Why all the hate for Keynesian Economics?

[Death Metal]

Well they're half right at least. Government spending ended it, but most of the spending happened before there was even a war.

Well it crowded out private sector consumption though... kinda hard to claim that's what you wanted.

Not really.The private sector left nearly a quarter of all Americans unemployed. The government gave out jobs, and a lot of them were pure bullshit. Some government employees at the the time had jobs that were literally moving a pile of rocks fifteen feet in one direction, then moving it back the next day, repeat. They were essentially handouts as the labor itself had no value whatsoever. Yet this provided people with paychecks, and the GDP had actually returned to pre-Depression levels before Hitler even took power in Germany!

[Mr Bananagrabber]

It is my view that the Keynesian model will never work for a sustained period in modern democracies, which is why I am inclined to view the Austrian School of Economics as the best way of retaining democratic and civil freedoms whilst keeping the economy growing.

This is something common on the internet which I can't understand. The options aren't Keynesian or Austrian; that seems only to be the perception on the internet.

[Death Metal]

One of the key claims of the Austrian School is that the free market is perfectly efficient. Now, this would be true if perfect information existed and if perfect competition existed, in other words this assumption would be true in a perfect world. Austrian economics would only hold true in a utopia.

And the best part is, even Hayek admits that pure free market is a bad idea. Road to Serfdom argues out that not only is government involvement in economy is beneficial, Hayek asserts that it's vital for a functioning economy that keeps human rights sacrosanct.

So even the Austrian Economists aren't Austrian Economists!

[Eleutheria]

It is my view that the Keynesian model will never work for a sustained period in modern democracies, which is why I am inclined to view the Austrian School of Economics as the best way of retaining democratic and civil freedoms whilst keeping the economy growing.

This is something common on the internet which I can't understand. The options aren't Keynesian or Austrian; that seems only to be the perception on the internet.

I am aware of that another internet perception seems to be that if someone chooses an option that someone else disagrees with then it must be because they aren't aware of the other options. But being a libertarian means that the Austrian school, in addition to working on a practical level also facilitates my ideology.

It is my personal view that the global crash has shown that the prevalence of so called "social sciences" like economics over the humanities like History has been responsible for a great deal of ill. There was a time when we looked to the past instead of simulations for answers, hopefully the result of this crash is that we won't be asking those only schooled in economics (be it Keynesian or Austrian) for the answers-but instead looking to Historians-my choice-and this is a purely personal thing, is David Starkey CBE.

[Mr Bananagrabber]

Well it crowded out private sector consumption though... kinda hard to claim that's what you wanted.

Not really.The private sector left nearly a quarter of all Americans unemployed. The government gave out jobs, and a lot of them were pure bullshit. Some government employees at the the time had jobs that were literally moving a pile of rocks fifteen feet in one direction, then moving it back the next day, repeat. They were essentially handouts as the labor itself had no value whatsoever.

Yes, I agree.

Yet this provided people with paychecks, and the GDP had actually returned to pre-Depression levels before Hitler even took power in Germany!

I don't agree here. I think the expansion of money did that. Underlying the Keynesian theory is that nominal spending (PY) is too low. MV = PY. Keynesian theory suggests that fiscal stimulus increases V, and hence PY. But during the Depression, recovery in nominal spending was led by M; the money supply increasing. We have doubts as to whether fiscal stimulus can increase V in any significant amount; we have no doubt that the central bank can increase M.

[Eleutheria]

I think that Keynesian economics deals with a utopian reality whereby politicians are not worried about the loss of popularity caused by scaling back spending in the perceived "good times"-something which the public as a whole will never respect or understand-and why should they? It is natural for the working man to presume that when times are good for all the government as a whole should have more money and be able to spend it, instead of scaling back public spending and storing up for the bad times ahead.

It is my view that the Keynesian model will never work for a sustained period in modern democracies, which is why I am inclined to view the Austrian School of Economics as the best way of retaining democratic and civil freedoms whilst keeping the economy growing.

I really hope you understand the irony of advocating Austrian Economics while simultaneously dismissing Keynesian economics as utopian?

