Up to a couple months ago I believed the Austrian economists were correct about economics. I read Robert Murphy's the politically incorrect guide to The Great Depression, and that solidified my believe even more, then I read Paul Krugman's End This Depression Now, and after having an open mind I think the Keynesian economists are right about most things. The Facts are that during the great depression when the govt started spending during the first part of the Great Depression unemployment fell it only rose again due to the stoppage of spending a few months later, also that if credit contracts you will get very high unemployment as seen during the Great Depression, and that deflation during a finanical crisis is horrible. And most importantly that WW2 got us out of the Great Depression.
Some people might say, like I even used to that say's law makes govt spending useless, well say's law isn't true, because if you have idol resources and people start to save their money, and banks freeze credit than your economy is not at operating as efficiently and using labor and capital that it would usually use so when you know your economy is suffering from a lack of aggregate demand it's best for the economy that the govt vastly increases spending.
One objection of Austrians and conservatives is that the debt is too big well that's just plain false as many countries have a debt to gdp ratio far higher than the USA such as Japan theirs is 208% so we can afford to spend many more trillions on a new stimulus.
During the golden age of capitalism there were no serious recessions, and the financial industry was very regulated much more so than today. Just look it up.
he Facts are that during the great depression when the govt started spending during the first part of the Great Depression unemployment fell it only rose again due to the stoppage of spending a few months later
What periods are you talking about here? Can I have evidence of the changes in government spending?
"During the golden age of capitalism there were no serious recessions, and the financial industry was very regulated much more so than today. Just look it up."
When was the "golden age of capitalism?"
Welcome to the forums by the way.
'Men do not change, they unmask themselves' - Germaine de Stael
It is pointless to use idle resources in the economy. They are idle for a reason. People dont need to use them.
Employing the use of an idle resource and ONLY TARGETING THAT SPECIFIC RESOURCE is nearly impossible.
Even something simple as making a pencil requires thousands of workers involved.
The government will have to buy these idle resources which will draw money from taxpayers, hurting the economy even more by employing something that obviously the economy didnt have any use for.
http://mises.org/daily/3290
“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence.""The sweetest of minds can harbor the harshest of men.”
http://voluntaryistreader.wordpress.org
Specifically during 1935, Congress authorizes creation of the Works Progress Administration in the same year unemployment falls to 20.1 percent to 25 percent, he next year unemployment falls to 17 percent, Roosevelt, however, fears an unbalanced budget and cuts spending in1937. That summer, the nation plunges into another recession. Despite this, the yearly GNP rises 5.0 percent, and unemployment falls to 14.3 percent, but the next year unemployment rises to 19 percent and gnp falls, in 1939
also Sweden and England end their depression much earlier than the rest of the affected countries.
here goes the link for my info
http://www.huppi.com/kangaroo/Timeline.htm
Also Just look at a WW2
The Golden age of capitalism lasted from the end of WW2 until the early 70's when we went off the Keynesian Bretton Woods system.
Unemployment being low doesn't mean anything. I can cure unemployment tomorrow by saying that if you're unemployed you will be exectuted. Likewise, I can mandate that everyone be drafted to the military and unemployement plummets to WWII levels.
If unemployment numbers are your guide, then you sure will come to be against the Austrian ideas. We do not guarantee 0% unemployment, especially when there are so many active government interventions to the contrary.
"The Golden age of capitalism lasted from the end of WW2 until the early 70's when we went off the Keynesian Bretton Woods system."
Why is that denoted as the "golden age of capitalism?"
Specifically during 1935...
Did you forget the fact that by June 1930 unemployment had dropped to 6.3 percent from a 12 month peak of 9 percent, i.e. a peak that is less than half of what you consider the recovery, before the government began to intervene greatly?? That shows that the recovery was already underway due to market forces, and was only thwarted by the intervention of the Hoover and Roosevelt administrations.
until the early 70's when we went off the Keynesian Bretton Woods system.
You mean the closing of the Gold window??
I am not really getting the meaning of what your saying, is it that when people don't but things that they don't need them?
that doesn't make sense, if somebody gets laid off why would they get another job?
I am not talking about Resources as in coal I am talking about human resources, and capital
I am not saying that the govt should go make bread or mine coal Im saying that when people are unemployed they ae being wasted, their talents, current labor usage, and skills are being wasted.
Thats the point. Their work is no longer needed (because of a bubble brought up), and therefore they must find a job that fits in the market economy, not some artificially created government bonanza.
while many millions of men were drafted during WW2 that doesnt account for the excellent economic growth of GDP and low unemploymnet for people who weren't drafted.
But we don't want or need another draft we need high speed rail and infastructure and lots of other things
Things that may not be in demand at the moment. It is best to let the free market consumer demand, demand for these things before they can be effectively built..
In 1931 there was a very big banking panic which made unemployment go up.
And what govt intervention are you talking about
David Silva,
You claim to have read Murphy's book on the Great Depression. You are either lying about that fact or did not comprehend it in the slightest. As for Hoover: spending, taxes, tariffs, subsidies, preventing wages from falling.
