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Okay then...let's examine the point made about Keynesian economics in the aforementioned article, paragraph by paragraph.
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9. This whole Keynesian thing has been totally disproved. It didn’t work during the Depression. It didn’t work for Japan in the 1980s.
Say what? We know that rewriting history is a favorite conservative pastime. America is Christian country. Slavery was good for black people. Bush was never a real conservative. Saddam was in cahoots with al-Qaida. And on it goes.
What exactly does this have to do with economics? Nothing? I thought so. Translation: Conservatives are bad, m'kay.
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The campaign to discredit Keynes (which is directly traceable to the Heritage Foundation) is a new and rather audacious fiction -- one that leaves both progressive and conservative economists as gobsmacked and sputtering as scientists get when you bring up "intelligent design." And the factual basis for it is, if anything, even more specious.
Actually, Keynes has been discredited for years, starting 60+ years ago with Friedrick Hayek (author of The Road to Serfdom), who attacked Keynes work Treatise on Money (1930). This has absolutely nothing to do with "intelligent design", and I would hope that the author knows this, but that obviously doesn't stop her attempt to discredit sound economic philosophy with plays on emotion. I'll say this here: This is a very poorly written argument.
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Paul Krugman addresses both the Depression and the example of Japan in his new book, "The Return of Depression Economics." According to his telling of the tale, in both cases the affected economies strengthened as long as the government continued to infuse capital into them; but bobbled when there was enough improvement that the budget hawks could get some political traction. When the spending flagged, so did the recovery. In Japan, bold steps alternating with repeated failures of nerve created a liquidity trap that stagnated the country's economy through most of the 1990s.
Well, at least now she's paraphrasing economists, instead of just making things up, but unfortunately this doesn't lend too much credit to her argument. Now, I'll be the first to tell you that an argument should stand independent of it's author, but Mr. Krugman has been criticized by The Economist (a London-based weekly magazine) saying: "A glance through his past columns reveals a growing tendency to attribute all the world's ills to George Bush…Even his economics is sometimes stretched…Overall, the effect is to give lay readers the illusion that Mr Krugman's perfectly respectable personal political beliefs can somehow be derived empirically from economic theory." What does this tell us? An irrationally anti-Bush article is citing an irrationally anti-Bush source. Not unexpected, but hardly convincing.
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Keynes' prescription has worked everywhere it's been tried -- as long as governments acted boldly and quickly enough. It's not medicine that works if you take it in half-doses, or quit before the course of treatment is finished. In fact, doing it with less than full commitment can actually make the situation worse.
This is a complete cop-out. What she's actually saying is, "Keynesian economics work unquestionably, and the places where they have appeared to fail actually represent cases where they weren't giving enough chance to work." This doesn't sound so bad on paper, but every failed economic policy can be classified this way. No matter how poor or ill-founded, one can always say that "it wasn't given a chance," much in the same way modern communists talk about their failed grand social experiments. What does work? Free-market economics. It has nothing to do with being a cowboy, and everything to do with the fact that the government cannot possibly account for the dynamic nature of an economy. You see, an economy is like a living organism...no amount of statistical analysis can begin to explain its intricacies, and no amount of good intentions can bend it to your will. The only chance you have to let it succeed is to let it be what it will. This is a hard concept to grasp for the 'we know what's best' social planners of the world, but is essential to the well-being of any financial system and a society as a whole.
A side note, I attend a state college in the People's Republic of California, and the first thing I was taught on day one of Economics 1A (taught by an Asian Woman) was: Free-markets create the greatest amount economic opportunity system-wide. Redistribution of wealth (and other tenants of socialism) appear on paper to provide a system with a greater degree of equality, but only do so through the destruction of wealth, making both the richest and the poorest in any given economy worse off for their trouble. This is because of several factors, including the destruction of wealth through relatively inefficient government spending programs and through the lost production that results from reduced desire to increase production (due to lost incentives in earning potential).
So I suppose the bleeding heart, power-hungry, quasi-socialists are better? You can blame greedy capitalists all you want, and certainly you're partially correct, but you also can't absolve the FNMA, dramatic expansions in the CRA, or other legislation that required lenders to make 'affordable housing' available to those who couldn't afford it. The result of this was, ultimately, inflated home prices which created the now infamous 'housing bubble'.
Congratulations on your gullibility. There were indeed expansions of CRA lending into low- and moderate-income communities between 1993 and 2000. These may seem dramatic to you because the Reagan and Bush-41 administrations had simply refused to enforce the law. If you had actually taken the time to look at CRA lending rather than take all your information off of right-wing websites, you would have known that a signficant portion of these supposed deadbeats were qualified at prime and near-prime terms, and that CRA loans were half as likely to include high-cost risk adjustment terms than loans extended into LMI communities by non-CRA lenders. You would have known that CRA lending led to rising property values in LMI communities, and that local and outside investments into community infrastructure had increased. At some point, you would also have learned that the entire portfolio of CRA loans has performed better than industry averages, not worse. Briefly put, CRA lending was both good policy AND good business. That you apparently don't know any of these things strongly suggests that you are arguing from a position of ignorance. This is rarely a useful or productive tactic.
