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> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that

by zeveb 11y ago

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it makes economic sense to tax people for money to fill up jars, tax people to pay for workers to fill jars with cash, tax people to pay for workers to bury the jars, and tax people to pay for workers to dig the jars up. Although I think there is a very valuable insight about velocities and derivatives rather than simply values-at-times, I think that government spending in general is essentially a drag on the economy: a necessary and inevitable malinvestment, but one to be avoided where possible.

jbooth 11y ago
It's not about 'wisely' in terms of returns to the individual who invested, it's about 'wisely' in terms of creating aggregate demand. For example, funding a bunch of national infrastructure projects would have horrible returns, being a 100% loss to the person who spent the money. But that money circulates in the economy, creating demand, and we get the infrastructure afterwards as well. That's speculation, of course, but we can look back to the New Deal to see that it's worked at least once before, and look at current-day corporate balance sheets and their underwhelming investment in demand-creating ventures to see that what we're doing now is not working. If the goal was to generate novel tax-avoidance schemes like the double-irish, though, we'd be a rousing success, so there's that.
- clarkmoody 11y ago
  Many smart people argue that the New Deal prolonged the Great Depression due to the government's incessant meddling in the market with price controls and new regulations.
  - deleted 11y ago
    [deleted]
  - jellicle 11y ago
    Nobody honest does. But I do agree with you that any economic opinion, no matter how nonsensical and contrary to evidence, can be purchased.
    - dragonwriter 11y ago
      > Nobody honest does. Maybe nobody who is all of honest, aware of the relevant documented facts, and sufficiently intelligent does. Maybe. But there are certainly people who are smart, people who are honest, and even people who are smart and honest that believe that the New Deal exacerbated the Depression in the way described. (Note that I very much do not endorse the idea that these beliefs are correct.)
- cpeterso 11y ago
  > we can look back to the New Deal to see that it's worked at least once before If only more legislation was evidence-based..
- marcoperaza 11y ago
  There are very respected economists and historians on all sides of debate as to whether the New Deal programs were effective, not effective, or if they actually prolonged the depression. Also, the New Deal was multi-faceted, so any analysis of its effectiveness needs to be specific. What parts were effective? Giving legal privileges to labour unions? Infrastructure investment? Social Security? Tax changes? You also have to consider the political side. Some of the New Deal proponents claimed that they saved capitalism, by preventing the crisis from boiling over to revolution. If they're right, there's certainly value in that. Now apply any lessons learned to today, a very different set of economic, social, and political circumstances. Also, beware of the broken window fallacy. Unproductive make-work is of no net benefit to society, and if foregone productive work is the opportunity cost, it's a net loss. Obviously, infrastructure investment is ideally productive, but the government has a pretty terrible track record for effectively spending money.
codyb 11y ago
I'd argue government spending on things like infrastructure moves goods and people to more places thus stimulating the economy. Government spending on research results in new drugs and medications which improve peoples qualities of life. Government investment in clean energy promises to reduce the tens of thousands of people adversely affected by pollution in our nation annually and also provide us with a hugely viable export technology. Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Meanwhile, the original owner might buy a boat while thousands of people have shoddy products and no recourse. Or they might buy a nice car while people deal with the pollution from their industry. In the end, I believe it to be about balance but lets not pretend that a lot of the research that goes into the vast majority of the technologically advanced products doesn't come from tax dollars and lets start ensuring that we as citizens benefit just as much as the owner of these big businesses which can (and should) capitalize on these investments made by society for the good of society. Then we can all go back to our enjoyable lives of digging up and reburying jars of money.
- vezzy-fnord 11y ago
  Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Some evidence to the contrary: http://www.brookings.edu/~/media/research/files/papers/2015/07/behavioral-politics-gayer/the-behavioral-paradox-of-government-policy.pdf http://www.brookings.edu/~/media/research/files/papers/2015/... There's always costs of utility forgone to putting upper bounds on heterogeneous consumer preferences, and as it turns out, they can be rather severe.
