While in an Obama facebook group, I naturally came across someone who scorned me for expressing my economic principles and was demanded to answer which economic model I was a proponent for. Naturally stating that I was a proponent for no model due to the fact that in no way can an exact model be accurately propose in the economic without a controlled state or infinite variables due to the dynamics of economic productivity. My opposition claimed I was a high school (oddly enough I’m going onto graduate work in less then a year) and while I am not an economics major I am a scholar of the social sciences specifically history which enables some degree of critical thinking in the social realm. I digress. Our discussion quickly went onto market failures in which externalies were brought up and I declared that for such things to transpire a market would have to be purposely stagnant and for there to be no incentive for coporations to go environmental in order to reduce waste and ineffiency (obviously both these events could never rationally transpire) Next came the Parento efficiency, which is a favorite of mine because it predisposes that someone has to lose during an economic transaction, I utilized the “Newspaper on the side of the street, who wins” situation in which I got no applicable answer to and naturally the conversation went into this:
“Tell me why did the markets crash despite minimal govt. interference and needed state intervention to stop it from going kaput ?”
Actually government intervention didn’t bring us out of the depression, it was an increase the demand of goods in the European arena. The Credit market was purposely inflated by an increase in the amount of money generated in the US economy. Now with this increase of money, came the lowering of interest rates in which investors started investing in higher-order capital goods which are more susceptible to misinvestments errors. When this increase of wasteful investments during the boom of a decade corrected itself in 1929, the higher-order capital goods experienced rapid liquidation to get rid of waste thus destroying any long term investments inside the economy. A depression decreases worker wages, price on capital goods and waste projects. It is the correction of a boom. Herbert Hoover did the exact opposite of what the Depression is suppose to do. He increased worker wages and public works projects in order to continue status quo of the 1920’s. Before Herbert Hoover, no president did what he did. They allowed either wages to fall, reduced spending and taxes or conducted all three. When Hoover activitely worked against depression using government intervention, he destroyed the whole economic correction of the the economy.
Now, can anyone tell me where my thought process is perhaps hypocritical or inconsistent?
Much apperciated.