Why is this not a criticism of keynesianism?

If keynesianism is so great, how come corporations never implement internally keynesian policies? For example, a corporation could run up deficits by buying a multi-million dollar cafeteria, raising its employee's wages, and forcing them to eat there. This would nearly completely internalize all the "economics", so if there are any benefits, they should materialize. Of course they will not and everybody knows this.

I'd argue that Keynes is more "macro" whereas corporate econ is more "micro".

I imagine Paul Krugman would say it's because the corporation isn't in a liquidity trap so the broken window fallacy would apply.

ViennaSausage:

I'd argue that Keynes is more "macro" whereas corporate econ is more "micro".

These corporations have larger economies than many countries, particularly many countries during the great depression.

Evilsceptic:

I imagine Paul Krugman would say it's because the corporation isn't in a liquidity trap so the broken window fallacy would apply.

So where is the liquidity trap and why can it not be "incorporated"?

Sieben:

These corporations have larger economies than many countries, particularly many countries during the great depression.

Perhaps even more reason not to have the macro/micro distinction.

Sieben:

 

Evilsceptic:

I imagine Paul Krugman would say it's because the corporation isn't in a liquidity trap so the broken window fallacy would apply.

So where is the liquidity trap and why can it not be "incorporated"?

Well to have a liquidity trap in a corporation  you would need to have a loan market inside the corparation.

I was going to bring up the micro/macro distinction, but what is the Keynesian argument for it working on the macro scale but not the micro scale?

The macro-economy is modeled as a closed system whereas an individual firm is modeled as an open one that interacts with other agents. Therefore the dynamics of it are different and require different analyses.

Anyway, Keynesianism isn't about runing up deficits willy nilly. The idea behind it is to soak up deficiencies in aggregate demand in times of recession (running deficits), and cool down the economy in boom-times (running a surplus). Most governments recently around the world have just been doing the former.

BTW, I'm not expert Keynesian so this is my half-informed understanding of it all.

consumertariat:

The macro-economy is modeled as a closed system whereas an individual firm is modeled as an open one that interacts with other agents. Therefore the dynamics of it are different and require different analyses.

Aside from the macro-economy obviously being open (lol), the implied stipulation of the OP is that corporations have THE OPTION to be closed. So the example was that they ran up their deficit spending it on something that would stay within the company and its workers.

consumertariat:

Anyway, Keynesianism isn't about runing up deficits willy nilly. The idea behind it is to soak up deficiencies in aggregate demand in times of recession (running deficits), and cool down the economy in boom-times (running a surplus). Most governments recently around the world have just been doing the former.

Still. If corporate sales begin to plummit, it should be obvious that the solution is not to run up corporate deficits, even for a "closed" corporation. There are literally no circumstances under which keynesianism will work for private entities.

Aside from the macro-economy obviously being open (lol), the implied stipulation of the OP is that corporations have THE OPTION to be closed. So the example was that they ran up their deficit spending it on something that would stay within the company and its workers.

What do you mean when you use the word 'closed'?

What do you think I mean when I use the term?

In what way do firms have the option to be closed?

 

Still. If corporate sales begin to plummit, it should be obvious that the solution is not to run up corporate deficits, even for a "closed" corporation.

See above

 

There are literally no circumstances under which keynesianism will work for private entities.

Exactly. That's my point. Keynesianism is a macro-economic theory not a business strategy.

Also. Just so we are on the same page. What definition are you using for the term Keynesianism?

consumertariat:

What do you mean when you use the word 'closed'?

What do you think I mean when I use the term?

Economic goods flowing in/out of the organization.

consumertariat:

In what way do firms have the option to be closed?

A policy is "closed" if its economic impacts stay within the organization. But if you really want to press it, a corporation could just flat out refuse to trade with any other market pariticipant.

consumertariat:

Exactly. That's my point. Keynesianism is a macro-economic theory not a business strategy.

And if its not a valid strategy for businesses, and businesses are similar in many respects to states (they are both economic organizations), then keynesianism is not a valid strategy for gummints.

Economic goods flowing in/out of the organization.

