Smug Prius owners

[jeff]

The original context of the "long run" quote can be seen at http://www.economicshelp.org/2008/10...jm-keynes.html

It's possible that in this thread the "in the long run we're all dead" could be taken as a response to the notion that in the long run the market will correct itself, eliminate dangerous products and pollutants (etc...) but by then we're all dead, so what good is it...

[downunder]

It's possible that in this thread the "in the long run we're all dead" could be taken as a response to the notion that in the long run the market will correct itself, eliminate dangerous products and pollutants (etc...) but by then we're all dead, so what good is it...

That was the idea (and I believe the context Keynes used it in, except a macro context rather than micro-externalities )

[Hauptman]

(the real estate bubble was just a re-inflation of the dot-com bubble)

Don't forget the surge into oil futures that started after that too.

While inflation regarding consumer prices remained relatively low over the last 20 years, inflation in the investor markets has been out of control.

This leads back to the absurd amount of money that's been available due to far too low interest rates (see the other thread), and tax breaks for investors.

What is even more sickening is that the largest investment firms/banks have now realized that they can make more profit using that liquidity to invest for themselves instead of worrying about their clients anymore. And why not since they have such a huge insider advantage at their disposal.

[I_luv_saber]

The original context of the "long run" quote can be seen at http://www.economicshelp.org/2008/10...jm-keynes.html

Sure, but the point still stands. Keynes calls for direct intervention via monetary policy, stimulus, and interest rates, which only makes the problem worse. The idea is, how can the government possibly know when/how much/how long to engage in these altering practices and how can they possibly act fast enough even if they could? The idea is the economy is far, far more complex than Keynesian government gives it credit for, and it's actions can have far further reaching consequences than it's aware of. Set up a good structure, but when you try to force a result bad things can happen.

I'm reminded of a Zen proverb:

“Sitting quietly, doing nothing, spring comes, and the grass grows by itself”

It's possible that in this thread the "in the long run we're all dead" could be taken as a response to the notion that in the long run the market will correct itself, eliminate dangerous products and pollutants (etc...) but by then we're all dead, so what good is it...

I hadn't picked up on that. This is where Inq and I tend to part ways. I've no problem with the government banning harmful substances and ensuring they are not being used in products, etc. It all depends on the kind of regulation talked bout.

Don't forget the surge into oil futures that started after that too.

While inflation regarding consumer prices remained relatively low over the last 20 years, inflation in the investor markets has been out of control.

This leads back to the absurd amount of money that's been available due to far too low interest rates (see the other thread), and tax breaks for investors.

What is even more sickening is that the largest investment firms/banks have now realized that they can make more profit using that liquidity to invest for themselves instead of worrying about their clients anymore. And why not since they have such a huge insider advantage at their disposal.

Indeed.

[jeff]

(snip)

“Sitting quietly, doing nothing, spring comes, and the grass grows by itself”

That's lovely. If only the economy worked the same way. Yet, we do put fertilizer down and plant crops, don't we?

Stimulus efforts work. When they're not needed, stop. FDR stopped too soon.

From today's NYT:

"Judging Stimulus by Job Data Reveals Success" - several economic research firms say the stimulus bill added "1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs" I recommend reading the entire article at
http://www.nytimes.com/2010/02/17/bu...l?ref=business

Even Haley Barbour in Mississippi uses stimulus to create jobs: http://www.nytimes.com/2010/02/17/bu...Q4Bkn3vJDjo6DA

I hadn't picked up on that. This is where Inq and I tend to part ways. I've no problem with the government banning harmful substances and ensuring they are not being used in products, etc. It all depends on the kind of regulation talked bout.

I think it simply irrational to let the public be harmed in favor of an ideological principle that claims somehow the process will stop in some future time by some means not explained - which will do nothing for those who have been harmed.

BTW: also in NYT's business section, a bunch of Old School bankers all speaking up in favor of vigorous regulation of banking and brokerage: Reed, Bogle, Soros... Those guys are from the heart of capitalism, not some wide eyed Marxists. It sounds like they would go further than what Paulson would do.

[I_luv_saber]

Stimulus efforts work. When they're not needed, stop. FDR stopped too soon.

Stimulus effort appear to work, if you look at the short-term. Of course, if the economy was recovering anyway, how would you know whether it's economic recovery or the stimulus at work?

Also, my big problem with this, is that Keynes advocated expansion of government in recession, and a scaling back when things got better. I think someone forgot to tell them about the latter part .

You also forgot to mention Keynesians say FDR stopped too soon. Not even a majority of historians and economists agree that the New Deal ended the depression. I refer you to the parable of the broken window.

From today's NYT:

"Judging Stimulus by Job Data Reveals Success" - several economic research firms say the stimulus bill added "1.6 million to 1.8 million jobs so far and that its ultimate impact will be roughly 2.5 million jobs" I recommend reading the entire article at
http://www.nytimes.com/2010/02/17/bu...l?ref=business

Even Haley Barbour in Mississippi uses stimulus to create jobs: http://www.nytimes.com/2010/02/17/bu...Q4Bkn3vJDjo6DA

We're really going to try to say "the stimulus is working" after so short a time? See, this is the short-term I was talking about. Take a look at this page, which sums up the another perspective of the Depression.