One of the key claims of the Austrian School is that the free market is perfectly efficient. Now, this would be true if perfect information existed and if perfect competition existed, in other words this assumption would be true in a perfect world. Austrian economics would only hold true in a utopia.

Your presuming that income equality is my end goal, I want nothing of the sort and recognise that an economic elite and conversely an economic underclass is a necessary part of any society, all that I wish to ensure is that the right sort of people (i.e. those who are intelligent and recognise the value of competition) get to the top, whilst retaining individual freedoms and the theoretical possibility of social mobility remains to ward off social stagnation.

Utopia is only possible when this world is populated by utopians, it isn't and it will never be, the best that we can hope for is the better humans to thrive and the worse to fall.

[Mr Bananagrabber]

This is something common on the internet which I can't understand. The options aren't Keynesian or Austrian; that seems only to be the perception on the internet.

I am aware of that another internet perception seems to be that if someone chooses an option that someone else disagrees with then it must be because they aren't aware of the other options.

Your phrasing seemed to me like those were the two options. My mistake.

But being a libertarian means that the Austrian school, in addition to working on a practical level also facilitates my ideology.

Fine. I'm more or less libertarian, but the Austrian school isn't the only school of economics that fits my values. Not that I should be assessing empirical questions based on my ideology.

[Death Metal]

I don't agree here. I think the expansion of money did that.

Except we didn't expand money or eliminate the gold standard until after the GDP raised.

[Eleutheria]

I am aware of that another internet perception seems to be that if someone chooses an option that someone else disagrees with then it must be because they aren't aware of the other options.

Your phrasing seemed to me like those were the two options. My mistake.

But being a libertarian means that the Austrian school, in addition to working on a practical level also facilitates my ideology.

Fine. I'm more or less libertarian, but the Austrian school isn't the only school of economics that fits my values. Not that I should be assessing empirical questions based on my ideology.

Agreed. Which is why I assert that we should look to history when making economical decisions, and then place it within the context of our own moral compass and ideological inclination.

[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.

[Death Metal]

Utopia is only possible when this world is populated by utopians, it isn't and it will never be,[

And thank fuck for that. Utopia is just a dystopia with good PR.

the best that we can hope for is the better humans to thrive and the worse to fall.

And yet a pure free market is all about "may the biggest asshole win"!

[Eleutheria]

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?

[Mr Bananagrabber]

I don't agree here. I think the expansion of money did that.

Except we didn't expand money or eliminate the gold standard until after the GDP raised.

That's not true. See Friedman & Schwartz (1963). A Monetary History of the United States.

[Chestaan]

I really hope you understand the irony of advocating Austrian Economics while simultaneously dismissing Keynesian economics as utopian?

One of the key claims of the Austrian School is that the free market is perfectly efficient. Now, this would be true if perfect information existed and if perfect competition existed, in other words this assumption would be true in a perfect world. Austrian economics would only hold true in a utopia.

Your presuming that income equality is my end goal, I want nothing of the sort and recognise that an economic elite and conversely an economic underclass is a necessary part of any society, all that I wish to ensure is that the right sort of people (i.e. those who are intelligent and recognise the value of competition) get to the top, whilst individual freedoms and the theoretical possibility of social mobility remains to ward off social stagnation.

Utopia is only possible when this world is populated by utopians, it isn't and it will never be, the best that we can hope for is the better humans to thrive and the worse to fall.

I'm not presuming that income equality is your end goal. I'm pretty sure income equality wasn't Keynes' main aim either. Economic efficiency, however, if your talking about economics should be a goal. The Free Market isn't efficient due to several market failures:
http://en.wikipedia.org/wiki/Market_failure#Public_choice

And what to the Austrians say to this? "Efficiency for a social system means the efficiency with which it permits its individual members to achieve their individual goals"

In other words "We don't mean real efficiency, we mean imaginary efficiency!"

[Eleutheria]

Utopia is only possible when this world is populated by utopians, it isn't and it will never be,[

And thank fuck for that. Utopia is just a dystopia with good PR.

the best that we can hope for is the better humans to thrive and the worse to fall.

