Fifth Grader Discredits Keynesians! (unemployed, fast food, legal, school)
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Keynesian economics, that economic theory that is once again running the country, was shown to be a complete sham this past Tuesday by a fifth grade student in small Midwestern town during a routine math assignment. The student’s teacher and school principal were impressed enough to issue a press statement, excerpted below:
The main problem with little Johnnie, is that he thinks that the money being taken from his dad's checks are going to the stimulus directly and wholly. Little Johnnie (or whomever actually wrote the article), seems to be under the impression that the economic model does not have ANY other aspects to it other than his daddy, the investment cycle and return to government.
What little johnnie misses are the number of jobs that will be created with each portion (shall we say $100 from everyone), which in turn creates cash flow cycles from formerly unemployed people, which leads to more people STAYING employed at grocery stores, at fast food stores, at video stores, at movie theaters, and also at State jobs, fixing roads, signs, cutting grass, etc. Each continues with it's own cash flow cycle, each making a small but significant deposit into the investment cyle, the household cycle and finally back to the government. Little johnnie instead of doing a direct ROI on the initial monies withdrawn from daddy's check, should concentrate on the larger direct economic impact that instead of keeping 1 person employed and using the small amount of savings they would contribute, they (the gov't.) can spend monies to stimulate business to employee several people who then contribute many small amounts across the cycle.
I think "Little Johnnie", while doing good for attempting to spout supply side economic theory get's a huge FAIL for Macroeconomic and Monetary policy.
And Keynes' as well as Friedman pwns little johnnie....and his dad. Again.
Hummm, an ultra conservative blog posting something (only them) about a vague 5th grader discrediting an economic theory of some one most people would never of heard of before starting an undergraduate course in economics. Most of the comments are just about the fifth grader being fictitious, which is beyond obvious, or the basic fail of econ 101 even in spinning this tall tale.
This is just made up horsecrap. Seems to happen again and again. What do we say kids? When some one must lie and make up fiction to support their position, it generally has nothing else going for it. I'll live in the factual world, thank you.
Hummm, an ultra conservative blog posting something (only them) about a vague 5th grader discrediting an economic theory of some one most people would never of heard of before starting an undergraduate course in economics. Most of the comments are just about the fifth grader being fictitious, which is beyond obvious, or the basic fail of econ 101 even in spinning this tall tale.
This is just made up horsecrap. Seems to happen again and again. What do we say kids? When some one must lie and make up fiction to support their position, it generally has nothing else going for it. I'll live in the factual world, thank you.
It will soon make its rounds via chain letters too.
Well I think that this is a great example of why the American educational system in the trash bin, because if a social science teacher actually thought this was a critique of the multiplier affect then the school system is worse off than I would have imagined.
The multiplier isn't an investment formula as this child thinks but rather a formula for increasing aggregate demand. If little Johnny's daddy didn't have to pay his 18% to the government in the form of taxes, Johnny's little dad might just save his 18%, that does not stimulate demand. It the government takes that 18% and spends it on a project, what ever amount of that 18% is then guaranteed to transfer to another party who will then spend some portion of that 18% to purchase capital and or labor to complete that project. In short the money is being forced into the economy and not into someone's mattress.
The main problem with little Johnnie, is that he thinks that the money being taken from his dad's checks are going to the stimulus directly and wholly. Little Johnnie (or whomever actually wrote the article), seems to be under the impression that the economic model does not have ANY other aspects to it other than his daddy, the investment cycle and return to government.
What little johnnie misses are the number of jobs that will be created with each portion (shall we say $100 from everyone), which in turn creates cash flow cycles from formerly unemployed people, which leads to more people STAYING employed at grocery stores, at fast food stores, at video stores, at movie theaters, and also at State jobs, fixing roads, signs, cutting grass, etc. Each continues with it's own cash flow cycle, each making a small but significant deposit into the investment cyle, the household cycle and finally back to the government. Little johnnie instead of doing a direct ROI on the initial monies withdrawn from daddy's check, should concentrate on the larger direct economic impact that instead of keeping 1 person employed and using the small amount of savings they would contribute, they (the gov't.) can spend monies to stimulate business to employee several people who then contribute many small amounts across the cycle.
I think "Little Johnnie", while doing good for attempting to spout supply side economic theory get's a huge FAIL for Macroeconomic and Monetary policy.
And Keynes' as well as Friedman pwns little johnnie....and his dad. Again.
little Johnny also forgot that most of his daddy’s check is paying interest on money that has been borrowed.
he also neglects that the current round of spending is on borrowed money too. money that little Johnny’s grand children will be paying for.
Johnny's argument is simplistic but your argument above that you think “pwns” (what ever that is) gives short shrift to certain realities that demolish both Keynes and Krugman. ALL of that money spent by government that goes back into the economy must pass thru government filters. Each layer of bureaucracy the money passes thru takes an administrative cut. Each cut reduces the impact of the money being spent.
If little Johnny’s dad gets a tax cut, there are no filters and the money stays in the real economy and is not filtered.
FDR proved the futility of Keynesian economics. Keynes is about as relevant today as Jean-Baptist Colbert
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