"If you believe their relevance to be so self-evident, you can troubled to write it down and prove it."
I already did and you haven't addressed it. Either address how the multiplier and circular flow do not disprove your statement that there is no reason to believe that spending will create additional spending or stop posting on this thread. I'm not going to be question dodged and asked to explain basic macro to someone who can't be bothered to respond to what I've already posted.
I think it's clear that practically everyone in society would gain from the end of a recession.
Ok, so you're talking about the end of a recession vs. never ending recession? In that case I understand completely. I was thinking more of the scenario of recovery in a few months (plus extra malinvestments etc.?) vs. recovery in a few years. Hence why I didn't see stimulus necessarily being beneficial in the long term.
Mind f***
Well I'm not sure if what you're referring to is in fact the problem of economic calculation under Socialism (which is essentially the inability to calculate opportunity costs). But we should leave this for the other thread.
I really am starting to wonder if I've missed a better version of the BWF than those of Bastiat and Hazlitt, because in their writings, the essential insight seems to be that you cannot create wealth by destroying it.
This is a different way of saying the same thing. A hint can be found in the title of Bastiat's original essay, "That Which is Seen and that which is unseen".
We see the value of the window being created, but we do not the see the value of the goods we could have produced with the same resources being destroyed. The value of those unseen and foregone goods is the opportunity cost of the window we have to fix.
And as I pointed out before, there's no reason to believe the Keynesian assumption that, in a recession, a policy that creates spending in one place will in turn snowball into all manner of spending in the market; the mere fact of being the recipient of such spending does not necessarily mean that they, too, will become a spender.
Actually, the notion that people spend their income isn't really a "Keynesian" assumption, it is a "Classical" assumption (if we really want to try and label these things). Every dollar you spend on goods and services is recieved by someone else as income. What do people do with income? They can spend it now or they can spend it later. Those are really their only two options (unless people started eating money). If they decide to spend it later, they can put it into a bank and the bank will loan it to someone who will spend it now.
An old-school "Keynesian" adendum to this story would be that people don't have to put their money in the bank if they want to spend it later, they can keep it in cash holdings. In that case, NO ONE spends the money now. And this has consequences for aggregate economic activity that Neodoxy has already tocuhed on. That is actually closer to the sentiment in your last sentence (bolded above). So maybe you are more of a Keynesian than you thought.
Ambition is a dream with a V8 engine - Elvis Presley
The irony is that the recession itself is a case of systematic window-breaking (metaphorically speaking).
Edit: Let me amend this. The preceding boom itself was really the case of systematic window-breaking, as resources were systematically allocated along lines that weren't as conducive to people's preferences as other lines presumably would've been. The recession is the period where the broken windows get fixed. Breaking and subsequently repairing other windows during that time draws resources away from this.
It's interesting to me that so many people see the recession as the problem, when the problem is actually the preceding boom. The whole point of Keynesian economics is to preserve/restore that boom. Why would this be? Because businessmen don't like losing their shirts. Gambling addiction may be an apt analogy here.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
i think we might be trying to stretch the metaphor a bit too far :)
Care to elaborate?
Do you ever watch zeFrank? In his invocation for beginnings video he had a line i liked which went something like "let me find metaphors that help me undersand the world around me, and let me have the wisdom to see when they no longer work."
Well, I think the entire point Neodoxy was making in the OP was that the BWF metaphor doesn't work for understanding Keynesian economics because it leaves so many things out that are essential to the Keynesian story (liquidity preference, sticky prices, the circular flow of income, etc).
It isn't that the Keynesian story is inconsistant with the BWF story, you can ammend the BWF metaphor to fit if you really wanted to (talking about a shopkeeper's cash holdings, assuming idle resources in the economy, etc), but I think you wind up with a story that really looks nothing like the original BWF story. And, in fact, the new story makes it harder to understand both Keynesian economics and the original intent of the BWF.
Similarly, I don't think we want to over stretch the BWF story further by trying to change it to fit the ABCT story. I mean it leaves out the informational role of prices, the response of the capital structure to a credit expansion. All kinds of things that are essential to the ABCT story. You can try to add them on top. But why would you want to?
