You’re kidding me, right?
Are you saying that there are people going around breaking windows?
Right, so there are three possibilities here: 1) you haven’t actually read Bastiat’s parable of the broken window; 2) you’ve read it, but don’t understand it; 3) you’re trolling.
Just for the record, Bastiat used the specific case of a broken window as an example. The point of his parable is not literally about broken windows. It’s about economic effects that are seen versus economic effects that are unseen.
Yes. Please give a specific, real life example of these effects.
Here’s a big, glaring one: any and all taxation.
I think taxes are good because basic public services like police and roadways are nice to keep funded. That’s all.
Nice try at sidestepping my point about seen vs. unseen economic effcts - which is also the point of Bastiat’s parable of the broken window. How about you actually address it now?
Are you saying that all taxes should be eliminated and police defunded?
Also, since the edit function is currently FUBAR, nice try at presenting the false dilemma of “public infrastructure or no infrastructure” yet again. Too bad it didn’t work this time, either.
That doesn’t address my point. Try again.
I don’t know how to address your point. In that sense, you win.
I don’t believe you at all. Try again.
I note the pic of Che Guevera..I understand he was a murderous individual who personally killed innocent men and women???
Keynesian scam…
Government Spending and Private Activity. Valerie A. Ramey. University of California, San Diego and NBER.
In the 1939-2008 sample, private spending rises slightly on impact, but then falls significantly below zero, troughing at around 0.5 percent of GDP.
In the 1947-2008 sample, private spending rises significantly on impact, to about 0.5 percent of GDP, but then falls below zero within a few quarters. These results are consistent with the effects of anticipations discussed in the theoretical section of Ramey (2009b). As that paper showed, in a simple neoclassical model, news about future increases in government spending lead output to rise immediately, even though government spending does not rise for several quarters.
Figure 4 shows the responses based on the Blanchard-Perotti SVAR. In contrast to the EVAR, this specification implies that government spending jumps up immediately in all three samples. Private spending declines significantly in response to a rise in government spending in the first two samples. The declines are sizeable, suggesting multipliers well below one. In the post-Korean War sample, private spending falls slightly below zero, but is not statistically significant. Appendix Figure A1 shows that the results of the augmented SVAR advocated by Perotti (2011) are essentially the same.
Figure 14 shows the results from the specification with my defense news variable. In the full sample from 1939:1 – 2008:4, a rise in government spending equal to one percent of GDP leads to a rise in government employment of close to 0.5 percent of total employment. Private employment rises by about 0.2 percent of total employment, but is never significantly different from zero at the 5 percent level. The story for the 1947:1 – 2008:4 sample is the same.
Figure 15 shows the responses based on the Blanchard-Perotti SVAR. Private employment falls in the first two sample periods for this specification. In the third sample period, it rises, but the standard errors bands are very wide.
- Conclusion
For all but one specification, though, it appears that all of the employment increase is from an increase in government employment, not private employment.
The data covers the entire time period 1939 to 2008, rather than recessionary periods (which is when stimulus is supposed to be used). Just pointing that out.
Really clever. Mustang, you do it on purpose, right ?
By the way…
https://forum.freecapitalists.org/t/permanent-keynesian-refutation-thread/5088/137
Below, three other studies.
Economic performance and government size
We analyse a wide set of 108 countries composed of both developed and emerging and developing countries, using a long time span running from 1970-2008, and employing different proxies for government size
Our results show a significant negative effect of the size of government on growth.
Interestingly, government consumption is consistently detrimental to output growth irrespective of the country sample considered (OECD, emerging and developing countries).
Read the rest of the article. I don’t have time to copy-paste.
Do Powerful Politicians Cause Corporate Downsizing?
Our main sample focuses on the behavior of 16,734 firms over the past 42 years
(1967-2008). Summary statistics are reported in Table I.Our empirical results support the predictions of the neoclassical model. Focusing on the investment (capital expenditure), employment, R&D, and payout decisions of these firms, we find strong and widespread evidence of corporate retrenchment in response to government spending shocks. In the year that follows a congressman’s ascendency, the average firm in his state cuts back capital expenditures by roughly 15%. These firms also significantly reduce R&D expenditures and increase payouts to their investors.
