Why all the hate for Keynesian Economics?

[Cameroi]

because there is no real science of economics. only pseudo-scientific excuses for ideological fanatacism?

[Ostroeuropa]

This. When the working class spend money, it goes to the middle class.
When the middle class spend money, it goes to the rich.
They get taxed, and it goes to the government.
Who gives it to the working class.

I call it trickle up economics.

nice one!

In conclusion: NO TAXCUTS!

Not quite
I take the posistion that there should be a nigh on complete tax abolition for the working class, and tax cuts for the middle class.
Their cash goes to the rich, and makes them richer.
in addition, the government cant tax the rich when the cash gets there, and it'd mean the economy picks up a little.
Less welfare checks, less revenue too admittedly, but due to raising the floor it should mean a lot less money gets handed out.

[Dongolia]

Fiscal stimulus is only considered by some people now because the Fed Funds rate is stuck at the zero lower bound and so they see monetary policy as being "out of ammunition", but that's also heavily disputed.

How is this disputed? Surely you're not referencing quantative easing, which is essential just fiscal policy anyway. The fact is the Fed is at real risk of falling into a liquidity trap just like the BOJ has been in for the last 15 years! (my opinions may or may not be exaggerated in an effort to stir up debate )

[Loichtenreich]

Gilded age, little Govt. spending, economy boomed.

Of course, some want to revert to those days.

Ah, the Gilded age: Child labor, unlimited Workhours, TB and cool tophats.

[Ostroeuropa]

Gilded age, little Govt. spending, economy boomed.

Of course, some want to revert to those days.

Ah, the Gilded age: Child labor, unlimited Workhours, TB and cool tophats.

So the UK conservative party

[Mr Bananagrabber]

Fiscal stimulus is only considered by some people now because the Fed Funds rate is stuck at the zero lower bound and so they see monetary policy as being "out of ammunition", but that's also heavily disputed.

How is this disputed? Surely you're not referencing quantitative easing...

I'm talking about forward guidance. The Fed committing to some policy rule which modifies expectations. QE, absent this, is irrelevant. Buying long bonds can't lower their yield if short rates are at zero. But QE can give a little bit of forward guidance on its own (through a couple of channels), but it's very weak. It takes something like $100 billion of QE to move long yields about 10 basis points through this channel.

which is essential just fiscal policy anyway.

How do you figure?

The fact is the Fed is at real risk of falling into a liquidity trap just like the BOJ has been in for the last 15 years!

What do you mean? The FFR has been near zero for years. It's already it a liquidity trap. The BOJ made no effort to get out of it, and nor has the Fed. Though the most recent FOMC statement is moving in the right direction.

[Norsklow]

Kindly keep me informed when a neoKeynesian country manages to pay off its entire debt.

Why would you want to?

Government debt plays a vital role in foreign exchange, and establishing the credit of a nation and its currency. Retiring securities early simply creates wasteful drags on an economy. What successful governments do, like the US did before the Republican Party decided to starve the beast, is continually deficit spend as a means of investment in infrastructure and human capital, and to build credit. They simply borrow at a rate that is less than the growth of the economy, so the debt to GDP ratio decreases during times of normalcy. They increase deficit spending during times of recession.

For example, Lyndon Baines Johnson, the creator of the Great Society welfare state, and also someone funding a war in Vietnam, engaged in considerable deficit spending during his time in office. Yet, the debt to GDP ratio decreased considerably by the time he left, thanks to robust economic growth.

Incidentally, this is something that every capitalist firm does. You can't run a business on cash alone and expect to be competitive. Credit is necessary, and that means borrowing. As long as you can pay your creditors back, and don't end up underwater, you're fine. It's the same with nation-states.

A Government is not a business. Thanks, we've seen Greece.

Neither is a government even required to create a currency.
Check a Hong Kong Dollar bill, from t'olde days. Worked just fine.

L'austerite, plus d'austerite, et toujours l'austerite. And no darned tax-cuts for anyone either.

With enough austerity - ESPECIALLY in good times - we actually CAN hope to engage in deficit spending in bad times and do something useful. Just like Keynes said.

[Provident Nation]

because they are ineffective and led up many countries to pile up debt.

[Norsklow]

nice one!

In conclusion: NO TAXCUTS!

Not quite
I take the posistion that there should be a nigh on complete tax abolition for the working class, and tax cuts for the middle class.
Their cash goes to the rich, and makes them richer.
in addition, the government cant tax the rich when the cash gets there, and it'd mean the economy picks up a little.
Less welfare checks, less revenue too admittedly, but due to raising the floor it should mean a lot less money gets handed out.