The broken window parrable is only 1 part of a longer essay that a French economist wrote 160 years ago that was supposed to be about illustrating the concepts of opporutnity costs and unintended consequences. Business cycles appeare to be far away from Bastiat's mind when he wrote about the Broken Window. So why are we twisting that story to get at something totally different?
As a funny aside, Brad Delong thinks that if you want Bastiat's opinion on temporary fiscal stimulus, you shouldn't stop at the Broken Window parrable, you should keep reading the same essay.
Frederic Bastiat channels his inner Larry Summers and declares himself in favor of the ARRA--a timely, temporary, and targeted fiscal stimulus program in a depression: "There is an article in the Constitution which states: "Society assists and encourages the development of labor.... through the establishment by the state, the departments, and the municipalities, of appropriate public works to employ idle hands." As a temporary measure in a time of crisis, during a severe winter, this intervention on the part of the taxpayer could have good effects... as insurance. It adds nothing to the number of jobs nor to total wages, but it takes labor and wages from ordinary times and doles them out, at a loss it is true, in difficult times. As a permanent, general, systematic measure, it is nothing but a ruinous hoax...." http://delong.typepad.com/sdj/2010/03/two-more-economists-support-the-obama-fiscal-stimulus-the-arra.html
Frederic Bastiat channels his inner Larry Summers and declares himself in favor of the ARRA--a timely, temporary, and targeted fiscal stimulus program in a depression: "There is an article in the Constitution which states: "Society assists and encourages the development of labor.... through the establishment by the state, the departments, and the municipalities, of appropriate public works to employ idle hands." As a temporary measure in a time of crisis, during a severe winter, this intervention on the part of the taxpayer could have good effects... as insurance. It adds nothing to the number of jobs nor to total wages, but it takes labor and wages from ordinary times and doles them out, at a loss it is true, in difficult times.
I already did and you haven't addressed it.
This is extent of your writings on the subject:
Are you denying the multiplier effect and the circular flow diagram?
Now what pray tell am I supposed to address? And how am I supposed to address the relevance of those things back to your main point when you haven't even defined it? You are being unncessarily evasive about having to answer for your own assertions.
It's not an example of opportunity cost, IMO, because the point of the BWF was that the shopkeeper was left with essentially a forced choice. Notice that there is never a question in the BWF as to whether or not the window will be replaced whereas in reality there would always be a choice; I do not believe this to be an incidental in the story.
Where did I ever say people don't spend their income? The point of Keynesian policy prescriptions, particularly in a recession, is because people are not spending "enough" of their income, thus they are going to "stimulate" spending. And "If they decide to spend it later, they can put it into a bank and the bank will loan it to someone who will spend it now." is a circular assertion. You haven't proven that the fact that someone would put the money in the bank means that the bank will just immediately loan it out to whomever, and as this last crisis has shown, the banks largely were not loaning until they too were properly "stimulated" (and even then it was quite the chore), which speaks more to my point than yours.
That is actually closer to the sentiment in your last sentence (bolded above). So maybe you are more of a Keynesian than you thought.
Actually, it's not even close at all. So maybe you're a little more proud of your ignorance of my position than you should be.
Aristippus,
No, that was more or less what I was talking about. Once again we're working under Keynesian assumptions of no malinvestment. However, we are working under the admission that a recession is an undesirable state of affairs. By this admission any time spent within a recession is negative, and any time spent within it decreases, all else equal, the wellbeing of people at any one time, so long as the economy continues to progress. Think of it like two linear graphs representing living standard and they have the same slope but one is two units higher on the Y axis at any point on the X axis. Everyone would rather be at the point where real incomes are higher, or in the timeline where the recession was ended swiftly.
Student,
Wow that throws a wrench into the works for the normal Austrian use of the BWF.