Could you be a bit clearer on what you mean please? Are you saying that a closed system is one which has flows going in and out of it? This would be an open system not a closed one. A closed system is one that is self-sufficient and in which all flows circulate internally

A policy is "closed" if its economic impacts stay within the organization. But if you really want to press it, a corporation could just flat out refuse to trade with any other market pariticipant.

Would this imaginary organisation also have a captive population? A banking sector? An internal market of competing firms? its own currency? Its own legal system? If not, then the organisation you described would not be closed. Of course, what is being descibed here is not a business but an economy.

And if its not a valid strategy for businesses, and businesses are similar in many respects to states (they are both economic organizations)....

No. They are nothing like each other at all. They are qualitatively different structures in a million different ways. They have completely different dynamics and so must be analysed with different tools.

Consumariat :

Could you be a bit clearer on what you mean please? Are you saying that a closed system is one which has flows going in and out of it? This would be an open system not a closed one. A closed system is one that is self-sufficient and in which all flows circulate internally

Obviously if goods are not flowing in or out, that is a "closed" organization economically speaking.

consumertariat:

Would this imaginary organisation also have a captive population?

Work contracts.

A banking sector?

Corporate coupons

An internal market of competing firms?

They're sometimes called "asset teams".

its own currency?

Coupons

Its own legal system?

Most corporations have rules, formal and informal.

If not, then the organisation you described would not be closed.

Why the hell not? Why does something have to have "internal competing firms" to be closed?

Of course, what is being descibed here is not a business but an economy.

An economy is just group organization of scarce resources. The world has an economy. So do its constituent countries. So do their constituent businesses. So do their constituent family units.

No. They are nothing like each other at all. They are qualitatively different structures in a million different ways. They have completely different dynamics and so must be analysed with different tools.

States are formed aggressively. That is the ONLY difference. One of the most practiced libertarian strategies is to point out the ways in which the private sector operates similarly yet superior to the public sector.

Obviously if goods are not flowing in or out, that is a "closed" organization economically speaking.

Ok. We are on the same page now.

Work contracts.

A work contract that forces the population to buy everything from inside the firm? One that prevents the population from getting a job outside the firm? This doesn't sound like a firm to me. It sounds like a nation state.

Corporate coupons

Corporate coupons is your definition of a fully developed financial sector?

They're sometimes called "asset teams"

Do these asset teams compete with each other for the custom of the coupon bearers? Do they produce all the amenities of life that they need? Do the asset teams all make different products and operate a division of labour?

Most corporations have rules, formal and informal.

Yes. And you can get a job elsewhere. So the system is not closed. Rules are not the same as laws.

Why does something have to have "internal competing firms" to be closed?

It doesn't. It has to have internal competing firms to be an economy. An economy is a system CONTAINING firms. A firm is not an economy. Get it?

An economy is just group organization of scarce resources.

No. It's not just that.

States are formed aggressively. That is the ONLY difference.

No. There are many reasons. Just a few of which I have listed here.

One of the most practiced libertarian strategies is to point out the ways in which the private sector operates similarly yet superior to the public sector.

Well then it's no surprise that libertarianism is not that widely accepted 

 

Without meaning to seem rude, could I ask what your area of education was?

consumertariat:

A work contract that forces the population to buy everything from inside the firm? One that prevents the population from getting a job outside the firm? This doesn't sound like a firm to me. It sounds like a nation state.

Corportions can employ coercion. Just not aggression. You don't need aggression for people to be "bound" to the organization. Again, "work contracts" are quite common.

consumerteriat:

Corporate coupons is your definition of a fully developed financial sector?

Its my example of banking/currency within the corporation. It actually exists. Corportions COULD develop their own currency/banks but haven't cus its probably a pretty bad idea. Kind of like how they COULD run up large deficits but don't.

consumertariat:

Do these asset teams compete with each other for the custom of the coupon bearers? Do they produce all the amenities of life that they need? Do the asset teams all make different products and operate a division of labour?

They compete for capital. Because they are TEAMS, they employ division of labor (is this so hard?). They may or may not make products different from other asset teams. They do not produce everything that they use, but they COULD. And this is not relevant anyway because nations do not even produce everything that they need.

consumertariat:

Yes. And you can get a job elsewhere. So the system is not closed. Rules are not the same as laws.

