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I was going to ignore this as a "who cares" until I got to: in the end there is simply no argument that it is much better for the country to utilize the resour

I was going to ignore this as a "who cares" until I got to: in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it. Not only is it false that there's "no argument", but your statement is completely wrong. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). But your statement that they're sitting on their wealth doing nothing with it is the biggest demonstration that you're off base. As far as I know, nobody rich is doing this. If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. Contrast this to government spending, which according to Keynesian theory could be used by paying people to dig holes and fill them back in, so long as the government is doing this. In the Keynesian model (that Obama and the rest of the government is using), the money does not get used productively. When the rich guy rents his money to someone willing to pay for it, it's much more likely to find good use.

codexon 17y ago
If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. You are absolutely incorrect. They aren't doing this. They are pulling out of the US economy and putting them in Euros, gold, or Chinese factories. Did you somehow forget the complaints of a credit crunch that banks weren't lending any money? Do you really think they are dumb enough to keep investing in the US when dollars are being printed non-stop? If so you are way off base. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Then why aren't they the ones making the decisions if they are so correct? And the government doesn't simply just spend money for the sake of spending it. It usually (not always of course) goes into projects that benefit the public for decades such as better roads, power, and homes. And Keynesian model being wrong because of the 70's? That is simply naive. Inflation was due to fears of Opec increasing oil prices and moving off the gold standard. Inflation was already rising when Nixon implemented his limits on wage/price increases. US Debt as a fraction of the GDP was even decreasing during this period. http://g-ecx.images-amazon.com/images/G/01/askville/4889596_8620368_mywrite/us_debt_from_1940.gif http://g-ecx.images-amazon.com/images/G/01/askville/4889596_... Describing this as Keynesian is absolutely inane.
- CWuestefeld 17y ago
  Inflation was due to fears of Opec increasing oil prices That would depend on your understanding of inflation. The monetarist views, which it seems to me have proven themselves out most successfully in the real world, say that nothing of the sort can happen. Inflation is caused by one thing, and that's an increase in the money supply. http://en.wikipedia.org/wiki/Inflation#Monetarist_view http://en.wikipedia.org/wiki/Inflation#Monetarist_view and moving off the gold standard Well, yes, but that's precisely the point. The end of Bretton Woods was already a done deal by the time we're talking about. We were well into the era that the Keynesians though they could play games "stimulating" the economy by injecting money, bringing down unemployment by so doing. The fact that this didn't achieve their goals is exactly what I was talking about, and one of the reasons you should be listening more to the Monetarists like Friedman, rather than to Keynes.
  - codexon 17y ago
    Inflation is caused by one thing, and that's an increase in the money supply. That is plain wrong. Think about what would happen if the scarcity of crucial goods like food and shelter increased by 1000%. Would there be inflation? I'd put my money on it! Well, yes, but that's precisely the point. No, it is not precisely the point. The economy was already declining when Nixon moved off the gold standard. Why do you think he wanted to do it in the first place? And if your theory was correct, then why did the economy recover? Last time I checked, we didn't move back to gold in 1980.
  - nostrademons 17y ago
    Check your assumptions. From the article you linked: "Velocity of money is often assumed to be constant, and the real value of output is determined in the long run by the productive capacity of the economy. Under these assumptions, the primary driver of the change in the general price level is changes in the quantity of money." Monetarists never claim that inflation is always and everywhere a monetary phenomena unless they're dumbing things down for the press. They claim that in the long run it's a monetary phenomena. There's still room in the monetarist model for short-term supply spikes like the OPEC oil crises of 1973 and 1979 that the grandparent poster alludes to. I'd also take issue with your statement that "you should be listening more to the Monetarists like Friedman, rather than to Keynes." They are not diametrically opposed. Friedman accepted Keynes; in fact, one of the reasons that monetarism was successful was because Friedman was one of the first people to accept Keynes on his own terms and then point out situations where Keynesian economics was unable to explain the observed data. Monetarism should be viewed as a refinement of Keynesianism, not a replacement.
ajross 17y ago
but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Whoa: way, way, way oversold. Your making a blanket argument on a very complicated subject from a single data point. What about the sustained growth in the 40's through 60's due to New Deal, WWII, and Great Society spending? Economics is hard, and poorly suited to ideological statements like that. Anyone sane would look at the evidence and say that Keynesian stimulus works sometimes, and not others, and that the details matter a lot. Only political partisans would make a statement like yours.
- CWuestefeld 17y ago
  Anyone sane would look at the evidence and say that Keynesian stimulus works sometimes, and not others Sure, and you quoted my qualifier, too. I did say that the question is, "just how wrong?" (Not that there isn't an ideology I favor, but I don't think I was whitewashing to sell it) You'll note that some of the credit in the early 60s has to be given to anti-Keynesians. Kennedy's tax cuts broke from the Keynesian model, and were successful. And if you'll buy into Hayek a little, I'll assert that the WWII boom (no pun intended) can't be credited to following any particular school, but is simply because the economic question is easy when you can get the whole society on the same page, working toward the same goal.
  - ajross 17y ago
    Indeed, and the same qualifier would give a blanket "wrong" to supply-side theory too. After all, it failed in the '28-'32 period. Just how wrong is the question. That logic doesn't work, sorry. Keyensian thought isn't "proved" wrong in anything but the ideological fantasies of Wall Street Journal editorialists.

