I prefer Keynesian Economics over Trickle Down Economics but can anyone explain Keynesian Economics's views of how to promote ec

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I prefer Keynesian Economics over Trickle Down Economics but can anyone explain Keynesian Economics's views of how to promote economic growth in the private sector I know Keynesian Economics supports Government Spending but Government Spending on what ? Public Works Projects ? Infrastructure Spending ?Doesn't Keynesian Economics support Consumer Spending to help the Economy ? I hear Keynesians say we need Government Spending to put money in the pockets of the people who then will spend the money this they say will help promote Consumer Spending which will help create Jobs how do Keynesians plan to pocket money in people's pockets is it by giving the people Jobs rebuiliding or building Infrastructure ?

John Maynard Keynes
The General Theory of Employment, Interest and Money
Book III
The Propensity to Consume

Chapter 10. The Marginal Propensity to Consume and the Multiplier

V

We have seen above that the greater the marginal propensity to consume, the greater the multiplier, and hence the greater the disturbance to employment corresponding to a given change in investment. This might seem to lead to the paradoxical conclusion that a poor community in which saving is a very small proportion of income will be more subject to violent fluctuations than a wealthy community where saving is a larger proportion of income and the multiplier consequently smaller.
This conclusion, however, would overlook the distinction between the effects of the marginal propensity to consume and those of the average propensity to consume. For whilst a high marginal propensity to consume involves a larger proportionate effect from given percentage change in investment, the absolute effect will, nevertheless, be small if the average propensity to consume is also high. This may be illustrated as follows by a numerical example.
Let us suppose that a community’s propensity to consume is such that, so long as its real income does not exceed the output from employing 5,000,000 men on its existing capital equipment, it consumes the whole of its income; that of the output of the next 100,000 additional men employed it consumes 99 per cent., of the next 100,000 after that 98 per cent., of the third 100,000 97 per cent. and so on; and that 10,000,000 men employed represents full employment. It follows from this that, when 5,000,000 + n x 100,000 men are employed, the multiplier at the margin is 100/n, and n(n + 1)/2.(50 + n) per cent. of the national income is invested.

http://www.marxists.org/reference/su...heory/ch10.htm

Infrastructure Spending Builds American Jobs

Public Investments Help Private Businesses Create Jobs

By Kristina Costa, Adam Hersh | September 8, 2011

Jobs induced by direct and indirect hires when they make consumer purchases with their paychecks

http://www.americanprogress.org/issu...structure.html

Infrastructure Spending Stimulates the Entire Economy

Pat O'Malley, Yahoo! Contributor Network
Jun 29, 2011 "Share your voice on Yahoo! websites. Start Here."

The Keynesian economic theory is one of the few classic economic principles that is based in reality. It maintains that government should increase spending during a recession. It should buy more of the things that government normally buys.
Those things are new and repaired roads, bridges, dams, harbors, levees, tunnels, buildings, schools, parking garages, subways, railways, parks, sewers, stadiums, airports, and other public facilities. That spending creates jobs for construction companies and workers. Those projects create demand for the supplies, equipment, tools, and other materials that they need for those projects. It creates demand for the trucking companies to ship them and the warehouses to store them. That creates jobs in all of those industries. If the companies supplying the construction industry have enough work, they can spend some of their revenue to hire more employees or to upgrade their own facilities. See, more demand, more jobs.

Then all of those workers have paychecks that they can spend on groceries, clothing, furniture, cars, houses, utilities, entertainment, appliances, restaurants, vacations, and all sorts of things. That creates demand in those industries. And that creates jobs. If those companies have enough work, they can spend some of their revenue to hire more employees or to upgrade their own facilities. See, more demand, more jobs. And government gets its new stuff built and its old stuff fixed. See. Everybody wins.

http://voices.yahoo.com/infrastructu...69.html?cat=55

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mikejohnson2007
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Comments

Does anyone know ?

