"since the new deal and Keynesianism failed to end the great depression" That's patently and demonstrably not true. Government spending during WW2 put people to work, put money in their pockets, stimulated private spending and investment, created demand for more products, created the middle class as we know it. Whereas Reaganomics destroyed all of the above. Shipped jobs overseas, gutted the middle class, reduced domestic investment, increased unemployment, lowered wages, deregulated speculators, lowered income taxes on the richest upper class, and facilitated the greatest income redistribution towards the upper classes since 1920s. In other words, created all the prerequisites for an economic collapse, which promptly came in 2008. So now you're argument is: do nothing, don't change anything, keep all the things that brought us here, keep pushing the gas pedal after you've plunged off a cliff and into the sea.
I'm just annoyed by how utterly lazy/dishonest many libertarians are on this subject.
First of all, I'm not an economist, so it's not my job to know all the details. The very fact that I study this stuff extra-curricularly is a sign of curiosity and motivation, not laziness. Second of all, you're the one who's debating internet flunkies on a debate forum rather than citing and debunking real Austrian economists such as Bob Murphy, Jorg Guido Hulsmann or Joseph Salerno whose work has significantly updated Rothbard's foundational but aging work on the subject which you guys seem to content yourselves with refuting.
Clayton -
1. So "people are saving (hoarding) all their money", on the one hand, and yet "Government provides people income". What happened to all the money they hoarded? Why should the govt give money to a bunch of hoarders? Don't they have enough with all their hoarded money?
[Why give him anything?]
2. There is "nothing to invest in" with all the money they "hoarded", on the one hand, yet when the "Government provides people income", they suddenly know what to do with it. Their hoarded money was no good. It had to be hoarded, not spent. But the money the govt gives them will suddenly not be hoarded, it will be spent for sure. [This is even more absurd when we realize it's the same money, see point 4].
3. "...people are saving (hoarding) all their money," and yet "they have no jobs". That's a pretty good trick. I would love to know how to save (hoard) money without a job.In my experience when you don't have a job you have to eat into your savings, it is impossible then to hoard money and not spend. At least it was for me. My landlord and hunger pangs made sure of that.
[Hard to hoard under these circs].
4. "That's what fiscal stimulus is for", to make people spend money. And yet, when you take money away from people, say a five dollar bill, [which is what the govt has to do in order to provide "fiscal stimulus", which means simply giving that same five dollar bill back], how can they spend that five dollar bill? The govt took it away, didn't it? Unless you mean that they will spend the money taken away from them when they get it back. But why should they? Why won't they just put it right back into the hoard where it was before?
5. How can there be both "no jobs" and "nothing to invest in"? Hire those jobless for cheap and make money selling your cheaper wares to the hoarders.
6. In any case, have you read the Austrian books that discuss the absurdity both of the Keynesian statement of the problem and the Keynesian proposed solution? Can you summarize what they say, and then refute them?
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
John,
So let me get this straight. You don't know about or aren't interested in the real argument in favor of fiscal stimulus, but you attack a straw man...because...what? You're lazy? You're dishonest?
Clayton,
No broken window. The resources are idle.
The cause of the GD is irrelevant.
Smiling Dave,
1-2. How much money would you spend if you and a quarter of the nation were suddenly unemployed, with no reason to expect the economic conditions to change anytime soon?
3. ...Easily?
4. Deficit spending means that government can spend without immediately taking other people's money.
5. That could happen. It'd be great if it did. It didn't.
6. That would be relevant if I were criticizing Austrian economists rather than forum posters. But I've read much of what Hayek has to say on the subject. I must admit I find modern Austrians to be rather dull on these and indeed pretty much all subjects.
Second of all, you're the one who's debating internet flunkies on a debate forum rather than citing and debunking real Austrian economists such as Bob Murphy, Jorg Guido Hulsmann or Joseph Salerno whose work has significantly updated Rothbard's foundational but aging work on the subject which you guys seem to content yourselves with refuting.
Woah, let's get the order of posting straight here. The OP quoted an argument that he couldn't make fit with his ideology, so he posted it here for you guys to "deconstruct". Coase and I sought to point out that all the posters were doing were rehashing any Austrian talking point they thought applied to the quotation in question. It's a little disingenuous that you'd tell us to deal with the "big guns" when the only mainstream arguments brought up here are caricatures of caricatures.
(And if you think the quotation provided by the OP came from an academic economist...)
I agree with EconomistinTraining and would like to add that Mr. inTraining looks excellent in red.
Right, this is the key point. The economy may get locked into one equilibrium because of the self fulfilling prophesies of entrepreneurs.
At this point, the argument that make the most sense to me are "equilibrium never" type statements and disregarding it in favor of a market as ever changing process approach. I do not see how a final general equilibrium analysis will tell us how any inconsistency is removed. All it seems to say is that courses of action are consistent with each other, which tells me nothing useful. If anything all you can do if you are in a high position of political office is hope you choose the right path, based off of a perhaps an educated hunch, cross your fingers, and hope for the best - particularly if expectations as a whole are very obviously grim and in dire straits.
"As in a kaleidoscope, the constellation of forces operating in the system as a whole is ever changing." - Ludwig Lachmann
"When A Man Dies A World Goes Out of Existence" - GLS Shackle
I agree with EconomistinTraining and would like to add that Mr. inTraining looks excellent in red
Something like that.