EDIT
Yayyyy!
myhumangetsme,
you're free to read the story any way you like. though i will note that my reading is hardly unique. below you will find the first three links from a google search that may help you see where i am coming from.
http://worch.leap-link.com/articles/Opportunity%20Cost%20and%20the%20Broken%20Window.pdf http://en.wikipedia.org/wiki/Parable_of_the_broken_window http://economics.about.com/od/output-income-prices/a/The-Broken-Window-Fallacy.htm
as far as the rest, i'm not really sure what you're driving at.
i was just responding to a direct comment you made to me (and if i misread you i am sorry) and now you're asking me to defend the notion that banks immediately lend out deposits? I never asserted that they always do. so how did we get here? and why should we continue?
Once again we're working under Keynesian assumptions of no malinvestment.
Oh ok, now I get it. Maybe edit that into the original post?
i was just responding to a direct comment you made to me (and if i misread you i am sorry) and now you're asking me to defend the notion that banks immediately lend out deposits? I never asserted that they always do.
I didn't ask you to "defend" anything, I pointed out that this statement in your argument:
If they decide to spend it later, they can put it into a bank and the bank will loan it to someone who will spend it now.
Is a circular assertion because you're using an example of the concept you want to prove as a proof of the concept.
And the real problem in mutual understanding seems to lie right here:
...the BWF metaphor doesn't work for understanding Keynesian economics because it leaves so many things out that are essential to the Keynesian story (liquidity preference, sticky prices, the circular flow of income, etc).
From yours (and Neodoxy's) perspective, these details are relevant to invalidating the BWF, but from mine they are not, because the BWF was never meant to address the specific knowledge or techniques of Keynesian policy, but the general methods they employ and the effects they produce. The fact that the BWF does not address aspects of Keynesian policy specifically does not mean it does not address them generally.
Student:Do you ever watch zeFrank? In his invocation for beginnings video he had a line i liked which went something like "let me find metaphors that help me undersand the world around me, and let me have the wisdom to see when they no longer work."
No, I've never seen zeFrank, but thanks for the heads-up.
Student:Well, I think the entire point Neodoxy was making in the OP was that the BWF metaphor doesn't work for understanding Keynesian economics because it leaves so many things out that are essential to the Keynesian story (liquidity preference, sticky prices, the circular flow of income, etc).
The notion of the circular flow of income is hardly unique to Keynesian economics. It's also at least implicit in Austrian-school economics, for example. Likewise for liquidity preference and sticky prices.
Student:It isn't that the Keynesian story is inconsistant [sic] with the BWF story, you can ammend [sic] the BWF metaphor to fit if you really wanted to (talking about a shopkeeper's cash holdings, assuming idle resources in the economy, etc), but I think you wind up with a story that really looks nothing like the original BWF story. And, in fact, the new story makes it harder to understand both Keynesian economics and the original intent of the BWF.
In my earlier post, I wasn't really trying to make better sense of Keynesian economics. I was relating Bastiat's parable of the broken window to Austrian-school economics' theory of the business cycle.
Student:Similarly, I don't think we want to over stretch the BWF story further by trying to change it to fit the ABCT story. I mean it leaves out the informational role of prices, the response of the capital structure to a credit expansion. All kinds of things that are essential to the ABCT story. You can try to add them on top. But why would you want to?
You seem to believe that I think the ABCT can be explained simply in terms of Bastiat's parable of the broken window. Why is that? My real point in my earlier post was to show how government stimulus in a recession is essentially - metaphorically speaking - breaking more windows and then fixing them, while there are other windows that have already been broken. Do you not see the point there?
Student:The broken window parrable [sic] is only 1 part of a longer essay that a French economist wrote 160 years ago that was supposed to be about illustrating the concepts of opporutnity costs and unintended consequences. Business cycles appeare to be far away from Bastiat's mind when he wrote about the Broken Window. So why are we twisting that story to get at something totally different?
As I understand it, the point of the parable of the broken window was to refute the notion that economic destruction generates wealth and is therefore good for people.
Well, in the portion of my post that you quoted, I was referring to Neodoxy's OP and not anything you wrote. Like I was saying, I think Neodoxy's point is was that critics that try to critique the Keynesian story using the BWF don't see how much of the Keynesian story they are leaving out.
I understand that the point you were making was to relate Bastiat's parable to business cycle theory. But I am not sure why we would want to. That's why I said we might be stretching his simple story too far.