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mikejohnson2007
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Quote mikejohnson2007:

I prefer Keynesian Economics over Trickle Down Economics but can anyone explain Keynesian Economics's views of how to promote economic growth in the private sector I know Keynesian Economics supports Government Spending but Government Spending on what ? Public Works Projects ? Infrastructure Spending ?Doesn't Keynesian Economics support Consumer Spending to help the Economy ? I hear Keynesians say we need Government Spending to put money in the pockets of the people who then will spend the money this they say will help promote Consumer Spending which will help create Jobs how do Keynesians plan to pocket money in people's pockets is it by giving the people Jobs rebuiliding or building Infrastructure ?

Well, it's a long story, but the idea is this. Sometimes, there is too much planned savings and not enough investment in the economy. After a stock market crash, people tend to hoard money and are fearful of the future. When there is a such an economic crisis or shock to the system, there is an increase in unemployment. Typically, a reduction in unemployment could be handled by a decrease in wages. But firms would rather fire a few people than lower wages, because it's a lot of work to change wage structures. Also, if all firms did decrease wages, then there would be a overall reduction in the desire to buy output, which cause further increases in unemployment. So the government should step in and hire these people and give them money. The extra money in the economy results in an increase in demand for products until the shock to the system ends. Notice that it is better to give the money to the unemployed and have them make public goods that are worthwhile to the economy. However, even if they don't do anything, and just spend the money, there will be a positive effect on the economy. Notice that it is also better to have the money spent on the unemployed, rather than the employed. The more the money ends up in the hands of the employed, then it just raises prices. There is more money chasing the same amount of goods. This situtation is analogous to conservative economic system, which holds that the economy is essentially at full employment all the time. Hence, if the government spends money it will cause an increase in prices - unless it also raises taxes. Notice I said nothing about growth, but merely explained how government spending on the unemployed (or their economy) should be increased in a recession. If a economy is not in a recession, then government spending does nothing but substitute private goods for public ones. The multiplier does not work when the economy is at full employment. If the government spends money on a bridge, it is true that this money winds up in the stuff that bridge workers buy and so on. But if people are building bridges, then they can't be building other stuff - so the multiplier works in reverse and there is no net increase in aggregate demand.

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Dr. Econ
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Quote Dr. Econ:
Quote mikejohnson2007:

I prefer Keynesian Economics over Trickle Down Economics but can anyone explain Keynesian Economics's views of how to promote economic growth in the private sector I know Keynesian Economics supports Government Spending but Government Spending on what ? Public Works Projects ? Infrastructure Spending ?Doesn't Keynesian Economics support Consumer Spending to help the Economy ? I hear Keynesians say we need Government Spending to put money in the pockets of the people who then will spend the money this they say will help promote Consumer Spending which will help create Jobs how do Keynesians plan to pocket money in people's pockets is it by giving the people Jobs rebuiliding or building Infrastructure ?

Well, it's a long story, but the idea is this.

Sometimes, there is too much planned savings and not enough investment in the economy. After a stock market crash, people tend to hoard money and are fearful of the future. When there is a such an economic crisis or shock to the system, there is an increase in unemployment. Typically, a reduction in unemployment could be handled by a decrease in wages. But firms would rather fire a few people than lower wages, because it's a lot of work to change wage structures. Also, if all firms did decrease wages, then there would be a overall reduction in the desire to buy output, which cause further increases in unemployment.

So the government should step in and hire these people and give them money. The extra money in the economy results in an increase in demand for products until the shock to the system ends.

Notice that it is better to give the money to the unemployed and have them make public goods that are worthwhile to the economy. However, even if they don't do anything, and just spend the money, there will be a positive effect on the economy.

Notice that it is also better to have the money spent on the unemployed, rather than the employed. The more the money ends up in the hands of the employed, then it just raises prices. There is more money chasing the same amount of goods. This situtation is analogous to conservative economic system, which holds that the economy is essentially at full employment all the time. Hence, if the government spends money it will cause an increase in prices - unless it also raises taxes.

