General

Re: More keynesian mumbojumbo

MatthewWilliam — Sun, 18 Jan 2009 18:19:38 GMT

Hoppe perfectly describes Keynes' discovery of underemployment equilibrium as the discovery of a square circle.

Re: More keynesian mumbojumbo

Sphairon — Sun, 18 Jan 2009 12:05:16 GMT

there are NOT enough jobs in the economy to sustain full employment, due to a shortfall in aggregate demand

I sometimes wonder, do Keynesians realize that there's a subjective element to demand? Maybe "aggregate demand" has fallen because people's time preference has changed and capital as well as labor have to adapt. Then what? Inflate the hell out of them to make them buy now?

Theoretically, wages could drop to $1 an hour and, ceteris paribus, no firms will hire.

I don't understand. It's not efficient for them to produce when wages are high. Then wages drop. Why is it not more efficient to produce, then?

This means that perfectly good productive capacity has to be eliminated, and the people who have a stake in them to suffer, in order for the economy to regain equilibrium again.

It has by no means to be eliminated. It may just be bought up and re-used. Markets have this tendency to not waste too much valuable capital, I don't see why he thinks it would be destroyed.

More keynesian mumbojumbo

fezwhatley — Sun, 18 Jan 2009 09:25:27 GMT

From another forum

"productive stagnation results primarily in cyclical unemployment. In this scenario, there are NOT enough jobs in the economy to sustain full employment, due to a shortfall in aggregate demand (that can be caused by a variety of factors, such as a decline in the money supply or low consumer confidence in the market). Because that's the case, the market will not find wage equilibrium nearly as easily as it did previously; businesses will not hire more workers because, microeconomically, they're already producing as much as is efficient for them to do so (remember, firms produce at at the level where marginal revenue equals marginal cost). Theoretically, wages could drop to $1 an hour and, ceteris paribus, no firms will hire. So, can the market get out of such a recession itself? Well, yes...but here's what has to happen. The market has to first liquidate a number of firms (they have to go bankrupt) so that existing firms will find becoming larger is finally microeconomically efficient. This means that perfectly good productive capacity has to be eliminated, and the people who have a stake in them to suffer, in order for the economy to regain equilibrium again. Or, we could just increase the amount of liquidity in the economy through deficit spending, maintain existing productive capacity, and have the economy pay for its salvation through the lack of GDP decline."

i mean, i could pick through line by line. Like it insinuates, that stagnating industries need to be bailed out, and off course thats better than liquidation. This generally sounds like a keynesian shock doctrine, where you have this stagnating rotating economy, and all it needs is liquidity to employ new resources? but it ends with a curious non-sequitor.