I think it simply irrational to let the public be harmed in favor of an ideological principle that claims somehow the process will stop in some future time by some means not explained - which will do nothing for those who have been harmed.

I certainly agree, as I said.

BTW: also in NYT's business section, a bunch of Old School bankers all speaking up in favor of vigorous regulation of banking and brokerage: Reed, Bogle, Soros... Those guys are from the heart of capitalism, not some wide eyed Marxists. It sounds like they would go further than what Paulson would do.

I don't think I ever toted the Marxism comparison along, did I? Keynesian economics is well-accepted, it's not a left field thing. That does not, however, make it right. Our endless boom/bust cycles are evidence of that. And why would government NOT accept it?

[Hauptman]

Also, my big problem with this, is that Keynes advocated expansion of government in recession, and a scaling back when things got better. I think someone forgot to tell them about the latter part .

I completely agree with this, and it is a huge problem. But remember that it is a political problem, and not a problem with the underlying economic theory.

Deficit spending during an economic downturn makes sense in that cutting back gov't expenditures will cause more shrinkage of the economy, and laying off gov't workers when there is already high unemployment is damaging too.

The problem you hit on is that the first thing to be done when the economy recovers is to pay off that accumulated debt, and not allow spending to increase beyond a healthy level. If we have an economic boom it is foolish to increase gov't spending at the same rate of increase; spending should be tied to long-term revenue projections, and not short-term revenue increases.

But like I said, that's a political problem. Politicians, like CEOs, are putting short-term personal interests ahead of the long-term interests of the people relying on them.

[fencerchica]

You also forgot to mention Keynesians say FDR stopped too soon. Not even a majority of historians and economists agree that the New Deal ended the depression.

Not arguing that the New Deal single-handledly ended the Great Depression, but its pro-labor policies (that were later added to during WWII) were a boon to the recovery of the American middle class in the middle of the 20th century. They were a massive reversal of the policies of a preceding era in which unions were often even met by the gunfire of federal troops.

[I_luv_saber]

I completely agree with this, and it is a huge problem. But remember that it is a political problem, and not a problem with the underlying economic theory.

However I think it's an inherent problem in the system. Just as why true socialism, IMO, would never work. While the idea might be nice, human nature would simply never allow it to function as it is intended. Again, this is an issue with Keynesian economics. It ignores many important factors in the micro level, and ignores human motivation.

[jeff]

Stimulus effort appear to work, if you look at the short-term. Of course, if the economy was recovering anyway, how would you know whether it's economic recovery or the stimulus at work?

Probably because we can trace the specific funding to the jobs they created, which wouldn't have happened otherwise. The people who made the jobs estimates are economists who studied the facts, so it's not like they just put a finger in the wind...

Also, my big problem with this, is that Keynes advocated expansion of government in recession, and a scaling back when things got better. I think someone forgot to tell them about the latter part .

Yes, indeed, though not everybody considers that a problem. We shouldn't assume that everyone assumes government-provided social networks etc is a problem.

You also forgot to mention Keynesians say FDR stopped too soon. Not even a majority of historians and economists agree that the New Deal ended the depression. I refer you to the parable of the broken window.

That's pretty definitional: "Keynesians are specifically the economists who think FDR stopped too soon, and vice versa". A tautology!

Not sure what you mean by the broken window - the only political metaphor I know of that one is the one about "minor" crime enforcement. Help a fella out, willya?

We're really going to try to say "the stimulus is working" after so short a time? See, this is the short-term I was talking about. Take a look at this page, which sums up the another perspective of the Depression.

How do you know when an antibiotic helps an infection? When fever drops. You don't have to wait for historical perspective.

I don't see any reason to consider the guys at that website authoritative. I think they mis-state Keynes argument, and their post-war analysis is IMO reductionist and largely wrong. Pro-labor legislation helped cause the depression? I think that's nonsense. They assert that the war didn't end the depression, but I didn't think so either - I think it was pre-war Keynesian support that ended it until we foolishly suspended it about 1937 until political pressure from the right. Post-war, the US emerged essentially undamaged and unchallenged after the war, and triumphed economically while other countries clawed their way back from disaster.

I certainly agree, as I said.

Yes - we agree in some areas.

I don't think I ever toted the Marxism comparison along, did I?

No - I'm not saying you did. There ares some other people on the board who like to throw out "Commie!" accusations. You're not one of them.

Keynesian economics is well-accepted, it's not a left field thing. That does not, however, make it right. Our endless boom/bust cycles are evidence of that. And why would government NOT accept it?

I agree to the first sentence of course, and that "well-accepted" does not prove it correct - I just like to remind people that Friedmanism isn't a "truth" either, as some people like to claim. I think boom/bust cycles have been shown to exist without Keynesian intervention, so we ought not blame them on Mr. K!