Dear David Silva, I don't have the time to read this full paper right now but just from skimming through it, I understand the resarchers point of view but I doubt that these policies are the sole reason on why the recovery was so slow, and more advanced econometric testing is needed which is hard to do because of lack of certain stastistics to fully understand cause and effect in the macroeconomy. But we have sort of a depression going on now and these policies aren't policy now and yet we still have a slow recovery.
And the reason we have a slow recovery now is because of lack of aggregate demand, if we only would of spent enough to cover the output gap then we would've been fine just like after WW2.
But thanks for that paper, i'll try to get to it later
The article i gave you was only cobncerning about the idle resources in a depression
Look I am sure they played a role but you can not simply say that those are the only reason for the depth and severity of the Great Depression currently we haven't had those things but were still in a non technical term recession to some people feels like depression.
I never said that the use of idle resources wre the mainstay of the depresssion.
Cheap credit expansion by the fed made boom which turned into a depression, and fdr, and hoover made it great.
Excuse me I Dear Rodolphe Topffer , and thanks said person for article
Lmao, got enough answers? It's like a whole page!
Sorry but Krugman embarassed himself when debating Murphy in 2011.
First he said Manufacturing lost more jobs than Construction after the 08 recession, then Murphy had to point out that Manufacturing percentage decline was smaller. Krugman can barely understand what Austrians think. Murphy also pointed to the loss of jobs in states with the most construction.
Keynesian economics is done because anything the govenrment does is inefficient, sorry but the most prosperous countries have the least regulations. Also in the long run the United States is broke.
If Krugman said manufacturing jobs lost more than construction and murphy said Manufacturing percentage decline was smaller, he did not refute anything krugman said. Secondly this should not become a dicussion of political theory just like the dicussion of global warming. secondly many prosperous infact most prosperous countries are highly regulated. Also Krugman is not the only Keynesian economist as there are many conservative keynesians.
First of all, a source for the unemployment numbers. But second of all, I hope that it's obvious that when you take a gigantic chunk of people out of the workforce the remaining people will find an easier time getting a job.
Furthermore, GDP growth doesn't mean anything. It's about what is part of the GDP that matters. The government can coin a platinum coin worth $1 trillion tomorrow and claim it's GDP growth. It doesn't matter.
you are correct but if the govt could hire people and give them a wage as soldiers and pay for their living than it could higher them to build constructive things that we need
If we need said things why isn't the private sector building them?
Mabye we need things done collectively that the private sector doesn't want to do
People wan't things Such as schools or national parks things that promote the general welfare of all people. The private sector doesn't wan't school for everyone or clean water for everyone.
And why not?
Sure, if you want to do things collectively.
Go outside, get a few friends into a group (the collective) and start building your railroad right there and then.
Just do not force others to embark upon your project.
(That sounds highly privatized, after all, a business is made out of multiple people).A
Andrew, you ought to read "Beyond Democracy" or some of Rothbard's works ("Anatomy of the State". "For a New Liberty").
Yes we could live in a world like that, but the problem the world be worse for the majority of people.
Many people who are wealthy or people who are in the middle class are there because of free govt education.
The reason that the sewage system in London had to be created in London England is because no company would undertake the project and many many people were dying.
There are many more examples. I use to say that same thing to people then I woke up to reality.
No. Youre being driven back in the mindset of the general populace.
1. Government education is not free. It is taxed. The free market can provide education at a lower cost with higher quality, just like it does with all other goods provided (computers, food, etc, etc).
2. Sewage can still be provided by private companies. Why wouldnt they? I admit, i dont know much about sewage in london, but there is no logical conclusion to support the government needing to provide such a service.
For any other public goods, see here: http://mises.org/journals/scholar/Sechrest7.pdf.
What constitutes a public good? Something that all people use? Food is something we all need, is it ok to put food production into the governments hands? (Look at ussr).
What about shaving cream? Should government provide this too? Whata bout shoes, clothes? How about govenrment condoms(lol thereare actually those)?
You see, the public goods argument in favor of government intervention in the economy is high flawed. There is no such thing as public goods.
Why would you use the bureaucratic wasteful, taxing, authoritarian rule of the government to provide a service, when it can be far better provided by the free market?
Look at the amazing things the free market has done: computer technology, food, housing, etc, etc. Capitalism is the only system to have massively improved standard of livng all accross the board. There are pockets in the world that suffer from mass starvation, yes, but it is soon that they will get help from charitable donations, and improvements to their standard of living as well (trade, agriculture, etc, etc); the mass cause of the few pockets of starvation can only be seen as caused by war, and exploitation, and who the fuck wages wars? Their governments.
You say that you used to believe the Austrians were correct. So tell us, which Austrian works have you actually read, if any? Have you really read Murphy's book or were you lying?
A public Good is something that mabye the private sector could provide, but is done better by the govt I am not saying it's done cheaper, but it's done safer and a public institution is semi accountable to the public a coropration is not.
The free market is responsible for most improvement in living standards, that is very true but it doesn't mean that you should not have a public sector.
Yes I have read Murphy's book and I often read it over, or part's of it.
And more that I forget right now