that matter. Uneducated people in rural towns may not think they have much leverage when the main employer starts threatening to leave.

Isn't it being counterbalanced by a general cut in capital outlays? There doesn't seem to be a boom in the numbers.

http://tribune.com.pk/story/688588/turn-down-pakistan-refuses-to-sell-gold-worth-2-7b-reveals-imf-report/

Need help from people who actually know economics. Does the IMF have the right of it or does the SBP?

It seems to be a highly technical question of whether Pakistan does better to hold reserves in currency or in gold, and frankly I don't know enough to offer an opinion. What's more important is the forecast of internal growth based on what appear to be supply concerns, particularly electricity generation. That's far more significant than the precise form in which it's hoarding currency.

Mind you, that's not just a worry for countries like Pakistan — a fair few Western countries have electricity supply concerns, especially concerning supplies in the near future.

The technical nature is kinda why I'm asking. What info is needed to make a determination?

And yeah, Pakistani power is rather pathetic. They only have one vertically integrated power company. Everything else are split between the GENC Os (the power plants) and DISCOS (the power grids), all gov't owned and on the privatization chopping block.

Question for those of you who know the economic schools better than me — what is the Keynesian response to the "crowding out" argument used by neoclassicists for why deficit spending supposedly wouldn't work? I'm only just looking into the various schools and I probably lean Keynesian but I'd like to see how it's addressed.

Keynesians acknowledge that in boom times, resources that can be allocated already are being allocated. The point is, when you use stimulus, you're specifically addressing instances where that's not the case.

We have a lot of empirical evidence to support that stimulus can indeed work, and therefore that crowding out as a universal fact is simply empirically wrong.

It's kind of weird because in my time studying economics I rarely, if ever, hear the term "crowding out" used in a macroeconomic sense. It usually comes up in microeconomic scenarios.

That aside, the typical Keynesian argument is that in a bust (particularly the most recent one) an increase in government deficits would not increase interest rates (and thus reduce private investments) because demand for private investment is so low.

In other words. In an extreme bust, deficit spending will not crowd out private investment because there is little investment for the government to actually crowd out.

edited 29th Mar '14 10:12:21 PM by Mio

The fundamental assumption of the crowding out argument is that all resources that can be allocated are being allocated. But that's a huge assumption that's not backed up by sound reasoning. And whenever a story is attempted to argue "Well here's why we think-" there are explanations for why that story isn't accurate.

Ah, thank you! I figured it might be along those lines. On an unrelated note, what's with the meme I hear a lot, that Keynes and the Keynesians thought the economy would crash again after WWII? Is there any truth to that?

They thought that the high wartime spending would stop after the war, which didn't happen.

It did, and there was something of a downturn in the United States that made Harry Truman's life hell for a while (why Dewey was thought to be a shoo-in), but what happened in America and Europe are two totally different things. In Europe's case, the welfare state rose after WWII, either for Marshall-Plan style rebuilding or in Britain's NHS, keeping the money moving. In America, we toned down the excesses of New Deal welfare spending and refocused that into military. In America's case, however, the war became something of a supply-side disruption because it prompted high levels of employment but also forced personal austerity due to the need to ration food, fuel, rubber, tin, etc. So these employed people had fewer places to spend their money, meaning savings, so that they were ready to spend once the war was over even if there was a short-term employment downturn.

What Ogodei said. There was a post-war disruption, but it was relatively minor because of the record low private debt that was enforced by rationing. Consumers were ready and willing to borrow and spend money to make up for the lack of government war stimulus.

More then that; from the Post–World War II economic expansion article on The Other Wiki:

This period also saw financial repression —- low nominal interest rates and low or negative real interest rates (nominal rates lower than inflation plus taxation), via government policy—resulting respectively in debt servicing costs being low (low nominal rates) and in liquidation of existing debt (via inflation and taxation). This allowed countries (such as the US and UK) to both deal with their existing government debt level and reduce the level of debt without needing to direct a high portion of government spending to debt service.

Interesting ideas.

Yes, it's almost as if they fought back against the inflation panic folks successfully.

Yeah. So the question becomes "how do we put America on the equivalent of a war footing without a total war to fight?"

I'm curious. Is there significant open (as opposed to covert, lobbyist-driven) opposition to expanding financial aid to higher education?

edited 30th Mar '14 5:31:01 PM by Ramidel

I could see the argument: the folks in the ivory towers get enough taxpayer money for their sophistry already, they're not teaching real skills, etc etc.

I wonder if any talking heads are actually making that argument in general, though. I mean, we're seeing meddling in university curricula, but I've never heard of an actual push to defund them.

Is there a push for business to increase funding for education, and teach the things employers want?

A Cold War with Vladimir Putin?

Not sure if anyone's seen this — a Jan 2013 article from The Economist on "re-shoring" to the US.

edited 31st Mar '14 4:21:44 AM by Greenmantle