Why all the hate for Keynesian Economics?

[Norsklow]

Which leads me to the question:

'what makes you think that increasing the amount of money - even if you use Gold money - is a Good Thing?

That 'wonderful' influx of gold and silver into Spain led to the bankruptcy of 1556-1557.

Is that question addressed to me?

To the Room in general.

I'm thinking in terms of Monetary Mass = M times v.

And I think that a focus on M0 and M1 is very misleading.

[Chestaan]

Sorry, I wiped my ass with that book, so I can't look at it right now.

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Meh I don't know. Arguably "The Wealth of Nations" and/or Keynes' "General Theory..." are more influential.

[Mr Bananagrabber]

Because nominal wages are rigid downwards.

And? ( I'm with you so far,but please elaborate. )

If total nominal spending starts falling, then nominal wages necessarily have to fall. But if nominal wages are rigid downwards, they don't fall when they're supposed to. This creates disequilibrium in the labour market and causes very unnecessary unemployment. So if we prevent nominal wages from ever having to fall, we prevent involuntary unemployment during business cycles.

[Death Metal]

Sorry, I wiped my ass with that book, so I can't look at it right now.

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

[Mr Bananagrabber]

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Meh I don't know. Arguably "The Wealth of Nations" and/or Keynes' "General Theory..." are more influential.

Well The Wealth of Nations kind of spawned the field of economics, so I'm discounting that. A Monetary History is likely more influential than The General Theory though.

[Chestaan]

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

IIRC Hayek won the Nobel Prize for Economics as well.

[Mr Bananagrabber]

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

I don't care about the Nobel. It's not even a real Nobel. But why do you disregard Friedman's work? It's the best empirical work in all of Macroeconomics.

[Mr Bananagrabber]

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

IIRC Hayek won the Nobel Prize for Economics as well.

Yes, in 1974.

[Chestaan]

Meh I don't know. Arguably "The Wealth of Nations" and/or Keynes' "General Theory..." are more influential.

Well The Wealth of Nations kind of spawned the field of economics, so I'm discounting that. A Monetary History is likely more influential than The General Theory though.

I guess we'll just have to agree to disagree. My main line of thought was that, without Keynes, there never would have been Friedman. But that's probably more down to Keynes' other works, not the "General Theory".

[Norsklow]

And? ( I'm with you so far,but please elaborate. )

If total nominal spending starts falling, then nominal wages necessarily have to fall. But if nominal wages are rigid downwards, they don't fall when they're supposed to. This creates disequilibrium in the labour market and causes very unnecessary unemployment. So if we prevent nominal wages from ever having to fall, we prevent involuntary unemployment during business cycles.

Can the same effect be achieved by increasing the speed of circulation?

( My guess is:up to a point )

[Norsklow]

Well The Wealth of Nations kind of spawned the field of economics, so I'm discounting that. A Monetary History is likely more influential than The General Theory though.

I guess we'll just have to agree to disagree. My main line of thought was that, without Keynes, there never would have been Friedman. But that's probably more down to Keynes' other works, not the "General Theory".

I'd argue 'father of quantitative Economy' - just as Ferdinand Verbiest is the Father of Autos - it is just that the State of the Art has moved on.

[Mr Bananagrabber]

Well The Wealth of Nations kind of spawned the field of economics, so I'm discounting that. A Monetary History is likely more influential than The General Theory though.

I guess we'll just have to agree to disagree. My main line of thought was that, without Keynes, there never would have been Friedman. But that's probably more down to Keynes' other works, not the "General Theory".

Well sure. And without Adam Smith or David Ricardo etc there wouldn't have been a Keynes. But in terms of the largest contributions to modern macroeconomics, Friedman's work has endured the longest. He had slightly more revolutionary ideas than Keynes and, more to the point, formalised them a lot better.

[Mr Bananagrabber]

If total nominal spending starts falling, then nominal wages necessarily have to fall. But if nominal wages are rigid downwards, they don't fall when they're supposed to. This creates disequilibrium in the labour market and causes very unnecessary unemployment. So if we prevent nominal wages from ever having to fall, we prevent involuntary unemployment during business cycles.

Can the same effect be achieved by increasing the speed of circulation?

( My guess is:up to a point )

Yes it can, but it's unclear how much government spending can increase velocity. In The Quantity Theory of Money: A Restatement, Friedman showed that in the long run the velocity of money is stable. In the long run, only increases in the monetary base can increase nominal spending.

[Death Metal]

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

I don't care about the Nobel. It's not even a real Nobel. But why do you disregard Friedman's work? It's the best empirical work in all of Macroeconomics.

Ridiculously anti-Fed and supported the Chilean dictatorship (And non-denouncing it later), for starers. And "natural unemployment" is a theory that lacks any substance and doesn't truly account for the self-employed. But mostly because he was pretty much just a contrarian for the sake of being a contrarian.

[Norsklow]

Can the same effect be achieved by increasing the speed of circulation?

( My guess is:up to a point )

Yes it can, but it's unclear how much government spending can increase velocity. In The Quantity Theory of Money: A Restatement, Friedman showed that in the long run the velocity of money is stable. In the long run, only increases in the monetary base can increase nominal spending.