[I_luv_saber]

Probably because we can trace the specific funding to the jobs they created, which wouldn't have happened otherwise. The people who made the jobs estimates are economists who studied the facts, so it's not like they just put a finger in the wind...

Yes but there's been all sorts of talk about the massaging that's gone on to the "jobs" stats.

I've seen nothing concrete that shows it has worked.

Yes, indeed, though not everybody considers that a problem. We shouldn't assume that everyone assumes government-provided social networks etc is a problem.

To a point, sure. But if we're forever expanding and never contracting, surely that can't be a good thing, no?

Not sure what you mean by the broken window - the only political metaphor I know of that one is the one about "minor" crime enforcement. Help a fella out, willya?

Parable of the broken window, or the broken window fallacy.

I don't see any reason to consider the guys at that website authoritative. I think they mis-state Keynes argument, and their post-war analysis is IMO reductionist and largely wrong. Pro-labor legislation helped cause the depression?

To a point, there could be some merit to it. This video of Hayek speaking on trade unions has some interesting perspective. He raises some interesting points.

EDIT: His views on Keynes are interesting as well.

I think that's nonsense. They assert that the war didn't end the depression, but I didn't think so either - I think it was pre-war Keynesian support that ended it until we foolishly suspended it about 1937 until political pressure from the right.

So let me ask again, in a slightly more straightforward fashion: If that were the case, and the simple spending of money and hiring on the part of the government is what took us out of the recession, why not just pay massive amounts of people to do nothing? Just so we can get some stuff done in the meantime?

The truth is, Roosevelt changed gears so often throughout the course of his Presidency, I feel it's unfair to point to just the items we happen to agree with as the winners.

I think boom/bust cycles have been shown to exist without Keynesian intervention, so we ought not blame them on Mr. K!

They do to a point. What I am arguing is that Keynesian intervention does not help either, and in fact makes it worse by "storing it up" for bigger busts later, whereas it may have only been a small recession before.

[jeff]

To a point, sure. But if we're forever expanding and never contracting, surely that can't be a good thing, no?

No, but it's not clear to me that we can extend the line out to infinity, either. I would rather judge an activity based on its results, not on hypothetical "what if we do even more things".

Parable of the broken window, or the broken window fallacy.

Thanks - the only one I knew of was about having broken windows in buildings leads to bad neighborhoods and more crime.

Metaphors are fun but I don't think it applies. When Keynesian efforts build needed (!) bridges and schools, the pane of glass didn't exist at all.

I note that the wiki article's neutrality is called into question.

To a point, there could be some merit to it. This video of Hayek speaking on trade unions has some interesting perspective. He raises some interesting points.

I'll listen when I can use sound...

So let me ask again, in a slightly more straightforward fashion: If that were the case, and the simple spending of money and hiring on the part of the government is what took us out of the recession, why not just pay massive amounts of people to do nothing? Just so we can get some stuff done in the meantime?

Joke opportunity: "That's what we're doing right now for <pick name of whatever group you want to malign>". Not so joking: I've heard conservatives say this is a good thing to do when the recipients are defense contractors - I'm not kidding.

Serious answer: because if you're going to spend money you should derive material value from it.

The truth is, Roosevelt changed gears so often throughout the course of his Presidency, I feel it's unfair to point to just the items we happen to agree with as the winners.

Changing activities to reflect conditions is a good thing, rather than being doctrinaire and keeping to the same policy no matter what the circumstances. Nonetheless, FDR is noted for this major part of his policy, and its fair to associate him with this.

Look at the "Lower Taxes!" crowd. No matter what the question or problem is, the answer is always "Lower Taxes!", since that particular nostrum is supposed to both warm a cold and cool a fever...

They do to a point. What I am arguing is that Keynesian intervention does not help either, and in fact makes it worse by "storing it up" for bigger busts later, whereas it may have only been a small recession before.

I don't believe that at all.

[I_luv_saber]

No, but it's not clear to me that we can extend the line out to infinity, either. I would rather judge an activity based on its results, not on hypothetical "what if we do even more things".

If we do not recede, it's only logical! Every time there is a recession (unless you are saying Keynesianism can avoid that altogether?) we expand, we never recede, eventually we get "too big".

Thanks - the only one I knew of was about having broken windows in buildings leads to bad neighborhoods and more crime.

Metaphors are fun but I don't think it applies. When Keynesian efforts build needed (!) bridges and schools, the pane of glass didn't exist at all.

I note that the wiki article's neutrality is called into question.

I think it's quite applicable, actually.

I would note only the section on "Different Interpretations" neutrality is called into question

I'll listen when I can use sound...

I also threw another video in there in an edit that's applicable to discussion.

Serious answer: because if you're going to spend money you should derive material value from it.

But that's not what it hinges on. It hinges on the spending of money and the hiring people. The material goods created have nothing to do with the actual recovery, it's the employment of people and the spending of money.

So, in theory, it would still work if we paid people to do nothing, yeah?

(obviously getting something out of it is sensible, I'm just pointing out how silly the concept is if you look at it in it's true most raw form.)

