I think it would be more productive to make a nice, long thread that posts point by point refutations of Keynesian methodology (for newcomers), if it starts falling down I’ll bump it-this will save us the need of continuously re-writing the same thing. Also, please don’t go off in wild tangents.
Thanks,
Luis Buenaventura
Haha, exactly, I was going to say that Hazlitt already did this.
I know (actually been wanting to buy it), but for newcomers that don’t want to spend the money buying a book, but would prefer to understand some basic refutations I found that it would be better to make a permanent thread on the aformentioned topic.
The book is great, you should get it. I love it. It is online for free in pdf form.
In any case, what you need to know about Keynesian economics is this:
The idea that government fiscal stimulus can increase actual aggregate demand is false. That money needs to either be borrowed, taxed, or printed. If it’s borrowed, that’s less money that the private economy may borrow. If it is taxed, that is less money that the private economy has. If it is printed, that is less value per dollar that the private economy has.
http://www.huppi.com/kangaroo/L-ausmain.htm
Look how original I am, everybody! I linked to Steve Kangas. And if you don’t watch out, I’ll link to my “secret weapon”–Mike Huben. Both say that Keynesianism is gold, therefore it is.
Something I was thinking about Keynesian Economics is that it has been implemented and believed now for almost 70 years. That was about the lifespan of institutional Marxism of the Soviet Union.
Right around 1988 Gorbachev and company had a meeting where they made plans about how to handle the burden on the Soviet Union and their client states when the capitalist west collapsed. They felt this collapse was inivitable since that is what Marxist doctrin had been telling them for the past 70 years.
One year later their client states were all gone and three years later the Soviet Union was gone as well.
Now the leaders carrying the banner of Keynesian Economics are planning somewhere how to bail out something, how to stimulate the economy by printing money and how to stop piracy, terrorism, North Korea, China, Sudan, Chavez and prevent venereal disease in Africa because they actually believe they can do these things and be stronger because of them.
No one even remembers how communism started falling …it just sort of happened. (really it was elections in Poland and Hungary that the communists thought they could win..but I had to look it up again just now)
I am wondering what seemingly small event will bring down the Keynesian system?
I’m going to go with China starting to dump dollars in exchange for commodities. Which it looks like they’ve already started doing. Copper?
I am actually reading Failure of the “New Economics” as we speak. It is a superb model of criticism and it’s fascinating enough to keep my interest and complex enough to put me to sleep. He just steam rolls over Keynes - exposing the confused and misleading thinking that Keynes’ General Theory was built upon.
I was just thinking of doing a blog on the subject, building up keynesian points from a more logical point of view, and tearing them down.
I am willing to start on this project over the summer.
Thanks for this video! It helped me to understand alot.
But I want to know, whats so bad about tax rebates? Sure I understand how it does not HELP, but why does it HURT? Since goverment spending is said to not work, by giving tax rebates, the government will have less m oney to spend, and the consumer will have more money to do what it wants with. Any help appreciated
Tax rebates are meaningless without spending cuts. Tax rebates do not reduce spending if the government borrows or prints the difference.
If people want a REAL rebate, cut government spending. Handing back taxes is just a political ploy.
I am confused, how does government spending affect the efficiency of tax rebates? If I get money back from a tax rebate and government spending stay the same (albeit high) wouldn’t that be better than no tax rebate??
No travis, it is bad, very bad…
If the government does not reduce its spending and rebates you money, where does the shortfall come from?
Personally, I think the best, most subtle & non-political way to “disprove” or dent Keynesianism, specifically for the economically ignorant, is to point to ye olde principle of scarcity & the obvious occurrence of technology, science, & information constantly refining in consistent leaps every 6 months (to give a nice, general chuck of time for perspective, even though it can be easily be every 6 weeks on smaller scales), which means very easily, we all could be wrong on many things, given a certain amount of time to pass (such as the case of philosophy once attempting to explain what physics does in describing the physical world, etc.).
Keyenesianism is no different, & anyone who says otherwise, is either an idiot/ignorant, or has something to lose over it being disproven (as it has time & time again), such as their ‘kaumpy’ place in a newspaper site, or sales from selling over-priced books @ Wal-Mart, or embedded with DRM @ amazon.
The fact that at some point, someone is probably going to attempt to create an information-based or energy-backed currency (i.e. new things), also puts economic knowledge & information at risk, specifically since one cannot precisely design an economical ideology that fits with future circumstances & phenomena, which is the entire point economic knowledge is continually tested, developed, & argued for & against.