- dragonwriter 11y ago
  > Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Well, that's clearly not the case for the BBB (which is a private nonprofit), unless you are counting granting tax exempt status to an organization as a form of "government spending". I tend to agree with regard to the FDA and EPA, most of the time, but its not exactly a non-controversial claim and regulatory capture is always a concern.
msellout 11y ago
> more wisely than the original owners ... would have invested It depends. If the original owners were a handful of wealthy oligarchs, that's likely to be worse (ie. more centralized) than as spent by a large, distributed bureaucracy. If the original owners were a large population of mostly middle-income and poor, that's likely to be better (ie. more decentralized) than government spending/investment. > government spending in general is essentially a drag If government is a centralizing force, then yes. If government is a decentralizing force -- improving the mechanism of the free market -- then it's increasing efficiency.
- brc 11y ago
  How do you categorise a set of 'wealthy oligarchs' as having 'worse' spending than a monolithic government, which we all know has terrible spending patterns and priorities. Politicians spend money on vain projects to get themselves popular and re-elected- how is that not worse than a wealthy oligarch spending money on a gold plated fountain? At least the gold plated fountain would not be built on promises that the future (unborn) taxpayers will make up the tab. The point here is that people tend to see the government as a relatively benign spender who sometimes gives money to others, while they automatically see a rich person spending money as terribly misdirected. When you impugn a government with perfect morals and individuals with terrible morals the thinking that results simply has to be wrong.
  - gnaritas 11y ago
    You're missing his point; he's saying whomever happens to be the larger group in a given scenario will be the better spender of the money. Which is a point, given your stances, that you should be agreeing with unless you're just purely anti-government. He's saying the government is a better spender than the 'wealthy oligarchs' precisely because that's such a small group and the government is the bigger group but that the poor and middle class are better spenders than the government because they're the bigger group..
    - brc 11y ago
      'Good' and 'bad' spending are pretty loose concepts. Sure, building weapons is worse than building tractors in terms of human impact, but when you get down to incessant government intervention in everyday spending, it's not clear that governments spend money better than individuals of any wealth level. Only a minority of citizens waste their money; while a majority of governments waste theirs.
jellicle 11y ago
There are a vast number of situations where the individual decisions about how to spend money/take action may be the best for the individual, but bad for the society overall. For each and every one of those, it's better for society to act as a unit to make the optimal decision. https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons
- mindcrime 11y ago
  > For each and every one of those, it's better for society to act as a unit to make the optimal decision. Depends on how you define "better". Who is to say that "better for society" trumps "better for the individual". There's no particular objective reason to take that position over the one favoring individual choice. https://en.wikipedia.org/wiki/Tragedy_of_the_commons* https://en.wikipedia.org/wiki/Tragedy_of_the_commons* If everybody owns something, then nobody owns it. We should probably rethink our notion of what "the commons" means, vis-a-vis property rights.
  - gnaritas 11y ago
    > Depends on how you define "better". Who is to say that "better for society" trumps "better for the individual" Society of course, thus democracy. > There's no particular objective reason to take that position over the one favoring individual choice. Yes there is, the will of the majority.
  - msellout 11y ago
    > If everybody owns something, then nobody owns it. We should probably rethink our notion of what "the commons" means, vis-a-vis property rights. Good point. Of course, that rethink might go in either way, moving more things from public to private or from private to public. It's a good idea to periodically review what we consider public property and try to make it more consistent with the idea of privatizing externalities.
jusben1369 11y ago
Your paragraph on Keynes is a very common misrepresentation of his policies. Keynes was very clear that he wanted the government to offset the private sector. So if the economy was strong he expected the government to reduce spending least they lead to overheating. If the private sector was weak he expected the government to step in and try and offset that weakness. So it's nigh impossible for government spending to be a drag on the economy because it's only there in force due to the absence of private investment.