Changing activities to reflect conditions is a good thing, rather than being doctrinaire and keeping to the same policy no matter what the circumstances. Nonetheless, FDR is noted for this major part of his policy, and its fair to associate him with this.

Sure it is, but it's just glorified correlation/causation. If he pursued all sorts of different policies how can you put a firm finger on X as what the solution was when he also did Y and Z? Especially since the results were farther off.

I don't believe that at all.

Nor did I expect you to. I'm simply clarifying that I'm not arguing Keynesian policies alone will start recessions - just that the policy does not help, and has the ability to inflict more harm.

[jeff]

If we do not recede, it's only logical! Every time there is a recession (unless you are saying Keynesianism can avoid that altogether?) we expand, we never recede, eventually we get "too big".

Oh, that's undoubtably true. Any monotonically growing function will tend to infinity. In infinite time. What I don't see is proof that we have the right to extend the trend line to the right forever...

Once upon a time, the Phone Company, back when it was Good Old Ma Bell, extrapolated the growth of telephone operators forward with the conclusion that at some point everyone would be a telephone operator.

So, the answer is that we don't know it keeps rising just because it has previously. In the meantime, we should judge actions based on their effects, not on this hypothetical risk.

I'll observe that reduced intervention in regulatory oversight is a big factor in what got us in trouble in this last go-around...

I think it's quite applicable, actually.

I would note only the section on "Different Interpretations" neutrality is called into question

When the gummint built a school, or created Hoover Dam, just what was the prior "pane of glass" that was being broken?

I also threw another video in there in an edit that's applicable to discussion.

Okeydokey.

But that's not what it hinges on. It hinges on the spending of money and the hiring people. The material goods created have nothing to do with the actual recovery, it's the employment of people and the spending of money.

So, in theory, it would still work if we paid people to do nothing, yeah?

Maybe. In which case, people advocating welfare were right all along, whether or not the recipients actually got off welfare and got real jobs, and whether or not welfare was 'workfare'.

(obviously getting something out of it is sensible, I'm just pointing out how silly the concept is if you look at it in it's true most raw form.)

Considering that's "welfare as it used to be", and "corporate welfare as it still is" - it's not an absurd proposition to everyone.

Yonder jerk loafer with state money in his pocket goes to store and buys a loaf of bread, or a pair of loafers for his feet. Store owner generates sales, purchases more goods from manufacturers, and hires more staff. Eventually, the loafer's not-so-lazy sister sees a Help Wanted sign and gets a job...

let me have a little fun, eh?

Sure it is, but it's just glorified correlation/causation. If he pursued all sorts of different policies how can you put a firm finger on X as what the solution was when he also did Y and Z? Especially since the results were farther off.

Are you saying he's not primarily known (in the economic sense) for the New Deal and for Keynesian intervention?

Nor did I expect you to. I'm simply clarifying that I'm not arguing Keynesian policies alone will start recessions - just that the policy does not help, and has the ability to inflict more harm.

The ability to inflict harm may be true, while also the ability to do good is clear - to me, at least.

[I_luv_saber]

Yay for slow business again! More time for posting!

Oh, that's undoubtably true. Any monotonically growing function will tend to infinity. In infinite time. What I don't see is proof that we have the right to extend the trend line to the right forever...

Where is the scaling back of government following recessions, to previous levels?

So, the answer is that we don't know it keeps rising just because it has previously. In the meantime, we should judge actions based on their effects, not on this hypothetical risk.

Just like we don't know the market recovers from Keynesian actions, eh?

We should judge actions on practicality, not what they are theoretically supposed to accomplish. I've not seen the scaling back that is supposed to follow expansions after a market has recovered. And the reason why is even logical to boot! This is not a theoretical hitch in Keynesianism - it's a fundamental flaw. He ignored the human factor.

I'll observe that reduced intervention in regulatory oversight is a big factor in what got us in trouble in this last go-around...

I agree some regulation is needed. I would be curious to know exactly which regs that were cut do you feel led to problems and why?

When the gummint built a school, or created Hoover Dam, just what was the prior "pane of glass" that was being broken?

That's not the (only) point to the parable. One interpretation is that which you point out, that something was destroyed hence we lose the value of that something, regardless of if the galss man benefited.

Another point that is made however, is the fallacy of redistribution. The glass man has made money, hooray for the glass man - but who's to say what the shoemaker would have spent that money on otherwise? Bread from the baker?

Another quick video that sums it up nicely.

http://www.youtube.com/watch?v=Hrg1CArkuNc

However, that said, I'm not opposed to all government project just because. If they are producing something NEEDED, something necessary, then fine. It's pork spending I object to.

Maybe. In which case, people advocating welfare were right all along, whether or not the recipients actually got off welfare and got real jobs, and whether or not welfare was 'workfare'.

I do hope you're being tongue-in-cheek.