First, in principle, no. A work contract could bind you to a corporation. Second, you can always just switch countries, so at least one of the following is true: Corporations CAN be closed, or countries are not closed in practice. Either way this issue is completely moot. So drop it.

consumertariat:

It doesn't. It has to have internal competing firms to be an economy. An economy is a system CONTAINING firms. A firm is not an economy. Get it?

Lol. That's an esoteric definition of "economy". And the boundaries of firms are arbitrary anyway, and firms can have competing asset teams (read: firm analogs) within them, so it seems like it falls apart on account of fuzziness. Try using a more normal definition of "economy", like "group organization over scarce resources".

consumertariat:

No. It's not just that.

I can't wait for you to tack on little superficial stipulations to the definition so that you wind up being "right". This is all SO FAR removed from the initial conversation. You are not even talking about keynesianism applied to states or businesses. You haven't given one ounce of analysis. You're just niggling over trivial definitions without even explaining why they would make a difference. Its a joke with you.

consumertariat:

No. There are many reasons. Just a few of which I have listed here.

Are you new? How about this. A state is an aggressive monopoly on arbitration. That definition is good because it allows me to successfuly identify all the things putatively called "states" without falsely identifying things not called states.

consumertariat:

Well then it's no surprise that libertarianism is not that widely accepted

Lol nice rebuttal. Libertarian strategy has always been to focus on the aggressive/involuntary aspect of the state, not its superficial structure. That's how libertarians define the state, and its a correct definition for reasons listed above.

consumertariat:

Without meaning to seem rude, could I ask what your level of education is?

BWAHAHAH I was just about to ask you the same thing! See you're just dancing around the issue of the OP by focusing on some trivial idiosyncratic way that you choose to define states, which in turn does not even apply to states in practice (states are not closed). I think you're confused and just trying to save face now. I'd rather you just give up because at this point you're wasting my time.

I'm a graduate student at UT Austin in Petro Engineering. According to department rankings, its pretty elite. But yeah thanks for talking down to me "without meaning to seem rude". I mean, "not to insult your intelligence", but "<insult to your intelligence>". Zzzzzzzz

 

 

The reason I asked is because your question is the sort of question a 13 year old would ask (And btw, at this point I don't care if I seem rude). I wanted to get a feel for the sort of level I needed to talk at.

Seeing as your a big boy now, I'm sure you will be able to cope with me telling you to go read some macro 101 because at the moment it is clear for all to see that you are an utter ignoramus. It's almost funny... almost.

No offense like..... 

Oh, and this is even funnier:

"People do an incredible thing. No matter how incompetent they are, no matter how poor their knowledge or technical ability, people will sit there and pretend like they should be taken seriously. "

The irony is delicious

consumertariat:

The reason I asked is because your question is the sort of question a 13 year old would ask (And btw, at this point I don't care if I seem rude). I wanted to get a feel for the sort of level I needed to talk at.

Lol. You've given it an answer that you think depends on the definition of "closed", except even if I am COMPLETELY wrong about the kinds of "closed" strategies corporations can adopt, states are not closed either so we still have a good comparison along at least this parameter.

consumertariat:

Seeing as your a big boy now, I'm sure you will be able to cope with me telling you to go read some macro 101 because at the moment it is clear for all to see that you are an utter ignoramus. It's almost funny... almost.

BWAHAHAHA. So lets see... if I were beating the living snot out of you, and you really were wrong about everything, this is exactly what you could say to save face. K. I'm just going to declare victory since you're A) not even trying to argue anymore and B) not even arguing about anything relevant to the OP.

consumertariat:

No offense like..... 

lololololololol you are indistinguishable from a troll. Have fun bluffing your way through life! If anyone ever contradicts you, you can just tell them to read a textbook loololololol.

consumertariat:

Oh, and this is even funnier:

"People do an incredible thing. No matter how incompetent they are, no matter how poor their knowledge or technical ability, people will sit there and pretend like they should be taken seriously. "

The irony is delicious

Lol. Right back at you. But I obviously get to you if you're going to go through the search engine and look for my old posts.

Umad bro?

 

consumertariat:

You have a serious misunderstanding about what I mean by a 'closed systems', which is why I was labouring the point. It's fuck all to do with 'strategy', it's about how the economy is modeled by most economists. Hint; a closed system is the opposite of an open one.