Keyenesianism would only win in a vacuum, & even then, it’s proponents would still have various inflated senses of worth over other “lesser” Keynesians who aren’t “Keyenes” enough!
Another thing to remind people is that history is not the past, despite the hammering done into anyone’s head in public schools. History is now, & if we aren’t careful, we’re going to miss it all before our eyes (as we are on the verge of missing the actual reasons for the incoming Blowback Period, which sounds less alarming than “Collapse” but just as correct in the effects of the 20th century’s “voluntary embrace” of Keyesnianism, Socialism, etc.).
In the long, Keyenesianism is dead, & quite ironically, it may take another 70 years for everyone on the globe to suffer under it “equally” for this to occur (hopefully, not). It’s not a surprise I’m typing this instead of sleeping, when I ponder such pessimism, but who knows, with the rate of technological progress, maybe Keyenesianis will eventually see no use for their “worse is better” economic ideology.
Where did the tax rebate money come from in the first place? They either printed money out of thin air or from taxes. So (1) drives inflation (purchasing power of money is lost, which is why dollar is worth about .03 compared to the 1913 dollar) (2) is money we would have had anyways but the government took it, then gave it back.
It is worth that much? I thought it was lower than that now…
Could be lower, and I don’t even know how these numbers are surmised. All these recent bailouts, and fund bills such as the recent one in Congress named “War fund” that will also include billions of dollars going to the IMF so the IMF can redistribute the wealth (the Global New Deal Gordon Brown discussed) to third world countries. I wouldn’t doubt this money going to the IMF will be paid out as carbon credits to the Third World countries because it’s following the same carbon credit cycle that is currently bubbling right now. This is the most recent graph I have, but the numbers, I wouldn’t doubt, are more like .0001 now. There’s always that original gold standard backed currency in circulation not the same bills but there is a lateral, historical base that is still present. That money never disappears from what I understand even though that was printed decades upon decades ago.
I also noticed that graph states it’s about 15 cents, yet, Ron P. and others say it’s about .03 or .04 cents. But as I mentioned you probably right the numbers are more like .0001 or something by now.
Last I checked, it was $.04, that was pre Bush stimulus…
If we use gold prices without the congressional fixes (should be $2000+ by now) we are less than a penny…
When the chickens come to roost, $.0001 will be generous…
I found this in the review/comment section on Amazon for Hazlitts book-
6 of 55 people found the following review helpful:
Hazlitt can barely understand prealgebra,
| By | Michael Emmett Brady “mandmbrady” (Bellflower, California ,United States) - See all my reviews |
|---|
This review is from: Failure of the New Economics: Analysis of the Keynesian Fallacies (Paperback)
Hazlitt(H)attempts to critique the General Theory(GT;1936)by concentrating only on Keynes’s literary exposition.H completely ignores the mathematical modeling carried out by Keynes in chapters 19 (and the appendix to chapter 19),20,and 21.These chapters explain the outline of Keynes’s theory of effective demand presented to the readerby Keynes in chapters 2 and 3 of the GT.It is based on the D-Z model of expected results(expected profits and expected prices).H has a partial understanding only of the Y-Multiplier model of actual prices-profits contained in chapter 10.Two semesters of calculus are required to follow Keynes’s exposition in chapters 19-21.One also needs to have read Part II,chapters 8-10,especially pp.86-102,of A C Pigou’s 1933 book, The Theory of Unemployment,in order to understand the comparison-contrast that Keynes makes between his D-Z model and Pigou’s model.H has absolutely no possibility of objectively critiquing the GT given his knowledge of sixth grade mathematics.The following is a summary of what H completely overlooks.The classical-neoclassical result that H seeks to defend is that w/p=mpl,where mpl is the aggregate marginal product of labor derived from an aggregated neoclassical production function and w/p is the real wage.This result means that no involuntary unemployment exists.Keynes generalized this optimality and equilibrium condition by showing that it is a special case of the following general optimality condition that is Keynes’s general theory:w/p=mpl/(mpc+mpi),where mpc is the marginal propensity to spend on consumption goods,and mpi is the marginal propensity to spend on investment goods,which would be primarily capital goods and secondarily inventories or stocks of finished/unfinished unsold commodities.Only in the special case where mpc+mpi=1 will the Hazlitt result occur.If mpc+mpi<1,a set of multiple equilibria occurs.It will be impossible for labor to cut its money wage to reduce unemployment.In fact,the money wage must rise to maintain the equality.Involuntary unemployment will automatically exist if mpc+mpi<1.Hazlitt is completely lost when he attempts to cover the above chapters in his book.A much better book to read would be the recent book by the Austrian economist Roger Garrison.