Yonder jerk loafer with state money in his pocket goes to store and buys a loaf of bread, or a pair of loafers for his feet. Store owner generates sales, purchases more goods from manufacturers, and hires more staff. Eventually, the loafer's not-so-lazy sister sees a Help Wanted sign and gets a job...

But that state money was stolen from other people in the first place! He's just spending everybody's money! Or else, why not take it to the extreme and have the state issue twice the amount they are now in order to generate even MORE sales and stimulate the economy even more? We do not, because that takes more money away from taxpayers that they could have spent on sales. That's not even to mention the fact that as the taxpayer money passes through the bureaucracy, some money is going to "stick" in order to pay for people salaries, office supplies, etc. Hence the $1k the government takes from me may only end up with $900 going into actual projects.

I grant you that the money that is taken from tax payers is needed for some things, and I agree that it's needed for a functioning society - but we need to remember that government spending is simply us spending.

Are you saying he's not primarily known (in the economic sense) for the New Deal and for Keynesian intervention?

Not that he is not known for it - that he pursued a plethora of different policies. So how do you know it was those policies that helped?

The ability to inflict harm may be true, while also the ability to do good is clear - to me, at least.

I am not so sure. The inability for it to be effective all comes down to the economic calculation problem.

[jeff]

Yay for slow business again! More time for posting!

Are market fans really supposed to say that?

Where is the scaling back of government following recessions, to previous levels?

US govt as % of GDP decreased in the 1990s (and grew again in the 200s...) It is NOT an ever-increasing function.

Just like we don't know the market recovers from Keynesian actions, eh?

We should judge actions on practicality, not what they are theoretically supposed to accomplish. I've not seen the scaling back that is supposed to follow expansions after a market has recovered. And the reason why is even logical to boot! This is not a theoretical hitch in Keynesianism - it's a fundamental flaw. He ignored the human factor.

I agree re: practicality, which is why I like Keynesian incentives to recover from a down market. They work. To the latter part: that seems endemic to economists, and is a large part of how I think of Friedman.

I agree some regulation is needed. I would be curious to know exactly which regs that were cut do you feel led to problems and why?

Glass-Steagal for a starter. We also cut down on environmental and anti-trust regulatory enforcement. We especially did not keep regulations in sync with business practices, and in the last 20 years a completely new and unregulated market in derivatives grew to immense proportions. That's what damn near drowned us all.

That's not the (only) point to the parable. One interpretation is that which you point out, that something was destroyed hence we lose the value of that something, regardless of if the galss man benefited.

Which is how I took it...

Another point that is made however, is the fallacy of redistribution. The glass man has made money, hooray for the glass man - but who's to say what the shoemaker would have spent that money on otherwise? Bread from the baker?

Another quick video that sums it up nicely.

http://www.youtube.com/watch?v=Hrg1CArkuNc
However, that said, I'm not opposed to all government project just because. If they are producing something NEEDED, something necessary, then fine. It's pork spending I object to.

I'm not buying "fallacy of redistribution", but since we agree on the conclusion "something NEEDED" I see no point to pursue the issue.

I do hope you're being tongue-in-cheek

Of course, but I have indeed heard right-wingers suggest the same for defense contractors.

But that state money was stolen from other people in the first place! He's just spending everybody's money!

I take issue with the verb "stolen". That begs the question of the legitemacy of taxation.

Or else, why not take it to the extreme and have the state issue twice the amount they are now in order to generate even MORE sales and stimulate the economy even more? We do not, because that takes more money away from taxpayers that they could have spent on sales. That's not even to mention the fact that as the taxpayer money passes through the bureaucracy, some money is going to "stick" in order to pay for people salaries, office supplies, etc. Hence the $1k the government takes from me may only end up with $900 going into actual projects.

I grant you that the money that is taken from tax payers is needed for some things, and I agree that it's needed for a functioning society - but we need to remember that government spending is simply us spending.

That's why it's always been referred to as "priming the pump" - not replacing it.

Not that he is not known for it - that he pursued a plethora of different policies. So how do you know it was those policies that helped?

That's my understanding of how FDR administration policies affected the Depression. If I'm wrong, so be it, but I'd like to hear something concrete other than what feels like "I'm rejecting the idea that the FDR policies I'm opposed to were the ones that were effective."

I am not so sure. The inability for it to be effective all comes down to the economic calculation problem.

That sounds to me like begging the question. If at one fell swoop you're going to claim that Keynesian economics is proved wrong by a calculation problem you'll have to be a little more forthcoming with evidence.

[I_luv_saber]

Are market fans really supposed to say that?

Maybe - when it's not a Keynesian economy we're in!

US govt as % of GDP decreased in the 1990s (and grew again in the 200s...) It is NOT an ever-increasing function.

But did it return to previous levels is the question? Or else your net is still expanding...

I agree re: practicality, which is why I like Keynesian incentives to recover from a down market. They work.

Debatable.

To the latter part: that seems endemic to economists, and is a large part of how I think of Friedman.

That's funny - when you look at their works it seems (for the most part) Keynes tended to ignore human motivation and action far more than Friedman ever did. In fact Friedman and indeed most free marketeers tend to focus on that.

