"Up to the Great Depression, there was no Keynesianism. It was as free market as the world has ever seen. Notice how many recessions there were, how deep they were, how long they lasted, and how little space was between them. We spent more time in recessions than out of them, and they were REALLY bad recessions; economic activity was dropping 10-30% every time the economy took a downturn.
Then comes Keynesianism in the mid 1930’s until about 1970. Fewer and shallower recessions with more time between them. Then comes Friedman’s monetarism, and they’re even fewer, shallower, and less frequent. Now a really “bad” recession sees GDP drop by around 4%.
You’re proposing a economic system similar to pre-1930 America. We know how that goes, which is why no one outside Ron Paul wants to give it another try."
There’s some truth to that in terms of severity. The recessions were much less frequent before the great depression, and usually involved a sharp contraction, and then a quick recovery.
The recessions are more frequent. The government has grown, the standard of living and the purchasing power of money have withered away. Tout all the GDP figures you want, things are worse with monetarism and keynesianism.
No. It’s a system that hasn’t existed in America. Namely, free currencies.
thanks joe for the reply. again, this was not my argument, but rather the points of someone that i am having a discussion with that is advocating keynesian economics and more/continued government intervention/regulation…
so let me ask: why have recessions/depressions become less frequent and less severe with the incorporation of keynesianism?
I’m not hugolp but if I may take a crack at it -I think that recessions (or depressions as they should be technically called) are on average, a little longer now. For instance we’ve been in a recession since 2008 while the recession of like, 1837 only lasted a year. The same for most depressions of the 19th century. And I’m not so sure that depressions have been less frequent during the 20th century. There was one in 1920, 1929, 1946, 1957, 197?,1989,1999, and now. Seems like just the same amount since the 19th century.
Up to the Great Depression, there was no Keynesianism. It was as free market as the world has ever seen. Notice how many recessions there were, how deep they were, how long they lasted, and how little space was between them. We spent more time in recessions than out of them, and they were REALLY bad recessions; economic activity was dropping 10-30% every time the economy took a downturn.
Then comes Keynesianism in the mid 1930’s until about 1970. Fewer and shallower recessions with more time between them. Then comes Friedman’s monetarism, and they’re even fewer, shallower, and less frequent. Now a really “bad” recession sees GDP drop by around 4%.
You’re proposing a economic system similar to pre-1930 America. We know how that goes, which is why no one outside Ron Paul wants to give it another try.
Sowell, by the way, isn’t arguing for Ron Paul/Austrian economics. He’s arguing for monetarism and a specific form of Keynesianism (i.e. unfunded tax cuts during a recession). His beef with the New Deal is government mandates, not government deficit spending. I agree with his critique in that regard."
That list is bullshit. For example, the Long Depression did not exist. There was a panic and then years of strong growth. The deal is that because the USA was on a gold standar prices were going down because of the increase in productivity (as they should in a healthy economy). But because of lack of understanding of economics of most historians and the keynesian influence, when they saw that prices were falling they assume that was a big recession. In reality, the economy was growing fast while prices were decreasing, as it should be.
It would be too long to explain all the rest, but its important to keep in mind that, before the Fed, the USA had 3 central banks, and some of the crisis are due to the central bank credit expansion. At the end, keynesianism (among other few things) is just another cover-up for “good old” theft through monetary debasement. And since 1913 you have the Fed, and while it was very limited at the beggining, it helped create the bubble that crashed in the 1920-21 crisis, for example, as well as creating the bubble that led to the Great Depression.
It is not very interesting to see it as pre-keynesianism vs post-keynesianism, since I dont think keynesianism was a big monetary revolution, more like a rationalization and intellectual cover-up of what was alredy developing. It is more interesting to analize it with a hard-money vs easy-money mindset. Hard money being anti central bank, austrian and easy-money being pro central bank, keynesians.