codexon 17y ago

If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them. You are absolutely incorrect. They aren't doing this. They are pulling out of the US economy and putting them in Euros, gold, or Chinese factories. Did you somehow forget the complaints of a credit crunch that banks weren't lending any money? Do you really think they are dumb enough to keep investing in the US when dollars are being printed non-stop? If so you are way off base. If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Then why aren't they the ones making the decisions if they are so correct? And the government doesn't simply just spend money for the sake of spending it. It usually (not always of course) goes into projects that benefit the public for decades such as better roads, power, and homes. And Keynesian model being wrong because of the 70's? That is simply naive. Inflation was due to fears of Opec increasing oil prices and moving off the gold standard. Inflation was already rising when Nixon implemented his limits on wage/price increases. US Debt as a fraction of the GDP was even decreasing during this period. http://g-ecx.images-amazon.com/images/G/01/askville/4889596_8620368_mywrite/us_debt_from_1940.gif http://g-ecx.images-amazon.com/images/G/01/askville/4889596_... Describing this as Keynesian is absolutely inane.

CWuestefeld 17y ago
Inflation was due to fears of Opec increasing oil prices That would depend on your understanding of inflation. The monetarist views, which it seems to me have proven themselves out most successfully in the real world, say that nothing of the sort can happen. Inflation is caused by one thing, and that's an increase in the money supply. http://en.wikipedia.org/wiki/Inflation#Monetarist_view http://en.wikipedia.org/wiki/Inflation#Monetarist_view and moving off the gold standard Well, yes, but that's precisely the point. The end of Bretton Woods was already a done deal by the time we're talking about. We were well into the era that the Keynesians though they could play games "stimulating" the economy by injecting money, bringing down unemployment by so doing. The fact that this didn't achieve their goals is exactly what I was talking about, and one of the reasons you should be listening more to the Monetarists like Friedman, rather than to Keynes.
- codexon 17y ago
  Inflation is caused by one thing, and that's an increase in the money supply. That is plain wrong. Think about what would happen if the scarcity of crucial goods like food and shelter increased by 1000%. Would there be inflation? I'd put my money on it! Well, yes, but that's precisely the point. No, it is not precisely the point. The economy was already declining when Nixon moved off the gold standard. Why do you think he wanted to do it in the first place? And if your theory was correct, then why did the economy recover? Last time I checked, we didn't move back to gold in 1980.
- nostrademons 17y ago
  Check your assumptions. From the article you linked: "Velocity of money is often assumed to be constant, and the real value of output is determined in the long run by the productive capacity of the economy. Under these assumptions, the primary driver of the change in the general price level is changes in the quantity of money." Monetarists never claim that inflation is always and everywhere a monetary phenomena unless they're dumbing things down for the press. They claim that in the long run it's a monetary phenomena. There's still room in the monetarist model for short-term supply spikes like the OPEC oil crises of 1973 and 1979 that the grandparent poster alludes to. I'd also take issue with your statement that "you should be listening more to the Monetarists like Friedman, rather than to Keynes." They are not diametrically opposed. Friedman accepted Keynes; in fact, one of the reasons that monetarism was successful was because Friedman was one of the first people to accept Keynes on his own terms and then point out situations where Keynesian economics was unable to explain the observed data. Monetarism should be viewed as a refinement of Keynesianism, not a replacement.

ajross 17y ago

but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?"). Whoa: way, way, way oversold. Your making a blanket argument on a very complicated subject from a single data point. What about the sustained growth in the 40's through 60's due to New Deal, WWII, and Great Society spending? Economics is hard, and poorly suited to ideological statements like that. Anyone sane would look at the evidence and say that Keynesian stimulus works sometimes, and not others, and that the details matter a lot. Only political partisans would make a statement like yours.

CWuestefeld 17y ago
Anyone sane would look at the evidence and say that Keynesian stimulus works sometimes, and not others Sure, and you quoted my qualifier, too. I did say that the question is, "just how wrong?" (Not that there isn't an ideology I favor, but I don't think I was whitewashing to sell it) You'll note that some of the credit in the early 60s has to be given to anti-Keynesians. Kennedy's tax cuts broke from the Keynesian model, and were successful. And if you'll buy into Hayek a little, I'll assert that the WWII boom (no pun intended) can't be credited to following any particular school, but is simply because the economic question is easy when you can get the whole society on the same page, working toward the same goal.
- ajross 17y ago
  Indeed, and the same qualifier would give a blanket "wrong" to supply-side theory too. After all, it failed in the '28-'32 period. Just how wrong is the question. That logic doesn't work, sorry. Keyensian thought isn't "proved" wrong in anything but the ideological fantasies of Wall Street Journal editorialists.