You see, the problem with Keynes is he got hung up on the macro while ignoring details.

Glass-Steagal for a starter. We also cut down on environmental and anti-trust regulatory enforcement. We especially did not keep regulations in sync with business practices, and in the last 20 years a completely new and unregulated market in derivatives grew to immense proportions. That's what damn near drowned us all.

Good points mostly. I would note Austrian free market economics doesn't seem to dictate (at least to me) that regulation is in and of itself a Bad Thing. It's their job to set the structure in which business operates. It's when government tries to steer things itself that things go wrong. I do think that some of the "chasing" regulation is silly since it's a never-ending game of find and close the loopholes - but I agree some regulations is certainly needed. It all just comes down to what kind of regulation we enact. If it does not overly restrict the market's ability to operate efficiently, regulation is actually a good thing. There's confidence in all parties involved that there will be reasonably fair play (though the risk/reward must stay in place). I think we mostly agree here.

I'm not buying "fallacy of redistribution", but since we agree on the conclusion "something NEEDED" I see no point to pursue the issue.

It's rather important to the issue of government spending in relation to Keynes...

Government spending on things that are needed (and that government does efficiently) - great. We need that always, and that has nothing to do with stimulating the economy. But the idea that we simply must take money via taxes and spend it in order to get the economy moving again is where the fallacy lies. The spending of money means nothing by itself.

Of course, but I have indeed heard right-wingers suggest the same for defense contractors.

This certainly does not surprise me.

"We're all Keynesians now" was, unfortunately a fairly accurate statement. And no surprise it's the darling of government - it attempts to give rationalization to pork spending and involvement....

I take issue with the verb "stolen". That begs the question of the legitemacy of taxation.

I simply used it to emphasize the fact that it is our money being spent. They are taking it from us, and spending it. Now, this is of course necessary. We need an army, police force, we need infrastructure, etc. But when we talk about government spending for the sake of stimulating the economy - why is it better for the government to take that and spend it on X when we can keep it and spend it on Y? That's the broken window fallacy. That saying spending money on X is good, when who's to say what we would have spent on Y? It's the government saying "money would better be spent here" rather than letting the market dictate what people want to spend their money on.

That's my understanding of how FDR administration policies affected the Depression. If I'm wrong, so be it, but I'd like to hear something concrete other than what feels like "I'm rejecting the idea that the FDR policies I'm opposed to were the ones that were effective."

The wiki article I posted notes however that the New Deal and other policies were a plethora of different policies. They were certainly not all Keynesian in nature. With this in mind, my point is how do you know it was those Keynesian policies that drove the economy to recover?

All I'm saying is, if you are making the assertion that the New Deal was an example of Keynesian economics at work, and that is what fixed the economy, you need to prove that assertion. Otherwise it's either cherry-picking which policies you say worked and which didn't work or simple correlation-causation.

As far as I have read, there is no where near a consensus about what "fixed" it.

That sounds to me like begging the question. If at one fell swoop you're going to claim that Keynesian economics is proved wrong by a calculation problem you'll have to be a little more forthcoming with evidence.

So you are going to decry economics as a "soft" science on the one hand, while demanding the evidence of a "hard" science on the other?

The actual calculation problem relies on logic and relates directly to price fixing. All it says is that the price mechanism is the most important tool in determining the value of any given good. If any entity (not necessarily just government) attempts to fix the price of something without the price the market dictates it, they will not be placing the price at the level of value since they have no other metric by which to measure it. It becomes all subjective to the entity doing the fixing.

Do you disagree this is the case? If so, what other metric IS there to determine a value for a given good aside from the market's price mechanism?

The idea is that the economy is so complex, and with the human factor is so nearly impossible to predict and calculate, that the government would be no better at trying to steer it than anyone else. They will invariably steer it at the wrong time or in the wrong way since they have no way of accurately calculating it. Which, I would point out, exactly coincides with your feeling of economics not being an exact science.

In which case I wonder - if you don't consider economics an exact science, how do you expect the government to be able to steer it accurately? What would they use to do this?

[Inquartata]

This is the absolute best way to get in the last word.(Unless you are Gav and can close the thread)

Except that it didn't work.

An argument can be made that Obama has moved to the right since being president.

OK. But I still look askance at the "moderate" label.

I'm also not convinced that a leopard can change its spots. Personally I think it's just pragmatic realization that politics is the art of the possible, and he's realized that he's not going to be able to get the things he really wants with so many Democrats who actually are moderates in Congress. But as you say an argument can be made for it...

Remember, being a moderate doesn't mean falling dead-center; you can be left of center and still be a moderate.

It also depends on the mix of policy issues. One can be a radical in one area and moderate in another. How do we compile completely different themes and average them for an overall left-middle-right score? If you're advocating government price controls on health insurers and "public options", and at the same time continuing some pretty conservative policies like continuing wireless wiretapping and the Cuban embargo---how can we decide which prevails in situating you on a simple spectrum?

In the end it's all semantics, and fairly meaningless.