Red herring. See "even if I am COMPLETELY WRONG about the kinds of "closed" strategies corporations can adopt, states are not closed either so we still have a good comparison".

And yeah. You're totally ignoring all the strategies that I pointed out corporations could and do adopt that could bring them towards being "closed" systems. See you want to pretend that corporations are these conventional white-collar operations where anyone can quit at any time, and the corporation only produces a narrow set of goods. This NEED NOT be the case. Corporations have the OPTION to form closed systems. Its just that they don't because that would be a bad idea because the benefits of keynesianism don't exist.

consumertariat:

I didn't realise it was a game of Warhammer Online. But fair enough, if it makes you feel emasculated to 'declare victory' then go ahead

Good thing you speak english. But yeah har har so funny warhammer online why are you so creative and witty? Btw you should probably learn to use the quote function instead of C&P like a 45 year old having a mid-life crisis.

consumertariat:

To be honest, I can't argue with you on that point. Sometimes the Tinterweb does funny things to people, and it is quite fun to troll sometimes. I'm sure a delicate wallflower such as yourself will survive.

No no no. You got me man. I cried for hours because of what you said. You're totally right even though you have never tried to prove that anything you are saying has consequences relevant to the OP. I guess I should just resign from having opinions... oh wait.

consumertariat:

Oh, and as an aside, my 'definition' of an economy was more of a description. Unlike the genuinly esoteric mumblings of The Cult of Mises, I prefer to deal with things as how they are in reality as opposed to 'truths' garned via armchair philosophising and bonkers 'a-priori' reasoning.

Why is your definition better? My definition is MUCH more general and it reflects what people actually CAN do with scarce resources and division of labor, not just some narrow artificial "well there have to be firms and those firms have to produce heterogeneous goods and hire from the same pool of laborers..." See you obviously miss out on describing anything that people could HYPOTHETICALLY do, which is the POINT of the op.

Also extend that my definition of government is superior. You didn't address it. Actually you didn't address a lot of stuff cus you're just cherry picking your way through my posts. Its a great way to avoid looking like you made a mistake! You just ignore it if it comes up. Maybe one day I can be that intellectually honest...

I give up. You are clearly insane.

If you honestly believe that "why don't businesses adopt Keynesian policies?" is a good critique of Keynesianism then either you misunderstand what Keynesianism is, misunderstand what an economy is, or misunderstand what a business is. At this point I assume it is all three.

 

Good day Sir.

>Why don't businesses implement keynesian policies?
>> Cus those policies are supposed to be for governments
> Why won't they work for businesses?
>> Because businesses aren't defined as governments
> I know but what is it about businesses that make keynesianism inapplicable?
>> Well, businesses aren't closed.
> Governments aren't closed either, and businesses could be closed in theory: (long list of examples)
> You are stupid and I can't use the quote function or words correctly

See you later noob.
 

I don't think that last bullet is helping you :P

Hey, we might have some 45-year old in his mid-life crisis come here and be driven away by that. You never know.

@Sieben

Well played.

As I am a sucker for hitting my head against a brick wall, I though I would draw a pretty picture for you in the hope something might eventually sink in.

Fisrt off, it is not the "definition" of an economy per se, but the ACTUAL DESCRIPTION of one that matters. Individual firms and entire economies are quite clearly different in their structure, their function, their scale and their internal dynamics. To deny this in favour of some ideologically convienient 'definition' is a mistake.

Here is a simplified model of an economy that assumes net imports/exports to be zero. Roughly speaking, the Keyenesian theory says that savings and investment will not always be in balance. Sometimes there will be more investment than savings, at other times it is the other way round. 

As a result, supply and demand can be out of whack. Sometimes aggregate demand will be too low, other times to high. To rebalance the system the Govt redirects the flows in various ways to ensure that aggregate supply and demand match.

Now look at the system from the perspective of the individual firm. The firm takes loans and invests in new production. It pays wages out and gets money in from its customers (the households). It is an OPEN system with flows going in and out.