I favour whatever it is the Germans are doing. They are actually expecting to have their highest tax-take EVER this year. ( Norddeutsche Zeitung, IIRC )

[Thesan]

Hate? J. M. Keynes should be declared "Saint" for me! During keynesianism my RL country enjoyed the most opulent, happy and glorious period of all times!
Ah! The wonderful '60s!

I think that keynesianism is perfect, but aren't perfect our idiotic politicians, they don't know how to create it in the real life for a long period of time, that's the only problem of keynesianism...

[Chestaan]

because there is no real science of economics. only pseudo-scientific excuses for ideological fanatacism?

I just can't let this go. What a load of utter crap. Maybe if you take an actual course in economics you will see the sense in the subject. And on top of that, while many economists disagree on many issues, there are several issues where there is a consensus. For example, almost all economists believe that the demand curve slopes down and the supply curve slopes up. In fact here is a list of ten other aspects of economics where most agree http://www.realclearmarkets.com/charts/ ... ve-44.html

Your problem is with normative economics, not positive economics. Also what is/was your area of study?

As for the question posed by the OP, of course those who oppose government intervention in the economy e.g Libertarians, Monetarists etc, are going to hate Keynesian economics.

[L Ron Cupboard]

because there is no real science of economics. only pseudo-scientific excuses for ideological fanatacism?

I just can't let this go. What a load of utter crap. Maybe if you take an actual course in economics you will see the sense in the subject. And on top of that, while many economists disagree on many issues, there are several issues where there is a consensus. For example, almost all economists believe that the demand curve slopes down and the supply curve slopes up. In fact here is a list of ten other aspects of economics where most agree http://www.realclearmarkets.com/charts/ ... ve-44.html

Your problem is with normative economics, not positive economics. Also what is/was your area of study?

As for the question posed by the OP, of course those who oppose government intervention in the economy e.g Libertarians, Monetarists etc, are going to hate Keynesian economics.

Still doesn't make it a science.

[Saragossa]

I'm sorry, I just got back to this and found that Keynes vs. Hayek rap and got distracted. Everyone else is invalid, this is great

Also, because Malthus is in the background and I want to see him rap

[Dongolia]

because there is no real science of economics. only pseudo-scientific excuses for ideological fanatacism?

I wish people would stop purposely misusing the word science to construct thinly veiled insults.

Science: The intellectual and practical activity encompassing the systematic study of the structure and behavior of the physical and natural world through observation and experiment.

Economics is the systematic study of "the production, distribution, and consumption of goods and services, or the material welfare of humankind." through observation and (contrary to popular belief) experiment. Whether it studies aspects of the structure of the "physical" or "natural world" and is therefore a science, is open to debate. Regardless, Economics is a rigorous and worthwhile area of knowledge.

[Saragossa]

I wish people would stop purposely misusing the word science to construct thinly veiled insults.

Science: The intellectual and practical activity encompassing the systematic study of the structure and behavior of the physical and natural world through observation and experiment.

Economics is the systematic study of "the production, distribution, and consumption of goods and services, or the material welfare of humankind." through observation and (contrary to popular belief) experiment. Whether it studies aspects of the structure of the "physical" or "natural world" and is therefore a science, is open to debate. Regardless, Economics is a rigorous and worthwhile area of knowledge.

Yeah, that should be my other question, "Why all the hate for economics?", although I can see where some of them are coming from, given that it often lacks the rigor of some of the other social sciences but also often sees itself as being a more tangible than other social sciences

Also, "Why all the hate for rap?" and, for the Australians, "Why all the hate for Peter Singer?"

[New England and The Maritimes]

Anything approaching scientific rigor winds up proving reactionaries wrong, so it's anathema to them.

[Dongolia]

I'm talking about forward guidance. The Fed committing to some policy rule which modifies expectations. QE, absent this, is irrelevant. Buying long bonds can't lower their yield if short rates are at zero. But QE can give a little bit of forward guidance on its own (through a couple of channels), but it's very weak. It takes something like $100 billion of QE to move long yields about 10 basis points through this channel.

Hmm, I don't know too much about forward guidance but I suspect it would fall on deaf ears, especially because after years of Fedspeak no one knows what the hell the Fed is talking about anymore. Not that it's not worth trying it along with QE. Nonetheless the main point remains, only "unconventional" monetary policy remains open to the fed, suggesting the they've run out of ammo (luckily I live in a country with plenty of room for movement with regards to monetary policy ).