In one sense I agree, but clearly words have power and names and labels are efficacious tools in politics, so in another sense...

[Inquartata]

Returning to an old one again. ( Another two-parter, I'm afraid. )

You once upbraided me for saying what was or wasn't conservative - only one such as yourself could do that.

Did I? I don't seem to remember that.

Now you tell me that you know what is or is not Moderate or Liberal. Does your rule not apply to you?

Well, duh! I am exceptional in all ways.

Obama usedthe financial crisis to nationalize the banks and GM, withdrew all troops from the Middle East, gave the bankers a big haircut, and returned tax rates to pre-Reagan levels. Wait - none of that happened.

1) Yet. It's only his first year, you know.

2) That he has been unable to accomplish those things does not mean that he does not favor doing them, or that he wouldn't have done them if he could have. Whether he is a moderate is not defined by what the inherently conservative nature of our governmental model has prevented him from doing, but rather by what he believes, no?

His "We had no idea who made the phone calls, who paid for them, or how many calls were made", is exactly the right tense for expressing "we didn't know at the time".

And on THAT basis you are confidently asserting what he himself has denied: That "he knew/knows"?

And you think I'M making conclusions on slender evidence?!

If you take that to mean he didn't know later, then you are saying something not supported by his actual words.

I myself prefer not to try reading his mind. You seem to have no qualms in that direction. His non-admission supports your notion that he didn't not know even less than it does mine, at the very least...

He explicitly said "I believe I know" - a direct declarative statement of belief. To convert that to a "guess" is to distort his words.

So "believe" connotes certainty to you?!

Why not just say "I know" if in fact he does?

Which is why I've provided proof. You continue to disregard it. For the Nth time - just what do you think Atwater was apologizing for?

For just what he said. I am not inclined to expand it beyond his actual words, and to assume that he "really meant" other or larger things...

I'm glad you're not going to hobble in next Sunday, though you can ref if you're masochistic.

Well, now we know, I guess.

A statement that applies to free market adherents - such as Miltie - just as much as those who oppose it.

Certes.

By your above statement, there is no unanimity among even "quite good" economists.

There is, on most of the thought about the way things work. The quarrels, as in fencing, are on small matters of different "interpretation". We all agree that in sabre the attack has priority, and most of us agree on the bulk of what constitutes an attack---even if we argue incessantly about why they do, and how. We disagree on a small minority of things about it, really. So too with economics.

The market continues, but not only (or ever) as "completely free" markets without government intervention. Markets with regulation, unions, and social safety nets have not fallen by the wayside.

Yes. I never said that a pure market existed. This does not mean that one might be better than the Frankenstein's monsters we have instead, because of the meddlesomeness of human nature and political nature especially.

Hey, you think solar power is the cat's pajamas, but---conventional power generation methods haven't melted away. They are the norm, in fact. We live with a whole lot of imperfect things rather than exchanging them for "better" ones. This doesn't mean that they aren't still better...

The opposite is also true and it doesn't disprove either.

Very true.

One must actually put up arguments rather than name drop or recite platitudes, which is why I keep pressing you. To the extent that an argument is based on "So-and-so says so", it is not science.

Does that also apply to statements like "We cannot afford to do nothing" from the President? To "A public option would not act to put private insurers out of business"? Etc.?

That argument is a two-edged sword.

Proof? Evidence? Mechanism of how this is accomplished?

I'm not teaching macroeconomics here, buddy! Pick up a textbook! ( smily the fifth )

But you don't think economics is even a science, so really, just save yourself the trouble...

Just what market mechanism would curtail tobacco's selling addictive substances while hiding its effects?

Punishment, in the form of increased costs and decreased profits?

When would this ever come to fruition?

Again this obsession with NOW. Aren't you the one who keeps quoting Keynes' "In the long run we are all dead" apothegm? Well, in the long run we are, and so are all of the ills you believe must be fixed right now...

Why should a polity wait for some perhaps mythical good outcome?

Because in that good old long run, it's cheaper that way. "Do something" always has transaction costs, often huge ones; market solutions do not.

Be it noted, I refer only to things which are not in the accepted purview of government. Some are, and in those the present is as good a time as any, because they are market failures, and the system well may never self-correct those.

You believe that the market would someday solve these issues - but don't even suggest how that might have happened in the cases cited.

Because I am not teaching macroeconomics. I can recommend some books if you'd like, but again, there's not much point given your low opinion of economics generally.

But this contradicts everything you just said. There's no role for government except where there is.

And "where there is" is well defined, and I have listed them for you often enough in the past. Yet you continue to pretend it's all just situational whimsy. Why?

This is a vast claim. Proof? Evidence?

Examples abound. Look at some stories on the actual results of this new credit card law:

http://www.smartmoney.com/Personal-F...h-Whats-Ahead/

That certainly was helpful, wasn't it? No unintended consequences, and no one has found ways to get around any of the new regulations. And it didn't harm anyone, the way I asserted that these things do, did it?

Market processes would not have ended child labor, nor put an end to companies poisoning ground water making goods that are sold elsewhere.