Notice I said nothing about growth, but merely explained how government spending on the unemployed (or their economy) should be increased in a recession. If a economy is not in a recession, then government spending does nothing but substitute private goods for public ones.

The multiplier does not work when the economy is at full employment. If the government spends money on a bridge, it is true that this money winds up in the stuff that bridge workers buy and so on. But if people are building bridges, then they can't be building other stuff - so the multiplier works in reverse and there is no net increase in aggregate demand.

I do not understand the last two paragraphs. Can you clear them up for me?

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In a demand economy like ours, the govt can be the consumer of last resort, by infusing money into the market. Tax cuts are Keynesian, but only when they are for people that spend them. The fica holiday is Keynesian, the bush cuts for the rich are not. The stimulus was Keynesian, it kept the teachers and firefighters, and police in their jobs, because the states have adopted the stupid balanced budget mentality. When the stimulus wore out, the states proceded to layoff more. Without those balanced budgets and the layoffs they caused, the unemployment would be down to 7%. Had the stimulus been larger, the rate would be 7% as well. All the hiring has been private, all 4,000,000 of them.

Keynes also knew that during a boom phase, you don't cut taxes, you save the surplus for the next bust. Sweden did just that, they never even had a recession. They tweaked the economy when all others were faltering and kept out of a ditch. They are now growing at about 6% annual. They had a surplus, so does Norway, and Denmark, and Finland. We could've had a surplus if the supreme court of voter suppression hadn't had their coup.

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The main contribution of Keynes was his revision of Say's Law. It is worth it to read about it:

http://en.wikipedia.org/wiki/Say%27s_law

In particular read about the difference between structural and cyclical unemployment. The whole debate really resides on this issue.

Trickle down folks have this idea that if you provide companies with extra capital, they will spend or invest in it - that there is no circumstance that would cause them to horde profits. Except this, we know, is not that case. Companies only invest when they see a probable return on the investment. When aggregate demand is very low, then investment becomes extremely risky and companies become risk adverse (as do people). What you get into is a glut based on risk aversion and lack of demand and they cyclically feed off of one another. The idea of Keynes was that if the government spent money by creating jobs for the unemployed - even if it was to dig a whole and fill it back up - then aggregate demand would rise and risk aversion would decrease. This has been proven to work quite well when cyclical unemployement is actually happening. The reason most Keynesian economist suggest infrastucture spending is because this is a job the government has anyway and it seems more beneficial to spend on that than digging a hole and filling it back up. The infrastructure not only creates jobs but it typically has ancillary benefits for the economy as a whole because it can improve the transportation of goods, commutes for employees, efficiency of electricty and means of production and communication, etc.

Now the tricky part is what you do when you are not in a recession experiencing cyclical unepmployment. Keynes said you reduce governmental spending and use revenues to create a rainy day fund for the next time you have a glut. Our government conveniently ignored this part of his suggestions and merely spent the money even when we were doing good. The only time this was not the case was when Clinton was in office. Anyway, the idea here is that when times are good, markets take care of themselves for the most part.

That said, I do not agree that governmental spending has no use in times of good economic times. Governmental spending has to do with more things than just regulating jobs and economic activity.

ah2
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Quote Karolina:
Quote Dr. Econ: If a economy is not in a recession, then government spending does nothing but substitute private goods for public ones....The multiplier does not work when the economy is at full employment. If the government spends money on a bridge, it is true that this money winds up in the stuff that bridge workers buy and so on. But if people are building bridges, then they can't be building other stuff - so the multiplier works in reverse and there is no net increase in aggregate demand.

I do not understand the last two paragraphs. Can you clear them up for me?

A lot people get lost when talking about tgovernment spending. Suppose the government builds a bridge for $100. And the bridge builders take their income and buy stuff at the store for $100, after saying some. The store owners then buy stuff at Denny's after saving still more. A lot of people say 'see! Government spending is great, because now all these people are spending loads and loads of money!'. In fact, if you add up the total spending over the year it is much more than $100 dollars.

