Keynesian Economics, a Critique

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  1. Quote Originally Posted by RobInKuwait View Post
    Mullet,

    In the current economic situation, do you think that governments are fundamentally misinterpreting Keynes and using him as a justification to spend money to build a larger government infrastructure vs a larger national economic infrastructure?
    It would appear that way. I think that you cannot apply classic Keynesian models to contemporary economics, due to the precipitous shifts in the perception of the interplay between micro- and macroeconomics. I sound like a broken record but that is why I prefer the IS/LM Model.


  2. Quote Originally Posted by Mulletsoldier View Post
    It would appear that way. I think that you cannot apply classic Keynesian models to contemporary economics, due to the precipitous shifts in the perception of the interplay between micro- and macroeconomics. I sound like a broken record but that is why I prefer the IS/LM Model.
    The problem is that most political representatives have minimal if any economic training. It may be a bridge too far to expect them to undertake anything resembling contemporary economic theory. Do you think its more detrimental to the economy to have government spend tax dollars on the economy in a reckless and haphazard manner, or have government not spend tax dollars on the economy at all? IE is it better for them to do it wrong or do nothing at all?
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  3. Quote Originally Posted by RobInKuwait View Post
    The problem is that most political representatives have minimal if any economic training. It may be a bridge too far to expect them to undertake anything resembling contemporary economic theory. Do you think its more detrimental to the economy to have government spend tax dollars on the economy in a reckless and haphazard manner, or have government not spend tax dollars on the economy at all? IE is it better for them to do it wrong or do nothing at all?
    This is where our operative definitions of work become problematic. One could quite easily characterize a policy of noninvolvement as a specific form of work, rather than a lack thereof. I tend to avoid being fatalistic, and so, in an ideal world, I would hope that proposition is merely a false dichotomy. In essence, I think an ideal political economy is one such that deregulation and capital expenditures work in concert with one another as a type of dual-predictive mechanism.

  4. Quote Originally Posted by Mulletsoldier View Post
    This is where our operative definitions of work become problematic. One could quite easily characterize a policy of noninvolvement as a specific form of work, rather than a lack thereof. I tend to avoid being fatalistic, and so, in an ideal world, I would hope that proposition is merely a false dichotomy. I tend to avoid being fatalistic, and so, in an ideal world, I would hope that proposition is merely a false dichotomy.
    Obviously there are degrees of intervention and government will always have some involvement in economic matters, even if its merely to protect the economic transaction. I was not taking issue with that question.

    My specific question was: "Do you think its more detrimental to the economy to have government spend tax dollars on the economy in a reckless and haphazard manner, or have government not spend tax dollars on the economy at all?" I should have qualified the statement with:"during an economic downturn."

    I don't think its a false dichotomy in this context because government spending during an economic downturn, though favored today, is by no means the only possible course of action. Governments still make the conscious decision to borrow and spend that money. Do you think its the right decision for governments to spend money in a downturn, if they they are spending it appropriately.

    In essence, I think an ideal political economy is one such that deregulation and capital expenditures work in concert with one another as a type of dual-predictive mechanism.
    In that context, something about the US's economy is not ideal or someone fell asleep at the switch....

  5. Quote Originally Posted by RobInKuwait View Post
    Obviously there are degrees of intervention and government will always have some involvement in economic matters, even if its merely to protect the economic transaction. I was not taking issue with that question.

    My specific question was: "Do you think its more detrimental to the economy to have government spend tax dollars on the economy in a reckless and haphazard manner, or have government not spend tax dollars on the economy at all?" I should have qualified the statement with:"during an economic downturn."

    I don't think its a false dichotomy in this context because government spending during an economic downturn, though favored today, is by no means the only possible course of action. Governments still make the conscious decision to borrow and spend that money. Do you think its the right decision for governments to spend money in a downturn, if they they are spending it appropriately.
    By false dichotomy I meant two negative extremes, whereby a third option is the most obviously beneficial. I.e., I would propagate neither reckless spending nor a lack of intervention, but a deliberate and focused approach.

    In that context, something about the US's economy is not ideal or someone fell asleep at the switch....
    I am pretty sure the latter caused the for former.
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  6. Quote Originally Posted by Mulletsoldier View Post
    By false dichotomy I meant two negative extremes, whereby a third option is the most obviously beneficial. I.e., I would propagate neither reckless spending nor a lack of intervention, but a deliberate and focused approach.
    Oh, I thought it meant a fake division. You and your fancy terms.

    Does Keynes or any of his neo-classical synthesis friends ever propose a mechanism to properly moderate the spending?

  7. Quote Originally Posted by RobInKuwait View Post
    Oh, I thought it meant a fake division. You and your fancy terms.
    lol, I was going to use a smiley but these new ones suck.

    Does Keynes or any of his neo-classical synthesis friends ever propose a mechanism to properly moderate the spending?
    Yes: The IS/LM Model.

    Literally, that is what the IS/LM is: a predictive mechanism meant to increase or curtail government spending to avoid economic crises.

  8. Quote Originally Posted by Mulletsoldier View Post
    Yes: The IS/LM Model.

    Literally, that is what the IS/LM is: a predictive mechanism meant to increase or curtail government spending to avoid economic crises.
    You've seen how congress spends money. President Elect Obama's stimulus has items in it like $194,000 going to a town of 143 people for "green projects", millions headed to various cities for Museum projects, and hundreds of billions set aside to get states out of the red. Does IS/LM assume all government spending is good, or does it have checks and balances built in to focus spending on infrastructure projects.

  9. Quote Originally Posted by RobInKuwait View Post
    ...or does it have checks and balances built in to focus spending on infrastructure projects.
    Bingo.
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