I disagree, but alas, this is the root problem: Without a basic understanding of economics and how its processes work, people prefer to operate on what their "common sense" or their "hearts" or their understanding of other sorts of processes work. I can never convince you that you are wrong on that, and you cannot find evidence to support it because none exists. So it's pointless to keep saying "Yes it would No it wouldn't" at each other.

A few weeks ago you opined that market forces would put bigoted companies out of business, and were going to think of examples. Thought of any yet?

Not yet. I suspect that it's going to be difficult---any examples are likely going to be very old, because government just doesn't wait for market forces to act any more. It leaps in and preempts them. And events before this became the norm may not have been recorded.

Vaguely I seem to recall something in Becker's book on labor discrimination, but I haven't been able to dig the thing up. ( Admittedly my attempt was desultory, given all of the other stuff on my plate recently. )

Must we depend on such an ineffective (or imaginary) process?

Must? No, obviously, since we don't. Would it be more efficient? IMO, yes, greatly so.

You say that economists often ignore economics principles, but that's an unsubstantiated claim. Rather, they disregard some versions of economics.

Well, you may be right. At a minimum they sometimes convince themselves they do. In the end I think it's a distinction without a difference, but I shrug. ( smily )

You say "pushing against" market forces as if it's a bad thing. That's a normative value judgment, not a fact.

No, it's a fact, according to positive economic principles and findings. Unless you want to stretch the meaning of "normative" so far that it covers everything.

Hey, physics tells us we can't fly like birds. But it's just wrong that mean old gravity won't allow us to do it, so---the law of gravity is a normative value judgement, not a fact! Maybe if we just believe hard enough that it doesn't apply---

Heh.

[Inquartata]

The promised part two:

Proof that this wastes resources? Evidence?

So are you saying that when government steps in to bring about a result it costs nothing? That a command economy functions as efficiently as the market?!

This should be too obvious to need explanation: Everything the government does adds costs to anything it affects. A charity may build a house for free*, using donated materials and volunteer labor. The government cannot.

*Not free in the economic sense: Scarce resources are still used; someone ultimately pays for those materials, and the volunteers sustain opportunity costs. But at least no outright transaction costs are added to these.

Assertion is not a substitute for reasoned argument.

I think you're mistaking "reasoned argument" with "mathematical formulas yielding invariable hard-science-like numbers". Not the same things, you know.

Not this way, but I gave you a fair shot.

Meh, how is it "fair", when you dismiss from the outset the whole basis of my arguments, to wit, economics?

And the problem with this is? Who decided that economics trumped all else?

What an odd thing for a scientist to say!

Maybe medicine shouldn't "trump" faith healing and chiropractic, and quackery should take precedence over science as long as that's the way people's beliefs run?

Really?

Oh, yes, I forgot---economics isn't a science...

You state a value judgment that policies should submit to a particular image of economics. That's mere opinion.

You mean, in the same sense that the consensus that we must act to countervene man-caused global warming is "mere opinion"?

Many things called "truths" are merely handwaving.

I quite agree! Although I suspect that our respective lists of examples would differ significantly.

You could respond to well-known examples of some of the largest regulatory interventions of government interventions into the private sector, and explain why they were harmful, and how in those specific instances the market would have provided superior results.

OK. Here's one: The current health insurance system.

Or do you believe that the current system works fine, and has not created any harmful effects?

Meanwhile, in the markets for other sorts of insurance, where government intervention was much less extensive and created much less distortion, these deleterious effects are not so great as to make reform of their markets a cause celebre. No one is talking about a public option for life insurance, or price fixing for auto insurance rates, or forcing everyone to take out trip insurance whenever they fly or else pay a fine...

Why? Several of us laid out perfectly good examples. Don't disregard them - they are entirely appropriate.

I am embarrassed to say that I seem to have forgotten what this one was about. Sorry.

What resources are expended?

I may have to invite Seth and Amy in for an installment of "Really???"
( smily )

Seriously...the salaries and benefits of government employees who will do the work? Overhead? Travel costs? Generation and dissemination of statistics and reports? To say nothing of the deadweight costs to industries of complying with reporting and inspection requirements...

Why is it unnecessary to halt dangerous products when the goal is to save lives?

Because it's needlessly wasteful of resources. The same thing could be accomplished by simply informing consumers of the problem and the effects of consumption. Then if they choose to be stupid and continue to buy the product, that's their choice as free individuals.

You know---the way we do with tobacco? OR do you feel that the government should just act to "halt that dangerous product"?

Here's your fairy tale. How is the government to even have this information without regulatory disclosure requirements?

How does it know now? How did it ever know? Laboratory testing? Investigative journalism? ( Isn't "The Jungle" one of your favorite examples of how this works? )

Do you imagine for a moment that government information would not be drowned out by corporate secrets, lies and disinformation?

I don't know. Maybe we could try it sometime...

Actual history shows the reverse is true.

You don't think that maybe modern technology has leveled that playing field just a bit since the 19th century?