And yet a pure free market is all about "may the biggest asshole win"!

I suppose that ones perception of what makes a human "good" is intensely subjective and an entirely different philosophical argument-but I would assert that a society of free market "assholes" whilst having a distinctly scatological décor would be a more functional society and ultimately a more successful one.

[Mr Bananagrabber]

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?

Because nominal wages are rigid downwards.

[Ostroeuropa]

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.

If the smallest denomination of money is too large, you need to increase the flow.


"How much for this piece of string?"
"1 cent."

"How much for that car?"
"1 cent."

"What the fuck?"
"There are only 10 cents in the whole USA."

IDEALLY, the smallest denomination should be equivalent to the most useless/valueless thing in the nation, that still actually has SOME value.

[Eleutheria]

Your presuming that income equality is my end goal, I want nothing of the sort and recognise that an economic elite and conversely an economic underclass is a necessary part of any society, all that I wish to ensure is that the right sort of people (i.e. those who are intelligent and recognise the value of competition) get to the top, whilst individual freedoms and the theoretical possibility of social mobility remains to ward off social stagnation.

Utopia is only possible when this world is populated by utopians, it isn't and it will never be, the best that we can hope for is the better humans to thrive and the worse to fall.

I'm not presuming that income equality is your end goal. I'm pretty sure income equality wasn't Keynes' main aim either. Economic efficiency, however, if your talking about economics should be a goal. The Free Market isn't efficient due to several market failures:
http://en.wikipedia.org/wiki/Market_failure#Public_choice

And what to the Austrians say to this? "Efficiency for a social system means the efficiency with which it permits its individual members to achieve their individual goals"

In other words "We don't mean real efficiency, we mean imaginary efficiency!"

There isn't an efficient economy in the context of humanity, so we can only judge it against individual goals.

[Death Metal]

would be a more functional society and ultimately a more successful one.

Well, in the way mideval England was for the nobles, maybe.

[Death Metal]

Except we didn't expand money or eliminate the gold standard until after the GDP raised.

That's not true. See Friedman & Schwartz (1963). A Monetary History of the United States.

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

[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.

If the smallest denomination of money is too large, you need to increase the flow.


"How much for this piece of string?"
"1 cent."

"How much for that car?"
"1 cent."

"What the fuck?"
"There are only 10 cents in the whole USA."

IDEALLY, the smallest denomination should be equivalent to the most useless/valueless thing in the nation, that still actually has SOME value.

*grabs out a HSBC-issued HK dollar note*

*waves*

*grabs an American Cigarette, Berlin, 1949*

*waves*

*grabs a Country Bank 5 pound note *

*waves*

*grabs a BoS 5 pound note*

*waves*

*debases a few shillings*
*chink*

[Mr Bananagrabber]

That's not true. See Friedman & Schwartz (1963). A Monetary History of the United States.

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.

[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?

Because nominal wages are rigid downwards.

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

[Death Metal]

IDEALLY, the smallest denomination should be equivalent to the most useless/valueless thing in the nation, that still actually has SOME value.

Wasn't the yen originally supposed to be the value of a single day's worth of rice?

[Chestaan]

I'm not presuming that income equality is your end goal. I'm pretty sure income equality wasn't Keynes' main aim either. Economic efficiency, however, if your talking about economics should be a goal. The Free Market isn't efficient due to several market failures:
http://en.wikipedia.org/wiki/Market_failure#Public_choice

And what to the Austrians say to this? "Efficiency for a social system means the efficiency with which it permits its individual members to achieve their individual goals"

In other words "We don't mean real efficiency, we mean imaginary efficiency!"

There isn't an efficient economy in the context of humanity, so we can only judge it against individual goals.

The specific cases that I put to you when I talked about market failure were not Pareto Efficient. i.e some market participant or some group of market participants can be made better off without making anybody else worse off. Therefore it's not efficient as there is no cost to improving the situation of a group of participants. So, because Pareto Efficiency actually has a specific definition your assertion is incorrect.