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>The latter statement only contradicts Keynesian economics Uh, no, it contradicts neoclassical economics. Keynesian economics views unemployment as a deficit o

>The latter statement only contradicts Keynesian economics Uh, no, it contradicts neoclassical economics. Keynesian economics views unemployment as a deficit of aggregate demand and most CERTAINLY does not pretend that it doesn't exist. >But although in one sentence he seems to think the Greek experience contradicts Keynesian economics A quick skim suggests he doesn't contradict Keynesian economists. Probably he contradicts new keynesian economics somewhere, but then again, New Keynesian is an abortion that would have Keynes turning in his grave.

yummyfajitas 11y ago
According to Keynesians, if real wages fall, employment should rise (relative to a counterfactual of fixed real wages). According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing.
- crdoconnor 11y ago
  >According to Keynesians, if real wages fall, employment should rise AGAIN, that's what neoclassical economists believe, NOT Keynesians. >According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. No, that's what Keynesian economics predicts which is the exact opposite of what Neoclassical economics predicts. >Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing. Neoclassical seems more favored these days despite its atrocious predictive capabilities. This is what Varoufakis was criticizing.
  - yummyfajitas 11y ago
    You don't seem to know what Keynesian economics is. Please google it. Other key phrases include "sticky wages". If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck.
    - notahacker 11y ago
      The problem is that a huge swathe of mainstream and formerly mainstream macroeconomic viewpoints are classed as "Keynesian", and the mainstream "New Keynesian" macroeconomic model you speak of which focuses on manipulating inflation to overcome resistance to real wage cuts and assumes a minimal role for fiscal policy is rather different from the traditional "Keynesian" (and "Post Keynesian") emphasis on increasing net government spend to stimulate consumption in a downturn. Pretty much any undergrad who's read their introduction to national accounts and Keynesian concept of aggregate demand and multipliers can devise a set of simultaneous equations which will yield both a real wage fall and an unemployment rise in a basic stylised macro model if you also slash G and raise T (especially if the assumption is - as with Greece - that the expected debt servicing will largely be repatriated to overseas bondholders)
    - yequalsx 11y ago
      I have the same suggestion for you. Google it.
    - crdoconnor 11y ago
      >You don't seem to know what Keynesian economics is. I'm really not the one who is confused here :) >If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck. Simple. Reduce aggregate demand enough (e.g. by slashing government spending like Greece has done) and employment and real wages will both drop. It's neoclassical economics with its idiotic presumption of 'full employment by default' that can't account for real wages and employment dropping at the same time. According to that theory, wages will just keep dropping until everybody is employed.
      - yummyfajitas 11y ago
        Step 1: Reduce aggregate demand enough (e.g. by slashing government spending like Greece has done) and Step 2: ??? Step 3: employment and real wages will both drop. How do you fill in step 2? Remember, I asked if you could show how Keynesian theory predicts this, not assert that it does.

yummyfajitas 11y ago

According to Keynesians, if real wages fall, employment should rise (relative to a counterfactual of fixed real wages). According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing.

crdoconnor 11y ago
>According to Keynesians, if real wages fall, employment should rise AGAIN, that's what neoclassical economists believe, NOT Keynesians. >According to Varoufakis, "real wages fell by 40% but employment dropped" which is the exact opposite of Keynesian economics. No, that's what Keynesian economics predicts which is the exact opposite of what Neoclassical economics predicts. >Another phrase for "Keynesian economics" is "macroeconomic models taught at the best universities", which is what Varoufakis is criticizing. Neoclassical seems more favored these days despite its atrocious predictive capabilities. This is what Varoufakis was criticizing.
- yummyfajitas 11y ago
  You don't seem to know what Keynesian economics is. Please google it. Other key phrases include "sticky wages". If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck.
  - notahacker 11y ago
    The problem is that a huge swathe of mainstream and formerly mainstream macroeconomic viewpoints are classed as "Keynesian", and the mainstream "New Keynesian" macroeconomic model you speak of which focuses on manipulating inflation to overcome resistance to real wage cuts and assumes a minimal role for fiscal policy is rather different from the traditional "Keynesian" (and "Post Keynesian") emphasis on increasing net government spend to stimulate consumption in a downturn. Pretty much any undergrad who's read their introduction to national accounts and Keynesian concept of aggregate demand and multipliers can devise a set of simultaneous equations which will yield both a real wage fall and an unemployment rise in a basic stylised macro model if you also slash G and raise T (especially if the assumption is - as with Greece - that the expected debt servicing will largely be repatriated to overseas bondholders)
  - yequalsx 11y ago
    I have the same suggestion for you. Google it.
  - crdoconnor 11y ago
    >You don't seem to know what Keynesian economics is. I'm really not the one who is confused here :) >If you think I'm wrong, please show how to use a Keynesian theory to predict "real wages fell by 40% but employment dropped". Good luck. Simple. Reduce aggregate demand enough (e.g. by slashing government spending like Greece has done) and employment and real wages will both drop. It's neoclassical economics with its idiotic presumption of 'full employment by default' that can't account for real wages and employment dropping at the same time. According to that theory, wages will just keep dropping until everybody is employed.
    - yummyfajitas 11y ago
      Step 1: Reduce aggregate demand enough (e.g. by slashing government spending like Greece has done) and Step 2: ??? Step 3: employment and real wages will both drop. How do you fill in step 2? Remember, I asked if you could show how Keynesian theory predicts this, not assert that it does.