My real point in my earlier post was to show how government stimulus in a recession is essentially - metaphorically speaking - breaking more windows and then fixing them, while there are other windows that have already been broken. Do you not see the point there?
I have to admit that I am having trouble.
So the government is breaking windows to create jobs, but there are other windows that are already broken???? Why aren't window-smiths already fixing them? And if they are fixing them, why do we have involuntary unemployment to start with? Or, if we don't have involuntary unemployment, why are we calling this a recession?
And what are these already broken windows supposed to represent? And who broke them? It is fuzzy to me.
I think this is a disgreement over language so I don't think we need to take it too far. But this is the second time someone has balked at the notion that the BWF is about opportunity cost, so I will at least type one good reply and we can drop it. :)
First let's not talk past each other. I agree that the conclusion that Bastiat reaches is that breaking windows does not lead to net wealth creation. But was that "the point" of the story? I don't think so. I think the point was to illustrate the concept that led him to this conclusion, which was the concept of "opportunity cost".
If you check out the introduction of the original essay that includes the parable (That Which is Seen and that which is Unseen), you will see Bastiat states that the essay is supposed to be an "examination" of the "seen" and "unseen" components of "certain economical phenomena". The parable of the broken window is just one of several stories that are meant to illustrate this distinction betwee seen/unseen consequences.
http://bastiat.org/en/twisatwins.html
In modern parlance, we call the "unseen" component of the broken window story the "opportunity cost"--it is the value of the goods the shopkeeper could have purchased if his window had not been broken. So I don't think it is unfair to say that "the point" of the broken window story is about illustrating the concept of "opportunity cost".
Honestly, if his primary aim was just to adress people like M.F. Chamans (who only gets a one sentence shout out at the end of the story) that claimed burning paris ot the ground wound benefit the French economy, I'm not sure why he bothered writing the rest of the essay.
And, again, this interpretation isn't unique to me. Here are three links that pop up on the first page of google when i search broken window and opporutnity cost. They all seem to talk about the BWF in the same fashion.
But now my reply is way to long. And it is all really beside the point anyways. I am comfortable with my interpretation and yours. I don't see them as being in conflict. So I will just drop it here. :)
I think the answer to this is relatively simple. A broken window is not a gain to the economy, nor is employing someone to replace it. That the government may cause employment to rise by spending is true, but investment in nonhomogeneous labor is no different than investment into capital goods. Nor are we talking merely on one window, anymore than ABCT talks of one infusion of money. We are talking about a policy of continually breaking windows so they can be fixed.
So, if the aim of government spending is merely to increase employment, why not simply 'hire' people to pass money back and forth and give them a percentage to spend? Why not 'hire' people to do the classic digging holes and then refilling them? The answer is the same in essence as with ABCT; some of the wealth invested in the process will inevitably be lost, and lost time is not the least among them. To see that part of it more clearly, why doesn't the government just periodically nuke a major city or two for the economic 'stimulus' of rebuidling it? Because, the subsequent increase in employment is spent trying to catch up to a level of wealth that had already achieved and then lost because of the destructive behavior of the government. And while people rebuild they lose resources, including time which can never be recovered, while trying to simply get back to where they were. It's the difference between running in circles and a straight line, and when your goal is to get somewhere, the circle doesn't help much.
So the original question misses the point, because increased employment due to government spending in Keynesian economics isn't an end itself, its ultimate justification is supposed to be economic 'growth' and an increase in the wealth and well being of the people in the economy. That isn't the result though. A policy of economic destruction can not be better than the sum of its individual destructive acts. It remains destructive. That people are 'employed' to do things which on their face 'seem' productive doesn't change the fact that opportunities were destroyed to make that activity possible, time was lost while doing them, and it does not change the fact that their actions are not subject to the profit and loss test and so unproductive behavior will not be corrected over time. So in the end it's really just a massive wealth transfer program, and if that's your goal, why not just give the money to the people you think need help as opposed to 'employing' them for the purposes of essentially walking around and repeatedly kicking each other in the balls?
So the real question is why should increasing employment be a goal at all when the very nature of the crisis we're in means that entrepreneurs don't know what the best allocation of labor, among the other resources at their disposal, is?
