I do not have any background in economics, however around one year i have been reading about economics. the articles i read here, sound totally logical. however lately i have observed the trend, each article lambastes what the US government and the federal reserve system for following the Keynes school of thought. All the articles which deal with criticism of the policies sound very logical, and to a common man like me, completely sensible.
So couple question arises in my mind.
Question # 1
How can Barack Obama go on his first press conference, and say in a very matter of fact tone, that most economists agree that doing nothing is not the solution. I have read few places that zero government intervention would be the best and only solution. he said it time and time again that what he is doing is best for the economy, while authors over here have continually ridiculed the on going operations.
Question # 2.
there was an article, where someone had asked, so what is the solution the “free market thinkers” suggest. and there was a response giving “politically incorrect”, theoretical solutions. i see so many articles devoted to criticism, however very few giving “feasible” alternatives to dealing with the problem. Criticism is easy, while to act is difficult, is that highlighted here.
-Thanks,
Otiose.
ps. i have read only daily articles, and i m an thorough engineer. so please excuse by naive comments.
Quite honestly the best short term solution is not to vote. Just stop and convince everybody else to stop, and worry about yourself in this recession not how you can influence government policies and the bad system of incentives that leads to stupid voting.
this was the post whr i started to wonder why there were x posts for solution of this mess, while 10x posts for criticism..
and wht i cmpletely fail to understand is how do politicians and other economists are equally confident just like free market believers are that their strategies are the only way out.
i feel (without any economic reasoning) that if free market did have such merits then atleast in dire situations like the current one people would have applied it.
there must be few shortcomings and a balanced governance probably is theway out..
You operate on the assumption that the interests of the government and of the governed are aligned. They are not. And thus your conclusions are fallacious.
Free market is the best thing that could happen to the governed, but is the worst thing that could happen to the government. Thus the government will not allow free market regardless of its implications for the governed.
I’m not totally read up on my rothbard but according to him, hasn’t it been historically the case that every depression (minus the great) has been beaten by doing nothing?(The 1919 one comes to mind first).
There are 10 times more criticism because of pedagogical reasons (the austrians need to reach the people what with statism having taken 99% of the market of ideas) and because of reasons derived specifically from austrianism (there isn’t going to be much of a need for economic policy if ancap succeeds). Or as ricardo once wrote “In economics there is much to learn but nothing to do”.
How can Elija Wood sound so convincing when he declares he will take The Ring to Mordor? Even when most people realize such things are works of fiction?
Because most economists in fact agree that state interventionism and central planning is the way to go in economic affairs. The current mainstream economic science is Keynesian at least in principle.
Answer to Question #2
The feasable alternative is for the government to get out of the way. No regulation, no licensing, no protection for special intrest groups, no nothing. If there is any function for government at all, which I highly doubt, it is in protecting the rights of the individuals to property (which includes life as this is the first property each human being owns).
Question #1
Some people think that the government needs to protect them from failing. This is how “free markets” errode in the first place. Lets say UPS gets scared that Fedex and DHL are getting too powerful. UPS lobbies congress and promises to provide massive contributions to both political parties. On top of this they will create hundreds of new jobs in Kentucky. The politicians from Kentucky get on board. Special tax reductions are provided to UPS. They are provided with special priority at the tax payer funded Louisville airport. The government gives UPS special funding to improve aircraft performance. The government hires ex-UPS employees to work on projects related to the success of UPS. etc. etc. This is a true story. Let’s ask the question again. Should the government have done nothing when UPS lobbyists walked into the halls of congress? Would it have been better for the government to say to UPS, “Sorry, we are not going to provide you with an unfair advantage.”? Should the government stop helping UPS right now? The answer of course is yes to all three.
Question #2
Please keep in mind that when people say that the answer is to do nothing that what is really meant is for the government to do nothing. The market participants, on the other hand, have quite a bit to do. They have to work hard to keep their business profitable. Unfortunately when perverse incentives align we get government intervention in the market. Congressman X needs to get re-elected and Businessman Y doesn’t want to keep putting in these 12 hour days just to stay on afloat. The result is the UPS story described earlier.
the articles presented here are quite clear, and they sound very reasonable to me. my question was however, if free market makes so much sense, then how can the govt go for keynesian model. how can they, with confidence, say that doing nothing is not the solution. how can they say everyone agrees, including most of the economics, that doing nothing is not the solution. how can bernanke go to london and say that he believes in free market, when he is advocating pumping huge amounts of money in the economy. how can these people get away with this. that was the main question.
i have been thinking about this, surely no one solution can be 100% right. i agree to adam smith when he says that pricing is driven by 3 things, labour, rent of land and profit or contingencies. and i understand how that workks, and how a free market can exists. however in the current age i have my doubts whether zero government intervention would work. for example, there are so many religious conflicts, there is hardly any harmony amongst different cultures, if there were a free market, things could go out of hand. buying of weapons, (i do not know what is the current norm), but i am assuming not anyone can go to the manufacturer, and say i want X stingers, and they would get it. what if it gets into “wrong” hands. (now reality is that government on its own makes this scenario happen but lets ignore that for the moment). so there has to be a control, not anyone can just walk up and say here are billion dollars, give me Y F16’s. one cannot allow to do that. there HAS to be a government intervention.
what i described is just like the gun law in united states. right to bear fire arms was the constitution law, but people now forget the constitution was written in different era. so anyone can just walk upto a store buy firearm. and later go on shooting in schools. there has to be a govt intervention saying no, not anyone can go buy guns. there was to be a legit reason to show you need the firearm.
this is just an example of why free market in current scenario needs to be tamed. mainstream economics should be based on free market, however there has to be certain areas where the government steps in. i understand that is how the government sell their intervention to the public, and instead of stepping in just the right select areas, government likes to control larger portion, creating the mess we are in.
The government is comprised of individuals that use the Keynesian model because it gives legitimacy to government and their jobs. They are not going to use ideals that are detrimental to their income and power. This will continue as long as citizens agree to their subjugation by voting for these individuals.
Is it true that a citizen cannot give up power that he does not already possess? If the government is permitted to execute criminals, then why isn’t an indivdiual citizen permitted to execute someone who they saw murder someone else? What gives the government the authority to kill people in the first place?
so basiclaly there is no fix to this. an international currency is inevitable? and what would be the next stage when even the international currency is inflated? ron paul is not even a presidential candidate. so no one to vote to, and hence no say in the policy. this is thus an example of plutocracy.