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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.
edited 17th Dec '12 10:58:52 AM by Topazan
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
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.
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.
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.
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
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
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
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).
Yeah, it's more like Plutocratic Feudalism, or Neo-Feudalism.
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, that.
edited 17th Dec '12 4:03:13 PM by Ekuran
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?
@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
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.
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.
Here's some info:
edited 17th Dec '12 4:41:54 PM by RTaco
Way to totally ignore my posts there.
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
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.
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.
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
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
It's funny how I did an entire project on fiscal policy, yet I've forgotten most of it.
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:
edited 17th Dec '12 5:24:12 PM by chihuahua0
Now what do some other theories say?
edited 17th Dec '12 5:52:37 PM by Topazan
@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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