Student:Well, in the portion of my post that you quoted, I was referring to Neodoxy's OP and not anything you wrote. Like I was saying, I think Neodoxy's point is was that critics that try to critique the Keynesian story using the BWF don't see how much of the Keynesian story they are leaving out.
The metaphorical notion of breaking windows doesn't cover all of Keynesian or Austrian-school economics. So in that sense, it's a leaky metaphor. But I don't think that makes it entirely useless.
As I tried to point out, the main difference between Keynesian and Austrian-school economics seems to be that the former sees the recession as the real problem, whereas the latter sees the preceding boom as the real problem.
Student:I understand that the point you were making was to relate Bastiat's parable to business cycle theory. But I am not sure why we would want to. That's why I said we might be stretching his simple story too far.
Neodoxy seemed to be arguing that Keynesian policies aren't really bad at all for recessions, as long as they can be utilized effectively. In a larger sense, I was trying to refute this notion. As a follower of the Austrian school of economics, I understand that recessions aren't the primary problem. Rather, I see the preceding booms as the primary problem.
Student:I have to admit that I am having trouble. So the government is breaking windows to create jobs, but there are other windows that are already broken???? Why aren't window-smiths already fixing them? And if they are fixing them, why do we have involuntary unemployment to start with? Or, if we don't have involuntary unemployment, why are we calling this a recession? And what are these already broken windows supposed to represent? And who broke them? It is fuzzy to me.
The involuntary unemployment is due mainly (if not entirely) to the liquidation of malinvestments. In the preceding boom, resources had been allocated along lines that reflected the actual production/capital structure and actual consumer preferences less than other lines would have. Resources can't always be re-allocated easily. "Economic stimulus" from the government not only keeps those resources from being re-allocated more easily, it also takes some of the resources and allocates them according to its preferences (so to speak) as opposed to the preferences of those who formerly possessed them.
To use the language of opportunity cost, the government imposes opportunity costs on those people that they wouldn't have imposed on themselves. These opportunity costs are added to the total that are incurred as a result of the economic boom.
haha i still have trouble seeing that in your re-telling of the broken window story, though. ;)
but that is okay. i understand what you are getting at and business cycle theory hasnt been sparking my interests these days. so i will wonder out of the convo as rudely as i wondered in.
i wish there were more micro or price theory threads. :(
I wasn't re-telling the parable of the broken window. I don't know where you got that idea.
+1 to xahrx. I haven't had much time to be here and as I was reading this thread I was starting to get worried that no one was going to step in to demolish this Keynesian Crap 101. Xarhrx spared me the trouble of doing it myself.
The question remains: Who has comandeered Neodoxy's account?
"So the real question is why should increasing employment be a goal at all when the very nature of the crisis we're in means that entrepreneurs don't know what the best allocation of labor, among the other resources at their disposal, is?"
Xahrx, have you been reading this thread? It seems as though you simply restated BWF without refitting it to the entire scenario which has been being discussed here. The only apparently relevant thing you wrote to the discussion was the section I quoted above.
The rest of what you wrote is irrelevant because the point is that the resources including labor are idle. This means that there specifically is no loss of resources or time because of government stimulus. There is no point in periodically nuking a city if, as you say, this will simply cause a loss in production from what otherwise would have been. This is the explanation of the broken window, and it makes sense, and it is true. If there is relatively full employment then the broken window fallacy applies perfectly. If this is absent, if prices and especially wages, are sticky. If these means of production are destined to remain idle, then the fact is that so long as the growth spurred by their spending by the increase in AD yields a greater deal of growth by the time that the economy would have recovered and returned to full employment had the government not taken action, then from a purely material standpoint any amount of destruction would be justified. At any rate the classic example you're talking about of just digging holes and refilling them is also justified, more so than direct destruction of wealth would be, because it would give people additional income and so then they could spend more. Therefore I feel as though you have improperly diagnosed the entire conundrum addressed here.
Now, back to the quoted section.