Resources are idle only because it is not profitable to employ them. Therefore, stimulus whose purpose is to employ idle resources is necessarily spending on unprofitable (money-losing) endeavors. That is logically equivalent to tossing bricks through windows.
Except that prices generally rise. The same money buys less now than it did before government stimulus. Oops.
Equilibrium:
The resources have no alternative use. There is no opportunity cost for x number of years where x is a number too large for any decent and sane person to allow the resources to stay idle (hence "in the long run we're all dead").
Coase:So let me get this straight. You don't know about or aren't interested in the real argument in favor of fiscal stimulus, but you attack a straw man...because...what? You're lazy? You're dishonest?
Huh? The only two people bringing up this nonsense argument both said they don't even buy it. I ask why even bring it up, then...and your response is that I don't know about or must not be interested in "the real argument" in favor Keynesianism? All I asked was why you would bother bringing up an argument you didn't even believe was correct, and somehow I'm attacking a straw man?
1) Again, if you don't buy the argument, why is that the argument you're bringing up and defending?
2) If the argument you're defending is not "the real argument", again why bring it up, and why don't you enlighten everyone with this supposedly unknown "real argument" for Keynesian fiscal stimulus?
You attacked a straw man when commenting on the effectiveness of wwII as fiscal stimulus. Pointing out the straw man is why I commented here in the first place, and I did not wish to allow you to distract from that purpose, thus my response to you. Also, you seem confused. I did present the real argument.
Let me put it this way: you call this argument nonsense. What about it is nonsensical?
"Government spending during WW2 put people to work,"
It does that now.
"put money in their pockets,"
"stimulated private spending and investment,"
It does that now. Are you saying this is always a good thing?
"created demand for more products,"
Can you expound on how the demand is created. You're just saying it was. It can be assumed that if you give someone money they will spend or invest it. It cannot be assumed that it creates demand in an individual. The demand might already have been there, but there was no money. It might be possible to say that it is a bad thing. For instance, what if all the money is used to pay off debts? Wouldn't the lenders raise their lending rates, with their now grim outlooks for future income via interest?
"created the middle class as we know it."
Can you describe this process? Are you saying that there was no middle class before, or that the middle class was different afterward? Is that good or bad, and why? Who is the middle class?
"Whereas Reaganomics destroyed all of the above."
What are the terms that make something Reaganomics? We should discuss this to make your explanation relevant. Define. Also, some examples of how these things were destroyed.
"Shipped jobs overseas,"
Please explain how Reaganomics did this. Is Reaganomics an acting party in itself? How did these "shipped" jobs remove money from pockets? How did it hamper spending and investment? How did it reduce demand for products? How did it destroy the middle class, as we know it?
"gutted the middle class,"
Can you describe this "gutting" process? What does it entail? How does it happen? Who does it? Why?
"reduced domestic investment,"
What specific act reduced domestic investment? Is it always better to have domestic investment, even if opportunities outside a nation have promising returns? What role might such returns play?
"increased unemployment,"
Did it? If so, by what application? Are there other factors that might have contributed to unemployment?
"lowered wages,"
Were wages lowered across the board, or only in some areas. In the areas that were lowered, were they already being held artificially high? If so, does this always have negative effects? Should we always be raising wages? What are the implications of lowering wages? Were they artifically lowered?
"deregulated speculators,"
Was the regulation good? Is that merely an opinion? Were they still somewhat regulated? At the time, were they TOO regulated? What were the regulations? How were the regulations having an impact to begin with"
"lowered income taxes on the richest upper class,"
Is this a bad thing? Is it always bad, or just sometimes? Should taxes always be raised? Is there a ceiling for when it becomes a problem to raise taxes? How is that ceiling determined? What is the lower limit for taxes? Is it always appropriate to raise taxes for the upper class and lower them for the lower and middle class? How are the classes distinguished?
"and facilitated the greatest income redistribution towards the upper classes since 1920s."
Was it a redistribution, or was it earnings? Should we consider all earnings as a redistribution? Is redistribution always bad? If so, was it proper to do so with the New Deal? Is redistribution okay as long as it isn't to the upper class? Who did the distributing? Was the redistribution a function of Reaganomics? If so, was Reaganomics a mandate that was being followed rigorously at all times during that period? Does this have any bearing on whether or not any of this is truly related? Are there other factors?
"In other words, created all the prerequisites for an economic collapse,"
Are all those things prerequisites for an economic collapse? Are there other things that could also be prerequisites? How do they relate to each other? How do they relate across a timeline to the economic collapse itself? What are the causal relations? ARE THERE OTHER FACTORS?
"which promptly came in 2008."
Was it prompt? Were there people that saw it coming earlier? Were they predicting it via the prerequisites you described above?
"So now you're argument is: do nothing, don't change anything, keep all the things that brought us here, keep pushing the gas pedal after you've plunged off a cliff and into the sea."
Is that the argument? Is it possible this is a loose interpretation of an argument? How does the argument work or not work? Is the entire argument false? Did anyone actually make the argument that pushing the pedal while falling down a cliff is the way to go? Are you implying that the argument is to keep doing what we are doing? Was the argument saying to keep doing what we are doing, or was it saying something else? Is it possible it was an argument that we should stop doing certain things that we are currently doing? Is this really just your personal interpretation of the argument? Have we plunged off a cliff? Are there things we can do that will help? What are those things? Is doing nothing automatically a bad thing? What if we do something that makes it worse? What is the argument against the argument? What might be negative consequences of the alternative proposal? ARE THERE OTHER FACTORS?