The Impact of Government Spending on the Private Sector: Crowding-out versus Crowding-in Effects
We find that the cumulative effect of government spending on private consumption (investment) is about 1.9 % (1.8 %), of which about 1.2 % (0.6 %) is captured by the contemporaneous change in the government consumption-GDP ratio and 0.7% (1.2%) by its lags. This result is interpreted as follows: an increase of government consumption by 1% of real GDP immediately reduces consumption (investment) by approximately 1.2% (0.6%), with the decline continuing for about four years when the cumulative decrease in consumption has reached approximately 1.9% (1.8%). The result is broadly robust to both country and time effects, and different econometric specifications.
Keynesian ideal dissolved into thin air…
“Can Government Spending Get America Working Again? An Empirical Investigation”
“In this POLICY BULLETIN, we examine the effectiveness of government spending on private-sector job growth. Rather than contemplate the average or typical effect of government stimulus on private-sector jobs, we divide the past fifty years of U.S. economic history into low-growth and high-growth periods. We then apply a non-linear, two-regime model to study whether the stimulus effects of government and private investment differ between recessionary and expansionary periods. During periods of economic sluggishness, we find that government spending has zero effect on private-sector job creation. This result is consistent with the apparent impotence of huge federal government spending increases aimed at reducing unemployment. In contrast, when it comes to job growth, expansions in private investment are effective in both regimes, but its efficacy is greatest during economic stagnation. By implication, policies that discourage private investment may have severe jobkilling effects during economic downturns, since it is during the low growth periods that private investment is most effective at creating jobs. In light of these results and the evident failure of government stimulus to restore economic growth, job creation appears best served, under present economic conditions, by policies that encourage efficient private-sector investment such as tax and regulatory relief.”
“We point to the following results as informative. First, the coefficient on government spending is negligible and statistically insignificant at any conventional level in the low growth regime (β LG = -0.001, t = -0.01). When the economy is in the high growth regime, the coefficient on government spending is positive and statistically significant (β HG = 0.072, t = 2.41). […] More significantly, this result implies that expanding government spending during economic downturns (i.e., recessions) may not help in creating private-sector jobs.”
“Second, we note that the coefficient on private investment growth is much higher in the low growth regime (β LK = 0.079, t = 8.43) than in the high growth regime (β HK = 0.042, t = 4.71). It should be also noted that the private investment growth is negative more often in the low growth regime (see Appendix A for estimated kernel density functions), which means that a higher coefficient (elasticity) implies greater job losses in the low growth regime.”
“However, this also implies that policies that help recover investor sentiments (e.g., tax incentive for investment) may help create private-sector jobs substantially. Using these estimates, we can again compute the implied employment multipliers. In the low growth regime, each $1 million in private investment creates 4.8 private-sector jobs. However, spending by the government creates no jobs (the multiplier is essentially zero).”
“In Table 2, we summarize the employment effects of a hypothetical 5% increase in private investment (about $90 billion in 2005 dollars) and the equivalent dollar increase in government spending.”
“Based on the computed multipliers, an additional 432,000 jobs would accompany this 5% increase in private investment during the low-growth period. In contrast, an equivalent $90 billion increase in spending by the government would produce no net jobs in the low-growth period. In the high-growth periods, the $90 billion in government spending or private investment both would generate over 200,000 jobs. We note the significant increase in the potency of private investment in the low-growth regime relative to the high-growth regime.”
And, in conclusion …
“Accordingly, we suggest that the United States consider a change of economic policy course: Regulatory relief, combined with policies that reduce the costs, and raise the returns, to domestic private investment, should be given a serious try, at least before any more additional deficit-funded “stimulus” is authorized.”
Aaaand what if ARRA didn’t crowd out private investment?
In fact, what if it actually crowded in private investment- it had a multiplier greater than one?
In my last post, I talk about “private jobs”. Government spending does not create private jobs. And please, re-read my post on ARRA. The ARRA program is a failure.
We asked organizations whether, before they received their ARRA-funded contracts, “things had been slow,” “things had been busy,” which caused them to turn work down, or “things had been busy,” and ARRA funding just made them work harder. Only 14 organizations indicated that they turned down other work in order to take on ARRA projects; but by a 2:1 ratio, respondents indicated that they had “been busy” before ARRA and so “worked harder” with ARRA funding rather than indicating that “things had been slow” before receiving ARRA funding (305 organizations chose the former response, 152 the latter).