This in and of itself doesn't address any the Keynesian concerns, and indeed in many ways misconceives of the nature of the business cycle. The problem is not necessarily that entrepreneurs don't know "the best way to allocate resources", although that certainly can be an issue during the business cycle, rather the main problem, at least in the Keynesian model (and indeed in Austrian models) is that wages are sticky and so they do not adjust. This is discussed to no end in Austrian circles, and rightly so. If a minimum wage rate is higher than the value of what was produced by labor, then that labor will not be employed. Therefore if wages are indeed sticky, as Keynesians claim, then even if entrepreneurs know exactly the most value productive employment for every resource on the planet, then there will still be mass unemployment. This should not be an area of controversy because if we simply assume sticky wages then this is identical to the Austrian model.
@z1235
Someone who's simply interested in the truth and increasing the quality of "economic" arguments made on this site.
Way to go xahrx. Finally someone spells it out for all to understand.
Let me see if I understand the counter argument:
Breaking windows is bad, in a vacuum. But when there is mass hoarding, resulting in idle resources and unemployment, we have bigger fish to fry. What's a few broken windows or nuked cities when we are in the middle of a recession?
You see, if people don't have a job, giving them any job at all [say digging and undigging ditches], even if accompanied by mass destruction [say breaking windows so someone can fix them], is just what the doctor ordered, and this must be true because it's Eco 101.
The idea is that if people get money in their pockets, from whatever source, they will spend it [=consumption, eating up, making things disappear]. Once things are gone, they will have to be replaced. So those folks who just sat around not hiring anyone and not making anything will have to get off their butts and end the recession by being productive.
And it's not their fault really. They wanted to make gizmos galore, but nobody was buying anything, because those with money chose instead to hoard it. And it's not their fault either, really. They are just a bunch of Spirited Animals who don't know any better. The paradox of thrift ruined the economy, and the wisdom of spendthrift will save it.
After we pry loose all that money from the tightly closed fist of those silly hoarders, the Fairy Godmother known as the Multiplier Effect will bless our handiwork, and for every dollar taken from the hoarders there will be $1.60 worth of job creation.
That's Eco 101, apparently, and that's Neodoxy's case.
In short:
Root cause: Animal Spirits.
Immediate Cause: Hoarding.
Solution: Taxation and Forced dishoarding.
Trivial side effect: Nuked cities here and there, or just a few broken windows if we are lucky.
The post is getting long. Next one will point out the flaws in the Eco 101 version of reality.
The rest of what you wrote is irrelevant because the point is that the resources including labor are idle. This means that there specifically is no loss of resources or time because of government stimulus.
At any rate the classic example you're talking about of just digging holes and refilling them is also justified, more so than direct destruction of wealth would be, because it would give people additional income and so then they could spend more. Therefore I feel as though you have improperly diagnosed the entire conundrum addressed here.
Therefore if wages are indeed sticky, as Keynesians claim, then even if entrepreneurs know exactly the most value productive employment for every resource on the planet, then there will still be mass unemployment.
I name Xahrx as champion. That's a lot of win to have all in one place.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
+1
Saved me from refuting Eco 101, because he did it better.
Mod Message: Please note that I have edited Neodoxy's original thread opening post with an edit that he requested be made.
Xahrx,
Do you see what you've done?
This thread was made specifically to encourage Austrians to stop using the BWF to attempt to criticize Keynesian economics, because it does not apply within a recession which is exactly the subject area where Keynesian economics originated and is still mainly involved. Throughout the thread I have been critiquing the relevance of the BWF in a recession from a Keynesian perspective. The response which you just gave me was excellent, and delved straight at the heart of Keynesianism, but it had practically nothing to do with the BWF.
These are exactly the kinds of arguments which need to be made against Keynesianism, not the broken window fallacy. We must stop focusing upon it (in relation to recessions) and start focusing upon the real faults of Keynesianism itself.
Yes and no. The BWF adds another shovel to dig the grave of Keynesianism. Once we understand that the problem in a recession is previous destruction of resources [aka malinvestment], then the BWF points out that more of the same, more destruction of resources, cannot possibly be the answer.
RobinHood, if you're going to critique Keynesianism, or indeed anyone's arguments, then follow Xarhx's example which you appreciate and do it right.