But this is really a rhetorical trick because people are unfamiliar with the idea that income is a circular flow of money from one person to the next. This flowing of dollars takes place in recession, expansion and normal times. It is not "Keynesian Economics" to point out the circular flow of money.

"Keynesian" stimulus spending refers to a time of unemployment and unemployed resources. People are not spending enough and instead hoarding money. Now, when the government spends money, unemployed people and resources go into play, and aggregate income rises. And, just as when there is any change in spending, there are multiple rounds as money goes from person to person. But this multiplier process is not anything new.

So what happens, you might ask, if there is no unemployment, no unemployed resources and government spends money? If the government hires a bridge builder, then that bridge builder quits his other job and works for the government. So all the products that the bridge builder did in the private sector is stopped and goes to build a public bridge. So we have one less private bridge and one more public bridge - there is no change in aggregate demand or income.

Please forget about my comment about the 'negative multiplier' - it really is an aside.

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Yer killin' me Docenomics.....""Keynesian" stimulus spending refers to a time of unemployment and unemployed resources. People are not spending enough and instead hoarding money....." -----yeah, all those un- and under- employed people hoarding the rich peoples' money supply...stop, please...stop...

"you might ask, if there is no unemployment, no unemployed resources and....."---- and what kinda crazy hypothetical world are you living in? one in which human creativity outpaces technological productivity and greed is subsumed by compassion?.....oh cut it out, yer killin me

What's not so funny is that these ideas are as simple and outdated as the nature/nuture debate. Still, the classics have their place.

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There is no public bridge vs private bridge. The bridge is built by private contractors paid from state budgets. Anyone building a bridge is a private employee, and they are not pinching a private enterprise resource. This kind of nonsense helps explain private equity's mantra that laying off employees creates more resources, because all the unemployed are now resources [human resources, not personnel] for other private companies. So it's good for companies to have a labor surplus so they can pay minimum, and making even more non-consumers. Slavery was not killed, just put on life support.

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douglas is correct. I don't really know what econ is talking about. Roads and bridges are always under governmental jurisdiction. The only exception to this I can think of is maybe when contractors purchase a large plot of land to do commercial or residential development. They may take it upon themselves to build the roads when putting up a subdivision but then these are turned over to the city for care and maintenance if I understand it correctly. Anyone in contracting know? Do you as a home builder get governmental funds for the building of roads? An interesting question.

The other thing I find confusing is that Dr. Econ claims that the cyclical exchange of money is not Keynesian ecnomics when that is exactly what the goal of Keynesian interventions are designed to do - to elminate hording which results in cyclical unemployment and get people spending to create cyclical spending and higher employment. It is true that this takes place in recession and good times but it is more a matter of degree.

ah2
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Quote douglaslee:There is no public bridge vs private bridge. The bridge is built by private contractors paid from state budgets. Anyone building a bridge is a private employee, and they are not pinching a private enterprise resource. This kind of nonsense helps explain private equity's mantra that laying off employees creates more resources, because all the unemployed are now resources [human resources, not personnel] for other private companies. So it's good for companies to have a labor surplus so they can pay minimum, and making even more non-consumers. Slavery was not killed, just put on life support.

This is exactly what had me puzzled.

The National Bank/Hamiltonian banking system that I would like to see happening again, here and all over the world, does not have a government hiring people directly. The government lends money at very low interest to private companies through the public National Bank for government approved projects that enhance the nation. The very low interest loans to the private companies (and people), are still profitable for the government because its investment has bigger returns for the nation than just financial profit for the National Bank. The projects strengthen the nation, its economy and its citizens.

That is why this can only happen if the Glass-Steagall Act is reinstated first. All banks (public and private) that would be dealing in government loans would have to be reregulated—otherwise this kind of credit system would be pointless and unsuccessful, due to the rampant corruption. FDR influenced Senators Glass & Steagall to get that act passed before he started on any rebuilding.