by zeveb 11y ago

jbooth 11y ago

It's not about 'wisely' in terms of returns to the individual who invested, it's about 'wisely' in terms of creating aggregate demand. For example, funding a bunch of national infrastructure projects would have horrible returns, being a 100% loss to the person who spent the money. But that money circulates in the economy, creating demand, and we get the infrastructure afterwards as well. That's speculation, of course, but we can look back to the New Deal to see that it's worked at least once before, and look at current-day corporate balance sheets and their underwhelming investment in demand-creating ventures to see that what we're doing now is not working. If the goal was to generate novel tax-avoidance schemes like the double-irish, though, we'd be a rousing success, so there's that.

clarkmoody 11y ago
Many smart people argue that the New Deal prolonged the Great Depression due to the government's incessant meddling in the market with price controls and new regulations.
- deleted 11y ago
  [deleted]
- jellicle 11y ago
  Nobody honest does. But I do agree with you that any economic opinion, no matter how nonsensical and contrary to evidence, can be purchased.
  - dragonwriter 11y ago
    > Nobody honest does. Maybe nobody who is all of honest, aware of the relevant documented facts, and sufficiently intelligent does. Maybe. But there are certainly people who are smart, people who are honest, and even people who are smart and honest that believe that the New Deal exacerbated the Depression in the way described. (Note that I very much do not endorse the idea that these beliefs are correct.)
cpeterso 11y ago
> we can look back to the New Deal to see that it's worked at least once before If only more legislation was evidence-based..
marcoperaza 11y ago
There are very respected economists and historians on all sides of debate as to whether the New Deal programs were effective, not effective, or if they actually prolonged the depression. Also, the New Deal was multi-faceted, so any analysis of its effectiveness needs to be specific. What parts were effective? Giving legal privileges to labour unions? Infrastructure investment? Social Security? Tax changes? You also have to consider the political side. Some of the New Deal proponents claimed that they saved capitalism, by preventing the crisis from boiling over to revolution. If they're right, there's certainly value in that. Now apply any lessons learned to today, a very different set of economic, social, and political circumstances. Also, beware of the broken window fallacy. Unproductive make-work is of no net benefit to society, and if foregone productive work is the opportunity cost, it's a net loss. Obviously, infrastructure investment is ideally productive, but the government has a pretty terrible track record for effectively spending money.

codyb 11y ago

I'd argue government spending on things like infrastructure moves goods and people to more places thus stimulating the economy. Government spending on research results in new drugs and medications which improve peoples qualities of life. Government investment in clean energy promises to reduce the tens of thousands of people adversely affected by pollution in our nation annually and also provide us with a hugely viable export technology. Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Meanwhile, the original owner might buy a boat while thousands of people have shoddy products and no recourse. Or they might buy a nice car while people deal with the pollution from their industry. In the end, I believe it to be about balance but lets not pretend that a lot of the research that goes into the vast majority of the technologically advanced products doesn't come from tax dollars and lets start ensuring that we as citizens benefit just as much as the owner of these big businesses which can (and should) capitalize on these investments made by society for the good of society. Then we can all go back to our enjoyable lives of digging up and reburying jars of money.

vezzy-fnord 11y ago
Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Some evidence to the contrary: http://www.brookings.edu/~/media/research/files/papers/2015/07/behavioral-politics-gayer/the-behavioral-paradox-of-government-policy.pdf http://www.brookings.edu/~/media/research/files/papers/2015/... There's always costs of utility forgone to putting upper bounds on heterogeneous consumer preferences, and as it turns out, they can be rather severe.
dragonwriter 11y ago
> Government spending on bureaus like the FDA, EPA, and BBB give consumers and citizens access to outlets for complaints against dirty businesses and give us a decent amount of protection against those who would harm us to gain more of those dollars you think they'd rather have in their own pocket. Well, that's clearly not the case for the BBB (which is a private nonprofit), unless you are counting granting tax exempt status to an organization as a form of "government spending". I tend to agree with regard to the FDA and EPA, most of the time, but its not exactly a non-controversial claim and regulatory capture is always a concern.