"You see, if people don't have a job, giving them any job at all [say digging and undigging ditches], even if accompanied by mass destruction [say breaking windows so someone can fix them], is just what the doctor ordered, and this must be true because it's Eco 101."
No, it's true because of the multiplier effect, because people will spend the money they earn and therefore return the economy back to full employment.
"They are just a bunch of Spirited Animals who don't know any better."
1. That's not animal spirits
2. No, they're simply individuals who are following their own best self interest. What might be in the best interest of the group might not be what's in the best interest of individuals.
"Root cause: Animal Spirits."
That's the supposed reason for the recession in the first place, but after it has hit it doesn't matter. From there it's supposed to be embodied within the liquidity trap.
"Immediate Cause: Hoarding."
Yes, but this is a major factor in Austrian models too.
"Solution: Taxation and Forced dishoarding."
Government spending through taxation, a surplus, or money printing
"Trivial side effect: Nuked cities here and there, or just a few broken windows if we are lucky."
No one would do this in the real world, it's just an example. IRL it's more likely to be public works projects.
xahrx, I know everyone (even Neodoxy) is showing a lot of love to your post, but I just got 2 cents to throw in there.
And that is completely wrong because if the resources are idle it's specifically because no one knows how to use them productively, and giving them something else to do 'in the meantime' means losses elsewhere because labor does not work in isolation.
This is NOT how to critique an opposing theory. You have merely pointed out that the Keynesian explaination for business fluctuations is different than the Austrian explaination.
A Keynesian could easily reply "And THAT is completely wrong because if the resources are idle it's specifically because aggregate demand has fallen in face of sticky prices. And if we don't give those resources something to do in the mean time we risk entering a deflationary spiral that could rival the great depression!"
And each "argument" is equally valid in the sense that if you grant each person their assumptions, you will reach the same conclusions they reach. But in the end, you may as well be talking to yourself. Because no one will be convinced but the converted. A hollow victory imo.
I mean, I see assertions like this...
The recovery is the very process of rediscovering what their productive use is. The stimulus by its very nature stifles that process.
and I think "sure, if you adopt some of the arguments of Austrian economics that assertion would makes sense. but would anyone that didn't already agree with you be convinced? Is he even trying to talk to anyone else but the converted?" And then I see sentences like this and I'm convinced you're not even trying to engage Keynesian arguments...
The fundamental point you're missing is that all idle labor, or idle resources of any type, do not exist in a vacuum: they are idle for a reason. Employing them to some other end by definitionmeans they are diverting resources from more productive uses,
Come onnnnnn! You are redefining idle mid-paragraph to suit your own argument. According to a Keynesian, if you were diverting a resource from a productive use, it *wouldn't be idle in the first place*!
I think it is funny how every thread even mentioning the word "Keynesian" leads to a ABCT v. Keynesian with random posters throwing down strange superlatives like "champion". Uggg. Why do we even needs "sides" and "champions" and this BS? It's like it is impossible for some people to just take Keynesian arguments on their own terms without devolving the conversation into "well my model says".
Anyways, that's my two cents. Hope you guys found it useful.
Neo, TY for your feedback. I was summarizing your position as I understood it, and am pleased to have your corrections.
I won't show its flaws, for as you said, xahrx already did an excellent job.
>> According to a Keynesian, if you were diverting a resource from a productive use, it *wouldn't be idle*!
To lable a resource 'idle', would a Keynesian have to say that the resources were either a)unowned, or that b)their owners had zero-reservation demand for them?
"I think it is funny how every thread even mentioning the word "Keynesian" leads to a ABCT v. Keynesian with random posters throwing down strange superlatives like "champion". Uggg. Why do we even needs "sides" and "champions" and this BS? "
Although not really your style:
http://mises.org/Community/forums/t/30336.aspx
"It's like it is impossible for some people to just take Keynesian arguments on their own terms without devolving the conversation into "well my model says"."
And I think we both know that's half of what's wrong with modern economics.
"Hope you guys found it useful."
I did.
This thread was made specifically to encourage Austrians to stop using the BWF to attempt to criticize Keynesian economics, because it does not apply within a recession which is exactly the subject area where Keynesian economics originated and is still mainly involved.
