The General Economics Thread

Right-wingers love to use the "in the long run we are all dead" quote out of context to claim Keynes himself only planned for the near future.

See also Niall Ferguson's beautiful logic of "Keynes was a fag = no kids = he didn't care about the long term" ^note  despite the fact that a quick look at Keynes' life would tell you he was probably bisexual and that his wife miscarried

edited 28th Jun '16 7:59:00 AM by majoraoftime

Does that include the circumstances that led to Keynes' death in 1946?

And then you have the U.S. Federal Reserve, which keeps getting captured by its own institutional desire to normalize as soon as possible, and ignoring the market thereby, which is screaming for rates to stay zero and for additional stimulatory measures to be taken.

Huh? I have no biographical knowledge of Keynes that would lead me to suspect foul play in his death, but that's the farthest thing from my mind when I talk about this stuff.

edited 28th Jun '16 8:04:00 AM by Fighteer

No, I was talking about the stress brought on about by Bretton Woods (in which Keynes' ideas were overruled by the Americans) and the negotiations for the post-war Anglo-American loan, which did nothing for his deteriorating health.

edited 28th Jun '16 8:08:26 AM by Greenmantle

Honestly, overheating is not nearly as dire a concern as people make it out to be. When the economy is a zero unemployment for extended periods of time, what actually happens is that more people are drawn into the labor market. That is how housewives became professionals during the post war era. And given that most of the western world currently has huge groups of people only marginally drawn into the economy, an extended period of "overheating" would be bloody excellent, because it would cause people to actually hire and train people who are currently considered unemployable due to disabilities like "Too much melanin" and "Funny name"

edited 28th Jun '16 8:10:16 AM by Izeinsummer

That is outside the scope of my interest in the discussion.

Agreed; some period of "overheating" is absolutely needed here to redress years of stagnation and induce more people into the workforce who had left it out of disillusionment.

So migrants are sometimes used as a way of keeping salaries low, while being maintained in long-term unemployment? A reserve army just in case employees get uppity?

Yes, that is a cynical, but fairly accurate way to look at it.

I see. The perfect scapegoats.

Bringing more people into the workforce happens well before you hit the 0% unemployment mark. IIRC the goal is around 5% unemployment with a fair amount of "churn" — people entering and leaving the ranks of the unemployed at a good rate while they switch jobs. If you continue stimulus activities past that point, you start running into the issue of inflating a bubble that Fighteer mentioned.

There is a minimum level of unemployment that represents natural labor market churn — people leaving jobs to find better ones, plus additional miscellany. 0% is not sustainable, because that implies that the labor market needs more workers than are available. 5% is a figure that is only hypothetical; it may not be a universal constant.

What we were talking about, however, is the fact that we may need to drive the economy hotter than is normally sustainable for a period of time in order to bring wages back up close to where they ought to be on the 1970 trendline, to match current productivity.

edited 28th Jun '16 9:11:54 AM by Fighteer

I think perhaps "percentage of unemployment" is a less interesting statistic than "average time unemployed" (the churn must be fast) plus "average time employed" (people should have stable jobs).

True. "Unemployment rate" is a very popular statistic, but it isn't a good gauge of economic fitness.

The time thing makes it harder to collect immediate data on, though.

Every economic doctrine can be failed, basically, but the micro doctrines at least sound like they make sense. Since Keynesian econ can be abused to turn into Chavismo or worse, there are always handy failures for people to point out, and it's a hard fight to win in a soundbite war.

That's a genuinely interesting idea, Handle, thx for that.

I'm sure the surveys track parts of that. I'm pretty sure about length of job search, with 6 weeks being deemed about the ideal (since no-one outside of certain low-skilled fields hires at the drop of a hat) and anything higher becomes troublesome.

Hasn't China been implementing Keynesianism?

Haven't seen it if it was the case. All I see is a lot of construction for constructions sake.

That is Keynesian - spend money just to get it out into the spending pool. Inefficient Keynesianism, mind - China's building cities that nobody will move to.

Won't move into but will use as real estate since stocks IIRC aren't as trusted in China, but land is.

It would be Keynesian if China was suffering a depression and was in need of stimulus, but the Chinese economy is running hot, meaning that the Chinese goverment should be paying down debt and such if it was being Keynesian.

Stimulus in a time of great economic growth isn't Keynesian.

China uses the stimuli to keep artificial growth figures though.

Equitable Growth: Must-Read: Timothy B. Lee: Brexit Isn’t the Most Serious Threat to the EU — the Euro Is. Basically, the lack of asymmetric stability mechanisms and the commitment to austerity are destroying the European project, with more nations to follow in Britain's wake if things don't change.

It's amazing how much of this wisdom — the post cited here is entirely accurate — fails to penetrate the hallowed halls of the ECB and of the European leadership.

edited 29th Jun '16 12:01:47 PM by Fighteer

Maybe it is because we are the ones who are wrong? I mean no offense, but this whole "governments can spend money infinitely thing" sounds way to good to be true.