If for some reason a firm is doing badly, it can take more loans sure (run a deficit), but if it cannot pay them back it goes bankrupt obviously. But at the national level, counter-cyclical fiscal policy just shifts around the money in the system in order to rebalance it. This is the fundamental difference between an individual firm and an entire economy.

You are claiming that Keynesian policy should work at firm level if it is to work at a national level. I am telling you that the POURPOSE of keynesian policy is to attempt to rebalance AGGREGATE supply and demand. How could a firm possibly do this?

Your question doesn't even make sense. It is like asking "If going for a jog is good for your entire body, why can't your lungs go for a jog by themselves?"

Consumariat:

As a result, supply and demand can be out of whack. Sometimes aggregate demand will be too low, other times to high.

"out-of-whack", "too low", "too high" - as defined by whom? This is ultimately subjective.

Consumariat:

. To rebalance the system the Govt redirects the flows in various ways to ensure that aggregate supply and demand match.

Even granting the former statement - does this have to be government?

consumertariat:

Fisrt off, it is not the "definition" of an economy per se, but the ACTUAL DESCRIPTION of one that matters. Individual firms and entire economies are quite clearly different in their structure, their function, their scale and their internal dynamics. To deny this in favour of some ideologically convienient 'definition' is a mistake.

First, no. The context of this thread is to ask a HYPOTHETICAL question. This will differ from ACTUAL practice. This is why we need a GENERAL definition that reflects all the things that people COULD do in an economy, not what they actually do. I already know corporations ACTUALLY do not pursue keynesian policy. That's kind of the point...

consumertariat:

Here is a simplified model of an economy that assumes net imports/exports to be zero.

Well that assumption is wrong. I thought you were going for an "ACTUAL DESCRIPTION"? Just sayin...

Your diagram is also not empirically correct. See the government also derives revenue from banks in the form of loans (like businesses), and obtains taxes from both firms and households (your diagram does not make this clear...). Firms also "consume" each other's products, so its not just "households" that buy the products of firms. Firms also SAVE and contribute to the loan-base. Firms also do not HAVE to take out loans - any economist will tell you that. Banks are also firms themselves, so... you know... durp.

I mean, you could write "government" where you have "firms" written and it would still be as correct as you have it now. You're basically just defining firms to be these white-collar 9-5 operations, but they don't HAVE to be. You have never challenged this. You have never challenged my observation that there are a variety of organizational strategies open to firms. So good job. But I guess drawing a diagram makes you feel smart.

consumertariat:

Now look at the system from the perspective of the individual firm. The firm takes loans and invests in new production. It pays wages out and gets money in from its customers (the households). It is an OPEN system with flows going in and out.

It does not HAVE to be. It does not have to take out external loans. It does not have to pay wages "out". It can pay wages "in" and produce products "in". Its called a contract. You should maybe include contracts in your theory of firms.

consumertariat:

If for some reason a firm is doing badly, it can take more loans sure (run a deficit), but if it cannot pay them back it goes bankrupt obviously. But at the national level, counter-cyclical fiscal policy just shifts around the money in the system in order to rebalance it. This is the fundamental difference between an individual firm and an entire economy.

Unless a corporation used its own system of credits. I mean you are really making this too easy... And a nation isn't even closed in the first place. People and capital are mobile and trading with lots and lots of external entities. So again, there's nothing to indicate that the economics of NGOs are somehow different from those of governments.

Except governments are aggressive monopolists on arbitration. See you're not even challenging my definitions you're just masturbating about your own trivial descriptions of the status quo. Good job? K.

consumertariat:

You are claiming that Keynesian policy should work at firm level if it is to work at a national level. I am telling you that the POURPOSE of keynesian policy is to attempt to rebalance AGGREGATE supply and demand. How could a firm possibly do this?

Because the aggregation is just arbitrary. It draws a line around a geographic area and says "durp, aggregate economy". I can do the same thing and draw a line around a firm. Or a person. Or several countries at once.

consumertariat:

Your question doesn't even make sense. It is like asking "If going for a jog is good for your entire body, why can't your lungs go for a jog by themselves?"

Except the lungs and body are categorically different. In this case, firms are capable of being independent economic units. And even if they are not, they are AS independent economically as states are from one another. So you know, its analogy time.

I'm actually lost for words at how obtuse you are. Jesus wept!