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Originally Posted by Widowmaker2k
You're half-right and half-wrong. The Republicans did not singlehandly create the recession, Democrats are at least as guilty as Republicans, if not more so. Republicans saw the writing on the wall, and tried to several times to reign in the sub-prime lending policies, but were ultimately blocked by the Democrats (though it likely would have been a case of 'too-little too-late', anyway).
As if you had the first idea of what you are talking about. Republicans made no effort whatsoever to reform the operations of the GSE's. In 12 years of effective control over Congress, they did exactly nothing. Their efforts were directed solely at the idea of driving the GSE's out of the securitization market share that they were "stealing" from your good Republican friends at all those now-defunct Wall Street investment banks whose zeal for profit at any cost is what put us in this mess. Republicans tried to install a Bushie czar to oversee the GSE's -- i.e., someone who would sit above the directors and force them to retreat rather than advance. They tried to create limitations on what assets the GSE's could hold for their own account so as to undercut proposals for GSE expansion. They sought to use accusations of accounting irregularities to put a moratorium on GSA activity. But the one thing they never did do, or so much as talk about doing, was to take any steps at all toward putting a damper on the building subprime crisis that academics and other independents had been warning of since at least late 2003. The free market is intelligent enough to regulate itself, they thought. No, it isn't. The free market is perfectly capable of driving straight off a cliff, which is exactly what it did in this case. This is what you get from cowboy capitalism let loose under the watchful eye of laissez-faire regulators who put constraints only upon themselves. Thanks, guys!
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Originally Posted by Widowmaker2k
However, the response of the Bush administration to the crisis (bailouts) was absolutely wrong, and completely contrary to conservative ideology.
The response was wrong because it was at least 15 months too late. All the cards were on the table by the summer of 2007. There wasn't any doubt at all about where we were or where we were going. It was clear that what are now called "troubled assets" had to be taken off the books in one way or another if we were to avoid seeing credit markets descend into a freeze. The response instead was to create the Hope Now Alliance and hope that the worst wouldn't come to pass. Wrong again.
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Originally Posted by Widowmaker2k
You can't spend your way out of recession. You can only cut taxes and let the free-market correct things itself.
LOL. Where have I heard that before! One day perhaps you will learn that free markets are perfectly capable of resolving themselves at equilibria that have absolutely disastrous social consequences. Markets are amoral...they don't care. The entire history of free markets is one of instability and punctuated catastrophe. It is only managed capitalism that has ever been able to uncover the natural underlying state of an economy, which is modest expansion punctuated by innovation-driven periods of more than that. Recessions are an abnormality -- a sign that something has gone or has been done wrong. When you are sick, you can go to the doctor. When the car fails to function, you can go to a mechanic. Or you can pray. Which is the equivalent of what you are recommending.
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Originally Posted by Widowmaker2k
This stimulus bill? Simply another example of failed Keynesian economic theory...it will be too slow to be effective the short term, and too inefficient (the essential nature of government bureaucracy, and all) to effective in the long term, ultimately only resulting in crippling inflation and devaluation of the U.S. dollar.
Hooey. Cornball right-wing advertising slogans and nothing more. I can go to townhall.com and get all that.
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Originally Posted by Widowmaker2k
Dr. Thomas Sowell said in his recent article "What Are They Buying?", of the recent stimulus plan, "Using long, drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire."
Sowell is a fool. While having done some quite respectable historical work, his thought processes are highly suspect. Where was he in the summer of 2007? Why not go back and check.
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Originally Posted by Widowmaker2k
Sources/Things I've Found Interesting:
Yes, interesting in the same sense that the Horoscope column in the morning paper is. Ideological tripe is still ideological tripe, however, no matter how you try to dress it up.
Saganista - I have come to expect posts like this from you. Please keep it up.
I was home yesterday to avoid the bad weather and was watching the House of Reps debating the stimulus bill. The Republicans kept up some nonsense about half the spending and twice the effect without any apparent understanding that half the spending would result in no results at all except their elite pimps would have received all the money.
I would vastly prefer my money went to a government stimulus bill where some of my friends might benefit than to a private sector fraud where only the money men win. The Republicans and their conservative “academics” whine about “Income Transfer” only when it is from the very wealthy to the working or middle class. They cheer when it is going the other way.
Yeah, we have a forty year wish list because we have forty years of deferred maintenance and social spending to catch up with. I have news for the right wing; As far as bridges are concerned, rust is NOT a structural material and most of our road bridges have rusted to an unsafe condition. In addition many of our most poverty stricken have descended into an economic hell they, without government support, can never get out of because they, unless they manufacture distribute and sell drugs, do not have ANY opportunity for economic advancement.