msellout 11y ago

> more wisely than the original owners ... would have invested It depends. If the original owners were a handful of wealthy oligarchs, that's likely to be worse (ie. more centralized) than as spent by a large, distributed bureaucracy. If the original owners were a large population of mostly middle-income and poor, that's likely to be better (ie. more decentralized) than government spending/investment. > government spending in general is essentially a drag If government is a centralizing force, then yes. If government is a decentralizing force -- improving the mechanism of the free market -- then it's increasing efficiency.

brc 11y ago
How do you categorise a set of 'wealthy oligarchs' as having 'worse' spending than a monolithic government, which we all know has terrible spending patterns and priorities. Politicians spend money on vain projects to get themselves popular and re-elected- how is that not worse than a wealthy oligarch spending money on a gold plated fountain? At least the gold plated fountain would not be built on promises that the future (unborn) taxpayers will make up the tab. The point here is that people tend to see the government as a relatively benign spender who sometimes gives money to others, while they automatically see a rich person spending money as terribly misdirected. When you impugn a government with perfect morals and individuals with terrible morals the thinking that results simply has to be wrong.
- gnaritas 11y ago
  You're missing his point; he's saying whomever happens to be the larger group in a given scenario will be the better spender of the money. Which is a point, given your stances, that you should be agreeing with unless you're just purely anti-government. He's saying the government is a better spender than the 'wealthy oligarchs' precisely because that's such a small group and the government is the bigger group but that the poor and middle class are better spenders than the government because they're the bigger group..
  - brc 11y ago
    'Good' and 'bad' spending are pretty loose concepts. Sure, building weapons is worse than building tractors in terms of human impact, but when you get down to incessant government intervention in everyday spending, it's not clear that governments spend money better than individuals of any wealth level. Only a minority of citizens waste their money; while a majority of governments waste theirs.

jellicle 11y ago

There are a vast number of situations where the individual decisions about how to spend money/take action may be the best for the individual, but bad for the society overall. For each and every one of those, it's better for society to act as a unit to make the optimal decision. https://en.wikipedia.org/wiki/Tragedy_of_the_commons https://en.wikipedia.org/wiki/Tragedy_of_the_commons

mindcrime 11y ago
> For each and every one of those, it's better for society to act as a unit to make the optimal decision. Depends on how you define "better". Who is to say that "better for society" trumps "better for the individual". There's no particular objective reason to take that position over the one favoring individual choice. https://en.wikipedia.org/wiki/Tragedy_of_the_commons* https://en.wikipedia.org/wiki/Tragedy_of_the_commons* If everybody owns something, then nobody owns it. We should probably rethink our notion of what "the commons" means, vis-a-vis property rights.
- gnaritas 11y ago
  > Depends on how you define "better". Who is to say that "better for society" trumps "better for the individual" Society of course, thus democracy. > There's no particular objective reason to take that position over the one favoring individual choice. Yes there is, the will of the majority.
- msellout 11y ago
  > If everybody owns something, then nobody owns it. We should probably rethink our notion of what "the commons" means, vis-a-vis property rights. Good point. Of course, that rethink might go in either way, moving more things from public to private or from private to public. It's a good idea to periodically review what we consider public property and try to make it more consistent with the idea of privatizing externalities.

jusben1369 11y ago

Your paragraph on Keynes is a very common misrepresentation of his policies. Keynes was very clear that he wanted the government to offset the private sector. So if the economy was strong he expected the government to reduce spending least they lead to overheating. If the private sector was weak he expected the government to step in and try and offset that weakness. So it's nigh impossible for government spending to be a drag on the economy because it's only there in force due to the absence of private investment.