How do you figure?

http://krugman.blogs.nytimes.com/2009/0 ... g-wonkish/

As it says in the article: "the Fed is, implicitly, engaged in a deficit spending policy"

What do you mean? The FFR has been near zero for years. It's already it a liquidity trap. The BOJ made no effort to get out of it, and nor has the Fed. Though the most recent FOMC statement is moving in the right direction.

Totally agree with you here. (a rather doomsdayish article on the subject: http://www.marketoracle.co.uk/Article35494.html)

[Lackadaisical2]

Probably the fact that whenever they forecast something, they're wrong.

[Chestaan]

I just can't let this go. What a load of utter crap. Maybe if you take an actual course in economics you will see the sense in the subject. And on top of that, while many economists disagree on many issues, there are several issues where there is a consensus. For example, almost all economists believe that the demand curve slopes down and the supply curve slopes up. In fact here is a list of ten other aspects of economics where most agree http://www.realclearmarkets.com/charts/ ... ve-44.html

Your problem is with normative economics, not positive economics. Also what is/was your area of study?

As for the question posed by the OP, of course those who oppose government intervention in the economy e.g Libertarians, Monetarists etc, are going to hate Keynesian economics.

Still doesn't make it a science.

It's a social science. If economics isn't a science then neither is psychology or anthropology. Economics uses the scientific method to make observations about incentives, production, resources, human behaviour etc. But I think that we may be simply disagreeing on semantics? Unless of course, you, like Cameroi, have a problem with the discipline itself and not just whether or not it is technically a science.

[Saragossa]

Does it even really matter if it is a "science" or not? I mean it's such a loose term, it doesn't lend it any special attributes. Being (or not being) a science doesn't make it's findings any more or less true

[L Ron Cupboard]

Still doesn't make it a science.

It's a social science. If economics isn't a science then neither is psychology or anthropology. Economics uses the scientific method to make observations about incentives, production, resources, human behaviour etc. But I think that we may be simply disagreeing on semantics? Unless of course, you, like Cameroi, have a problem with the discipline itself and not just whether or not it is technically a science.

I am okay with it being called a social science; I think it is a fundamental area of study. I just think, like ecology and psychology, we have much more to learn than we already know.

[Dyakovo]

I was reading this article about Libertarianism and it mentioned the majority of young people in America don't believe Keynesian principles work (i.e. increasing government spending will not increase overall spending). This really confused me, maybe it's because I'm not American, but I never saw Keynesian economics as A. associated with the left wing or B. at all disputable.

Can someone explain to me how anyone can actually disagree with it? I've always thought it was like disagreeing with it was like disagreeing with the link between smoking and lung cancer (although, that said, I heard that done a week ago)

Because Ayn Rand.

[Vetalia]

http://krugman.blogs.nytimes.com/2009/0 ... g-wonkish/

As it says in the article: "the Fed is, implicitly, engaged in a deficit spending policy"

A more pure deficit spending policy than government as well; it's creating the money to purchase bonds/MBS/etc., increasing the money supply. On the other hand, the deficit spending by the US government is being soaked up by sales of debt to pay for it...one thing I've always wondered is if the deficits run by the government are restricting the money supply rather than expanding, or at most having zero effect because of the complete ability to finance it via selling debt rather than creating money to pay for it.

Of course, there are negative consequences to this policy...QE2 was ended undoubtedly early and quickly because of the substantial increase in inflation in a short period of time, which could have spiraled rapidly out of control and derailed the entire plan. Combine that with the fact that nominal wages weren't keeping pace and it would have harmed the economy rather than helped it. I also believe this is why the current QE3 is open-ended but much more moderate in terms of pace than previous efforts; $40bln per month of MBS purchases is a lot less drastic and will be less likely to generate inflation (although that depends on a lot of other factors). Question is whether it'll stimulate the economy or just inflate a worsening asset bubble that'll lead to even more trouble down the road.

Either way, we do need to get the deficit under control to at least some degree...we can't keep spending because we can borrow at 0.60% now, the time will inevitably come to refinance that debt at much higher rates and it'll happen sooner rather than later.

[Takaram]

Gilded age, little Govt. spending, economy boomed.

Of course, some want to revert to those days.

They do know we call it a Gilded Age and not a Golden Age for a reason, right?

[Dyakovo]

Gilded age, little Govt. spending, economy boomed.

Of course, some want to revert to those days.

They do know we call it a Gilded Age and not a Golden Age for a reason, right?

No, they don't.