Probit results indicate that firms who said things had been slow (with a 1-0 indicator; there was no natural ordering for an ordered probit) were not more likely to be in the best-funded tiers.
Further, only in the univariate regression was the ARRA fraction of a firm’s revenue a reliable predictor of past slowness (Tables 6-8); this result fell to insignificance after including the most cursory controls. Again, one must interpret voluntary survey responses with due caution, but it appears that for the majority of organizations, ARRA was not a lifeline during a time of deep economic trouble: it was a new burden to carry. Once again, ARRA did poorly under Summers’ “targeted” test.
Did stimulus-funded projects hire the unemployed or the already employed? Our surveys indicate a near-tie on this question. Of the 277 respondents hired after January 31, 2009, 42.1 percent had been unemployed immediately beforehand and 47.3 percent had come directly from another job. Of the rest, 4.1 percent had been out of the labor force, and 6.5 percent had been in school. Thus, the weight of the evidence suggests that ARRA did an enormous amount of “job shifting” rather than “job creating.” There is evidence of the latter, but, under Keynesian reasoning, every worker hired away from another job reflects some weakening of the stimulus.
No Such Thing as Shovel Ready: The Supply Side of the Recovery Act
"The organizations we interviewed often didn’t reveal or didn’t know if their new hires were unemployed beforehand; but in some cases, they pointed out that they either hired workers from the private sector or brought retirees back into the labor force. More often, firms just told us they hadn’t created that many jobs — they just used their own workers more (15) and just hired some temps for a few days or weeks.
(15) If stimulus-funded firms produce their extra output largely by using their own full-time workers harder — a common theme in interviews — then as a matter of accounting stimulus funds would largely accrue to owners as higher profits. When firms hold onto little-used workers during a recession, Keynesians refer to this as “labor hoarding.”
As mentioned above, we also found evidence that ARRA often created work without creating jobs: we heard many versions of, “Things were slow until the stimulus money came along; ARRA gave our employees something to do.” In Keynesian terms, these organizations were labor hoarding, holding onto workers through the slowdown even though they didn’t have much work to do. In these cases, ARRA funds boosted profits by plugging a hole in the company’s revenue stream; whether or not ARRA actually saved jobs at labor-hoarding firms is still a matter of speculation. To summarize our job creation findings: job switching: yes; giving a company’s current workers more to do: certainly. But hiring people from unemployment was more the exception than the rule in our interviews."
The Tradeoff between Speed and Quality
At least 12 of the respondents brought up concerns about the quality of stimulus-funded projects relative to other public projects. Some said that the federal government’s push to spend money was hurting the project’s quality; several said stimulus dollars were funding projects that were far down the list of needs, and a few voiced a general worry that while they were doing good work, they thought the government workers overseeing ARRA were so overworked that it was bound to hurt quality. To some extent the tradeoff was a result of the ill-defined goal of being “shovel-ready.”
Several respondents suggested that this was not a meaningful phrase for the large infrastructure projects that the popular imagination considered ARRA to be funding. For instance, one state transportation manager suggested that “shovel ready” was an arbitrary distinction that did not comport with the realities of infrastructure building, saying, “It takes years of permitting work, environmental analysis, et cetera, to get to the shovel ready stage, and millions of dollars. Who’s going to get that far and then stop on a project that’s really important? It doesn’t make sense.”
As Barack Obama himself acknowledged “there’s no such thing as shovel-ready projects” :
When the president campaigned for the stimulus package at the start of his presidency, he and others in his administration repeatedly insisted the investments would go to “shovel-ready” projects — projects that would put people to work right away. As recently as August, however, local governments were still facing delays spending the money they were allocated from the stimulus, CBS News Correspondent Nancy Cordes reported.
Furthermore, the spending wasn’t timely: Three years after the law was adopted, some programs still have managed to spend only 60 percent of the appropriated funds. Not only was the spending poorly timed, it also wasn’t targeted. The data show that stimulus money wasn’t targeted to those areas with the highest rate of unemployment.
Your last post is a copy-paste. I’m already aware of the original article. It does not refute my statement.