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BTW - I am not some dewy eyed kid fresh from the pernicious influence of my left wing college professors. I am a 60+ yr old Veteran of Viet-nam and of the 40 years of government ineptitude and economic mismanagement starting with Ronnie Raygun’s tax cuts and deficit spending for military toys no mater how useless and expensive. I can only imagine how great our country might have been if we had knocked off our colonial wars and spent the money on ourselves and paid for it with FDR style progressive taxation and enforcement of realistic trading rules with other countries.
The spineless parasites are the ones strutting around as if their own mind-boggling stupidity isn't what made the stimulus bill necessary in the first place.
>>>> Nice burn on the Obama supporters, but you just agreed with him while attempting to disagree with him.
Actually, Keynes has been discredited for years, starting 60+ years ago with Friedrick Hayek (author of The Road to Serfdom), who attacked Keynes work Treatise on Money (1930). This has absolutely nothing to do with "intelligent design", and I would hope that the author knows this, but that obviously doesn't stop her attempt to discredit sound economic philosophy with plays on emotion. I'll say this here: This is a very poorly written argument.
The argument is probably written well enough, but while taking the right tack, it wasn't at all as well developed as it might have been. Hayek meanwhile has been relegated to status as a thoughtful and interesting read that has unfortunately been used to distract far too many into the realms of dogma-driven analysis. You are perhaps on the verge of becoming one of those, and it isn't like Hayek himself didn't warn you...
...probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all of the principle of laissez-faire capitalism.
-- F. A. Hayek, The Constitution of Liberty
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Originally Posted by Widowmaker2k
Not unexpected, but hardly convincing.
Your critique of Krugman is in the same category.
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Originally Posted by Widowmaker2k
What does work? Free-market economics. It has nothing to do with being a cowboy, and everything to do with the fact that the government cannot possibly account for the dynamic nature of an economy.
False dichotomy.
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Originally Posted by Widowmaker2k
You see, an economy is like a living organism...no amount of statistical analysis can begin to explain its intricacies, and no amount of good intentions can bend it to your will. The only chance you have to let it succeed is to let it be what it will.
Argument from complexity.
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Originally Posted by Widowmaker2k
This is a hard concept to grasp for the 'we know what's best' social planners of the world, but is essential to the well-being of any financial system and a society as a whole.
Conclusion not supported by the permises.
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Originally Posted by Widowmaker2k
A side note, I attend a state college in the People's Republic of California, and the first thing I was taught on day one of Economics 1A (taught by an Asian Woman) was: Free-markets create the greatest amount economic opportunity system-wide.
See if there's still time to drop the class.
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Originally Posted by Widowmaker2k
Redistribution of wealth (and other tenants of socialism) appear on paper to provide a system with a greater degree of equality, but only do so through the destruction of wealth, making both the richest and the poorest in any given economy worse off for their trouble. This is because of several factors, including the destruction of wealth through relatively inefficient government spending programs and through the lost production that results from reduced desire to increase production (due to lost incentives in earning potential).
Probably not the best time for your people to be bringing up destruction of wealth. People with their 401-k statements in hand have already been told all about that. Otherwise, risk-sharing and the redistribution of wealth are two of the primary reasons why societies are formed to begin with (and btw, it's tenets, not tenants). Your private sector meanwhile fails to provide indivisible goods and services either at all or at all efficiently. The public sector is by comparison a highly efficient engine for such. Even in its more broadly stated forms, your theory of lost production due to reduced income incentives fails to take remotely sufficient account of variable elasticities and the effects of substitutions and trade-offs, but basically, what you are supporting here is the framework of Bush's completely failed Ownership Society. All that you actually own under such a system is MORE RISK, as people have been painfully learning in recent times.
Last edited by saganista; 01-29-2009 at 07:15 AM..
I was home yesterday to avoid the bad weather and was watching the House of Reps debating the stimulus bill. The Republicans kept up some nonsense about half the spending and twice the effect without any apparent understanding that half the spending would result in no results at all except their elite pimps would have received all the money.
These are people who somehow didn't get the recent memo. Their choice now is between the carrot and the stick, and they appear to prefer the latter. I suppose they hope that the disinformation media will be able to whip the rabble into some sort of lather on their behalf, but judging from what's been seen here of late, chances are that the lot of them will merely end up looking ridiculous for their trouble...
Since Ronnie Raygun, the Republicans have existed by realizing that "You can fool most of the people most of the time." The recent financial collapse was created by not being able to "fool all the people all the time".
The big boys bailed in 2006-7 after creating fradulant finance (CDO"s ETC) to cover their losses until they could consolidate their wealth into protected havens. In 2008 the rest managed to convince the government that they needed their losses covered as well. The little folks with their 401k retirement plans never had a chance to cover their losses. If you have ever read about boom and bust economies this is exactly what they are set up to do. That is transfer wealth to the gamblers and risk to the suckers. Lying conservative politicians help the wealthy get away with this fraud to the cost of most of society.
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