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Also, for this to work well, the government needs to be corruption free, each member of the government doing his or her duty to represent and serve the people and the nation.

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Dr econ and Douglaslee are correct. The problem conservatives have right now is they have a religion called "tax cuts and slash welfare", whatever happens the correct course of action is tc&sw. Which is what Bush did, and the tax cuts blew up the deficits. Now they want to dismantle the safety net. Neither of which lead to growth, or broad prosperity.

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Quote MEJ:

Yer killin' me Docenomics.....""Keynesian" stimulus spending refers to a time of unemployment and unemployed resources. People are not spending enough and instead hoarding money....." -----yeah, all those un- and under- employed people hoarding the rich peoples' money supply...stop, please...stop...

"you might ask, if there is no unemployment, no unemployed resources and....."---- and what kinda crazy hypothetical world are you living in? one in which human creativity outpaces technological productivity and greed is subsumed by compassion?.....oh cut it out, yer killin me

What's not so funny is that these ideas are as simple and outdated as the nature/nuture debate. Still, the classics have their place.

Perhaps you could spell it out for me. You don't believe in unemployment?

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Quote douglaslee:

There is no public bridge vs private bridge. The bridge is built by private contractors paid from state budgets. Anyone building a bridge is a private employee, and they are not pinching a private enterprise resource. This kind of nonsense helps explain private equity's mantra that laying off employees creates more resources, because all the unemployed are now resources [human resources, not personnel] for other private companies. So it's good for companies to have a labor surplus so they can pay minimum, and making even more non-consumers. Slavery was not killed, just put on life support.

I think you are getting hung up in the example. I was comparing public goods made by government vs. private goods made by the private sector. If the government hires people to build a public bridge when the economy is a full employment, then those people cannot build anything in the private sector. There is a trade off between public and private goods when the economy is at full employment.

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Quote Karolina:

Also, for this to work well, the government needs to be corruption free, each member of the government doing his or her duty to represent and serve the people and the nation.

Not true. Economic principals worked in Libya under Khaddafi. They work today in Arizona, with highly entrenched crony capitalist structure.

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Phaedrus76
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Quote ah2:.... The other thing I find confusing is that Dr. Econ claims that the cyclical exchange of money is not Keynesian ecnomics when that is exactly what the goal of Keynesian interventions are designed to do - to elminate hording which results in cyclical unemployment and get people spending to create cyclical spending and higher employment. It is true that this takes place in recession and good times but it is more a matter of degree.

Not sure what you mean by 'cyclical exchange of money'.

All economic theory since the dawn of time explains that money circulates in the economy. When the government spends money on person x, that person spends it on person y and that person spends it on person z. There's nothing Keynesian about that.

Keynesian - as usually understood - is advocating government spending to reduce hoarding and unemployment. The fact that government spending of an initial dollar then multiplies into the economy is not, in itself, the key to Keynesian economics. For example, a conservative could say that if someone made a profit form improving technology, that that person would spend money on someone, and that person would spend it on someone else and so on. Thus initial improvements in supply as well as demand have a 'multiplied' effect on output.

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Dr. Econ
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Quote Karolina:... The National Bank/Hamiltonian banking system that I would like to see happening again, here and all over the world, does not have a government hiring people directly. The government lends money at very low interest to private companies through the public National Bank for government approved projects that enhance the nation. The very low interest loans to the private companies (and people), are still profitable for the government because its investment has bigger returns for the nation than just financial profit for the National Bank. The projects strengthen the nation, its economy and its citizens.

Perhaps you are confusing stabilization policy with banking policy. Stabilization policy employes government spending during a recession to increase output. The banking policy above that you are advocating is simply a state run bank, that you advocate because you believe the private banking system is inadequate.

Even though our current recession was caused by a bank run, most recession are not. Many are caused by increases in oil prices, I think. If we did have a national bank, and we had a recession, I would still advocate government hire unemployed people for the duration of the recession.

