I think the discussion in the comments section is good.
Selfish Bump.
What about when Keynesians point out that there was no inflation in Japan’s recession years of the late 80’s through the 90’s while their government expanded the money supply like crazy. Krugman calls it a liquidity trap and proof that we won’t necessarily have hyperinflation. Why didn’t Japan have inflation with all that growth in money supply?
Question: I have not read Keynes General theory but I am told that it is confused and muddled. Does one need to read the General Theory in order to understand Hazlitt’s criticisms?
Yes, Keynes’ GT is confusing. Hazlitt points this out in his intro. But don’t worry - Hazlitt quotes extensively from the GT and even orders his chapters so they match up with Keynes’ corresponding chapters.
Define Keynesianism.
Keynesian isn’t just a pejorative term for all the economics you don’t like. You can’t refute something you haven’t defined.
If you mean the conept of sticky wages, that will be impossible to disprove theoretically. Sticky wages are an empirically based assumption and so would need to be countered with evidence.
If you mean fiscal stimulus as a way to relieve falling aggregate demand, that has already been discredited by almost the entire economics community, despite what certain public figures would like to have you believe. Most New Keynesians don’t believe in fiscal stimulus.
The only other aspect of Keynesianism I can think of that still gets mentioned is the liquidity trap, which relates to barriers on monetary policy. If anything, this idea should be championed here.
Maybe because it’s debt to GDP ratio went from something like 60% to 260%? And because individaul savers financed all of the government borrowing?
Remember, Keynsian spending can be funded by:
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Taxes
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Gov’t Borrowing
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Monetization
And the primary method Japan’s gov’t used was #2 above. Then again, they also had a ‘lost decade’ and more years of stagnant growth (according to government numbers).
Do you think American citizens can finance the massive expansion in government spending here?
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There are extreme qualitative differences between Japan’s economy then and America’s now. A more apt comparison would be what happened in Argentina, where they didn’t seem to have any kind of liquidity trap.
Pardon my ignorance, but I have never heard of these fixes before. Could you elaborate?
I’m not sure it this point has been made or is somewhere in the links (I’ve read to read that book.I will get there eventually).
Keynesians claim saving is the cause of recessions.They also claim that consumption is the solution to recessions
Austrians know fractional reserve banking inflating the currency and the after effects of this are the cause of recessions.Austrians claim that in recession it’s better people save than spend.
I love this guy! So funny!
I honestly suspect him of being an under-cover austrian economist who infiltrated the mainstream camp in order to make them sound ridiculous.
I love this Steve Kangas guy! So funny!
I honestly suspect him of being an under-cover austrian economist who infiltrated the mainstream camp in order to make them sound ridiculous.
Has anyone ever seen or read Paul Krugman’s “Why Libertarianism Doesn’t Work” A-Z articles?
Hell, has anyone ever refuted any of them yet? I saw a cheap refutation from CATO, but meh.
On this specific article:
http://krugman.blogs.nytimes.com/2010/05/14/why-libertarianism-doesnt-work-part-n/
For starters, he seems to suggest that libertarians would suggest better politicians as the answer. I don’t think this argument makes any sense from a libertarian standpoint, as they are more anti-politician solutions.
Wow, Krugman cites the actions of politicians as proof of the failure of libertarianism? The man is off his rocker. Libertarianism calls for the institution of a natural, non-coercive order of mankind. It does not require better politicians, it requires politicians to get out of the way and let men act free of interference the violent intermediary of the state.
I think the essence of the Keynsian flaw is that the theory basically empowers government, therefore the statists embrace it and there is no requirement to show a “return”, hence deficits continue to grow. Eventually all debts must be repaid.
Is there any systematic walkthrough of the “general theory” in print or on the web that also thoroughly and systematically debunks it all?
Thanks!
Yes by Hazlitt. The Failure of the New Economics.
good link
thanks for sharing
Keynesianism was criticized at various points in Viception. Here is one point: “Keynesians emphasize spending. Austrians emphasize production. People earned money from previous production, their work. The Keynesian focus on total spending and total employment omits the production structure. The Keynesian belief in total spending as the basis for economic growth omits the role of capital investment which improves production which leads to higher living standards. If for a month most people in a city use the maximum credit on their credit cards to buy stuff, Keynesians easily confuse the temporary spending with economic growth because of their focus on total spending, not production, especially sustainable production. The Keynesian focus on totality leads to the devaluation of what is produced. An example is the Keynesian celebration of World War II spending that they claim ended the Great Depression for the United States. Keynesians focus little on if cars or tanks are produced as the long as total production rises. Excluding military production during World War II shows the U.S. civilian economy was still depressed. The Keynesian misdiagnosis of recession leads Keynesians to advocate government spending to support malinvestments which diverts resources from profitable businesses to unprofitable malinvestments continuing the unsustainable production structure. Malinvestment liquidation would lead to general falling prices allowing the factors of production, the resources used to make stuff, to adjust to sustainability. The Keynesian solution to recession will deepen and extend a recession possibly into a depression. Inflationary spending will stop the necessary fall in prices, stopping the production structure from correcting itself. The inflation will lead to more malinvestments that will have to be liquidated. An example is the U.S. housing bubble which was created from the inflation used to cushion the bursting U.S. dot-com bubble.”