Throughout the thread I have been critiquing the relevance of the BWF in a recession from a Keynesian perspective. The response which you just gave me was excellent, and delved straight at the heart of Keynesianism, but it had practically nothing to do with the BWF.
This thread was made specifically to encourage Austrians to stop using the BWF to attempt to criticize Keynesian economics, because it does not apply within a recession
Says who?
Freedom of markets is positively correlated with the degree of evolution in any society...
It's like it is impossible for some people to just take Keynesian arguments on their own terms without devolving the conversation into "well my model says".
"The point of the BWF is unseen costs, and that 'economic activity' for its own sake isn't a source of wealth. You are arguing that when resources are 'idle' then the unseen costs don't apply and the fallacy doesn't apply."
Stop right here, no I am not, I'm arguing that if the Keynesian assumptions are true, then the BWF necessarily doesn't apply.
"As I said, 'idle' labor doesn't exist in isolation. It is idle for the very reason that people are unsure of the best way to employ it vis a vi the resources that aren't idle to achieve greater productivity. Any attempt to bring it into use without affecting non idle resources and leading to the unseen costs of the broken window analogy would mean the means of employing the idle resources would somehow have to be isolated from the rest of the economy so as not to affect prices, judgements, and resouce allocations. This is impossible in the real world, though it may be possible in an equation that describes an imaginary world. You yourself admit this is impossible because the whole point of employing idle resources is so they will spend their wages, which means even if you somehow get the money directly into their hands with no influence on the rest of the economy, they will then be making buying decisions which they otherwise would not have made, and which will affect the rest of the economy"
This isn't the BWF, this is an argument against sticky wages, the long term effects of stimulus upon the production structure, and the impossibility of government omniscience. It is not the BWF. You even admitted my point in the bolded area
"It has everything to do with the BWF because you don't have to literally break windows or do something similarly and obviously destructive to lead to the unseen costs. In the analogy the shop owner is forced by the actions of a vandal replace the window. All you have to do is substitute the government for the vandal who broke his window in the analogy, and the government doesn't even have to break his window. It just has to employ 'idle' labor to open a textile plant to manufacture environmentally safe stretchwall panels for offices, and suppose the shop owner was a dress maker, and now he has to bid for the same textile resources the plant wants to use..."
Once again, this is the problem of government ignorance, which I already pointed out as being an inherent reason why even someone who is a Keynesian should probably oppose stimulus.
"You can't employ idle labor without affecting how other resources are being used throughout the economy. You can't break a window in an idle plant without consequence. Because when someone does buy the plant, he will need to replace it. When someone does liquidate the plant, the glass will be a loss and harder to recycle, or a clean up cost. And when someone does want that idle labor which is no longer idle, it will not be available, or will not be available at the price it would have been."
This loss would be irrelevant if the Keynesian assumption was true and stimulus would cause the economy to recover.
"The real fault of Keynesianism at its base is it assumes what holds in some ideal fantasy world described by simultaneous equations applies to the real world. You can't get to the conclusion that 'idle' labor can somehow be employed without consequence unless you live on a blackboard where variables can be isolated and solved for, added and subtraced, multiplied and divided. In the real world it's a simple matter to explain to someone why paying people who are otherwise unemployed to dig and fill holes is a really dumb and even desctructive idea. And the best way to refute Keynesianism is to show that distinction between the real world and the blackboard."
Once again, not the BWF, rather an argument against government omniscience and the simplification of economic reasoning.
You have not used the idea that if labor was unemployed because consumer spending is not high enough while prices are sticky and will not recover in any reasonable time, that hiring by the state hiring the idle labor and resources, for no valuable long term purpose, in society the recession will cause those people who were hired, who were employed in another activity, to be diverted from the productive to unproductive. In 80 posts no one has done this because it can't be done, the BWF focuses upon full employment or certain patterns of government spending, not an omniscient government and the Keynesian assumptions.
"Says who?"
In response to what was stated before or after the comma?
If it was after the comma, then says me, Student, and presumably everyone who has stopped posting here, starting with the OP and continuing on to my previous post.
If it was before the comma, then says the creator of this thread.