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Quote Dr. Econ:

Keynesian - as usually understood - is advocating government spending to reduce hoarding

When a man creates a dollar and then saves it (or hoards it as you so quaintly put it) there is still a net benefit to society of that one dollar.

Keynesians prefer to stimulate demand by stimulating supply of goods produced by their cronies. It matters not to them whether anyone wants to buy the stimulated goods or not so long as workers are paid who can then spend that income increasing demand. But what if they demand goods not produced by the stimulus? Unwanted inventory and higher prices for the goods consumers DO want. Keynesian is essentially malinvestment.

We either believe that goods pay for goods, and money is the abstraction, or that money pays for goods, and everything is an abstraction

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Quote Dr. Econ:
Quote ah2:.... The other thing I find confusing is that Dr. Econ claims that the cyclical exchange of money is not Keynesian ecnomics when that is exactly what the goal of Keynesian interventions are designed to do - to elminate hording which results in cyclical unemployment and get people spending to create cyclical spending and higher employment. It is true that this takes place in recession and good times but it is more a matter of degree.

Not sure what you mean by 'cyclical exchange of money'.

All economic theory since the dawn of time explains that money circulates in the economy. When the government spends money on person x, that person spends it on person y and that person spends it on person z. There's nothing Keynesian about that.

Keynesian - as usually understood - is advocating government spending to reduce hoarding and unemployment. The fact that government spending of an initial dollar then multiplies into the economy is not, in itself, the key to Keynesian economics. For example, a conservative could say that if someone made a profit form improving technology, that that person would spend money on someone, and that person would spend it on someone else and so on. Thus initial improvements in supply as well as demand have a 'multiplied' effect on output.

You are contradicting yourself from one paragraph to the next. The very definition of hording is people not circulating money that they have. While the idea of circulating money itself is not Keynesian, the goal of stopping hording and getting money circulating again IS. So, this is an essential concept in the Keynesian theory. You can't just ignore it like it doesn't matter.

ah2
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Quote Calperson:
Quote Dr. Econ:

Keynesian - as usually understood - is advocating government spending to reduce hoarding

When a man creates a dollar and then saves it (or hoards it as you so quaintly put it) there is still a net benefit to society of that one dollar.

Keynesians prefer to stimulate demand by stimulating supply of goods produced by their cronies. It matters not to them whether anyone wants to buy the stimulated goods or not so long as workers are paid who can then spend that income increasing demand. But what if they demand goods not produced by the stimulus? Unwanted inventory and higher prices for the goods consumers DO want. Keynesian is essentially malinvestment.

We either believe that goods pay for goods, and money is the abstraction, or that money pays for goods, and everything is an abstraction

This is why Keynesian suggests spending the money on public goods (nonrivalrous and nonexcludable) which always and forever will have an underrepresented demand in the market due to free-rider issues. Keynesian investment would only be malinvestment if you put it into something that is a private good (excludable and rivalrous) like cell phones or food. So, no, you are incorrect. In a way, Keynesian investment in public goods takes care of two economic problems at the same time - free-riders and hording. There is a double benefit, not a malinvestment.

The saved/horded dollar only has a net benefit to society in-so-far as it might lower interest rates. But what if interest rates to the banks are already zero like they are now? No benefit at all. If aggregate demand is so low that no interest rate is going to reduce risk aversion to the point that banks will lend and companies will invest, then the saved dollar is nothing but a detriment - economic stagnation.

ah2
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Quote Phaedrus76:
Quote Karolina:Also, for this to work well, the government needs to be corruption free, each member of the government doing his or her duty to represent and serve the people and the nation.
Not true. Economic principals worked in Libya under Khaddafi. They work today in Arizona, with highly entrenched crony capitalist structure.

The crony capitalism would allow those cronies of power people in the government to be the ones getting the loans and the jobs, without any patriotic need to actually do good work.