As far as I am concerned, you can leave the question of government spending out of it,
as the background ( and my interest ) in the question is the role of the State in the creation of Money.

As I see it, the State in one positive actor in the creation of money, but not the only one.

AFAIK, the State is more likely to hold down the creation of money, and for good reason too. It is a necessary balance on the creation of media of exchange ( including TC's, commercial paper,and so on and so forth ).

It is my belief in the need for the State to counter-act the influece of the 'banker's principle' that leads me to be very suspicious of the State actually INCREASING ( ultimately ) M4.

EDIT: I am assuming that
A] the market initially WILL increase the speed
but B
B] later counter-balances when someone ( such as even a pawnbroker ) increase the amount of money going around in circles.

[Death Metal]

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

IIRC Hayek won the Nobel Prize for Economics as well.

Yeah, and he didn't do shit to earn it.

[Czechanada]

Because Proudhon's economics is better than Keynesianism.

[Mr Bananagrabber]

I don't care about the Nobel. It's not even a real Nobel. But why do you disregard Friedman's work? It's the best empirical work in all of Macroeconomics.

Ridiculously anti-Fed

Well... they did kind of fuck things up for everybody during most business cycles.

and supported the Chilean dictatorship (And non-denouncing it later), for starers.

And his ideas affect the validity of his empirical work somehow?

And "natural unemployment" is a theory that lacks any substance and doesn't truly account for the self-employed.

First, it does in fact account for the self-employed. Second, the theory isn't really held as gospel in modern times.

But mostly because he was pretty much just a contrarian for the sake of being a contrarian.

I don't see how that assertion is at all justified.

[Mr Bananagrabber]

IIRC Hayek won the Nobel Prize for Economics as well.

Yeah, and he didn't do shit to earn it.

You don't think his work on the Socialist Calculation Debate or Prices and Production were extremely good?

[Chestaan]

To be honest, this thread has made me question the degree I'm taking. Not the subject itself, as I love economics, but the fact that I'm in second year and Friedman has only been mentioned once in passing really makes me wonder. I expected him to be much more prominent.

[Tunasai]

Studies show the policies of Franklin Delano Roosevelt, known as Keynesian Economics, extended the Great Depression for over 7 years.

http://newsroom.ucla.edu/portal/ucla/FD ... -5409.aspx

^Most people don't realize this specifically.

Libertarians in General despise Government spending as do Modern Conservatives. Why? Were $16 trillion in debt and we want to spend more? A 5th grader could tell you thats a terrible idea.

[Mr Bananagrabber]

As far as I am concerned, you can leave the question of government spending out of it,
as the background ( and my interest ) in the question is the role of the State in the creation of Money.

As I see it, the State in one positive actor in the creation of money, but not the only one.

Yes. It created outside money (the monetary base), but not inside money (deposits, etc).

AFAIK, the State is more likely to hold down the creation of money, and for good reason too. It is a necessary balance on the creation of media of exchange ( including TC's, commercial paper,and so on and so forth ).

It is my belief in the need for the State to counter-act the influece of the 'banker's principle' that leads me to be very suspicious of the State actually INCREASING ( ultimately ) M4.

EDIT: I am assuming that
A] the market initially WILL increase the speed
but B
B] later counter-balances when someone ( such as even a pawnbroker ) increase the amount of money going around in circles.

The amount of money the market can create on its own is directly tied to the quantity of outside money, which is must hold as reserves for the liabilities in creates. So ultimately the quantity of money is determined by the state.

[Mr Bananagrabber]

To be honest, this thread has made me question the degree I'm taking. Not the subject itself, as I love economics, but the fact that I'm in second year and Friedman has only been mentioned once in passing really makes me wonder. I expected him to be much more prominent.

Yeah you don't learn a lot of good stuff in undergrad. You can read ahead on your own though.

[Mr Bananagrabber]

Studies show the policies of Franklin Delano Roosevelt, known as Keynesian Economics, extended the Great Depression for over 7 years.

http://newsroom.ucla.edu/portal/ucla/FD ... -5409.aspx

^Most people don't realize this specifically.

Libertarians in General despise Government spending as do Modern Conservatives. Why? Were $16 trillion in debt and we want to spend more? A 5th grader could tell you thats a terrible idea.

I make a point of calling "bullshit" whenever anybody says "studies show" without citing the exact study; but in this case:
http://ideas.repec.org/p/fip/fedmwp/597.html

[Chestaan]

Studies show the policies of Franklin Delano Roosevelt, known as Keynesian Economics, extended the Great Depression for over 7 years.

http://newsroom.ucla.edu/portal/ucla/FD ... -5409.aspx

^Most people don't realize this specifically.

Libertarians in General despise Government spending as do Modern Conservatives. Why? Were $16 trillion in debt and we want to spend more? A 5th grader could tell you thats a terrible idea.

Keynesian economics is not simply about spending more in recessionary times. The other side to it is decreasing spending during a boom but most governments tend to ignore that.