The quality of products and services in general, is so inferior now to what it was decades ago. Rarely are people these days trying to do a great job. Now its all about making a great profit with as little work as possible. Having rampant, self-serving corruption in government is demoralizing on all levels.

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Quote Calperson:
Quote Dr. Econ:

Keynesian - as usually understood - is advocating government spending to reduce hoarding

When a man creates a dollar and then saves it (or hoards it as you so quaintly put it) there is still a net benefit to society of that one dollar.

How so, the rest of your post does not explain that.

Quote Calperson: Keynesians prefer to stimulate demand by stimulating supply of goods produced by their cronies. It matters not to them whether anyone wants to buy the stimulated goods or not so long as workers are paid who can then spend that income increasing demand. But what if they demand goods not produced by the stimulus? Unwanted inventory and higher prices for the goods consumers DO want. Keynesian is essentially malinvestment.

Then the proof that your wrong is that there is no inflation.

I'll ignore the inventory arguement for a minute because it will just lead to more confusion.

Quote Calperson:...We either believe that goods pay for goods, and money is the abstraction, or that money pays for goods, and everything is an abstraction

Have no idea what this means.

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Dr. Econ
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Quote Calperson: Keynesians prefer to stimulate demand by stimulating supply of goods produced by their cronies. It matters not to them whether anyone wants to buy the stimulated goods or not so long as workers are paid who can then spend that income increasing demand. But what if they demand goods not produced by the stimulus? Unwanted inventory and higher prices for the goods consumers DO want. Keynesian is essentially malinvestment.

Seeing as how others took this arguement on, let me add something.

I don't think anyone takes this arguement seriously for the reasons I have already explained to you or your friends. You can actually measure things likes capacity utilization, number of cars produced, tons of plastic, industrial production. All these things tend to move and cycle together during recessions and expansions. Increaseing aggregate demand increases all these things at once. There is no 'malinvestment'.

The increase in aggregate demand caused by the government on economically useless products during WWII didn't prevent all the industrial and commerical output from increasing a great deal.

And not only that, but far from being 'malinvestment', the industries had increasing returns to scale that led to huge gains in efficiency. In other words, simply giving Ford huge contracts to make trucks no one wanted to buy meant Ford upscaled it's plant and equipment to such an extent that it was able to lower costs, increase it's technological investment, and make more profits than before. And it wasn't just Ford. GE, IBM, all the giants of our economy at that point in time gained heavily from government contracts that lowered their per unit cost because of increasing returns to scale.

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Dr. Econ
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Quote ah2:The very definition of hording is people not circulating money that they have. While the idea of circulating money itself is not Keynesian, the goal of stopping hording and getting money circulating again IS. So, this is an essential concept in the Keynesian theory. You can't just ignore it like it doesn't matter.

Well, not to beat a dead horse, but I think people don't understand this distinction. They think that if the government spends it will result in other people spending, and those people will spend and on and on. They then cannot answer the question of 'well, why doesn't government spend an infinite amount?'. And the answer is because the crucial difference between Keynesian theory and classical theory is that Keynesians believe in hoarding. And if the economy were at full employment, then the money would still circulate, but it would be worth less, as wages were bid up instead of employment. So, that is why hoarding is important.

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Dr. Econ
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How can you prefer a economic system you have never lived under?

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Quote CollegeConservative:

How can you prefer a economic system you have never lived under?

You are writing like beaten man, lost with no hope. Is this even supposed to make sense to somebody, or is just a lost fragment pertaining to another debate in another time?

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Dr. Econ
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Jul. 31, 2007 4:01 pm

Im pointing out that the Op is stating that he prefers something that has never been fully tried in the Us and unless he has lived abroad how can he have a preference? If I say I prefer Capitalism that would be silly because all I have ever known is capitalism and I have no frame of reference to other system outside of academics so i have no tangible experience to base my thoughts on.

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CollegeConservative
Joined:
May. 4, 2012 2:22 pm

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