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The world economy is dominated by people in governments who believe that printing money, burying it and paying people to dig it up again will increase the amoun

by brc 11y ago

The world economy is dominated by people in governments who believe that printing money, burying it and paying people to dig it up again will increase the amount of trucks built and goods shipped. No amount of failure of this theory will be enough for it to be abandoned, because it has a certain amount of truthiness to it, and it excuses profligate and wasteful behaviour. Both these things are fun and buy votes. The Baltic dry should be studied in conjunction with other indicators such as yield curves and indications of credit tightness.

netcan 11y ago
I absolutely will not defend Keynes or any other idea in economics, inasmuch as they can possibly be implemented in the political process that decide on economic policies. That said, I do not think this is a case of a bad economist. Economics theory is theory... theory that attempts to quantify societal behaviour, various cooperation dynamics, measurable output, etc. None of them know how to deal with various problems like "quality" & "technology" even though all economists admit they are pretty important. These theories usually have money playing a central role in some way). Anyway, they're theories about people acting together in big groups economics calls markets. Political dynamics is another piece of the puzzle. So is every other meme in society. In some place homosexuals are allowed by society. In some places it is banned. Why now? Why not in 1750 or 2235? There are theories about how to quantify and predict here too, but obviously the ability of theories about such things are not up to the task of making consistent predictions. Asimov's "psychohistory" is a fictional discipline which is basically economics, historical determinism, political science etc. The fictional twist is that these theories can make consistent predictions within very usable margins of error.
- fnordfnordfnord 11y ago
  Have a look at what Keynes wrote in 1930. "Economic Possibilities for Our Grandchildren." http://www.econ.yale.edu/smith/econ116a/keynes1.pdf http://www.econ.yale.edu/smith/econ116a/keynes1.pdf
- acjohnson55 11y ago
  The printing money concept is due to the monetarists, not Keynes. Keynes would recommend deficit spending.
  - deleted 11y ago
    [deleted]
  - vezzy-fnord 11y ago
    Monetarism is just a theory of the transmission mechanism going from money supply->price level->output, with some variations. Their policy proposals have been quite diverse. Keynes himself had differing policy recommendations, as well, but ultimately settled on what he called "socialization of investment" where the state would fill in certain entrepreneurial activities that the private sector is deemed to be lacking, though the specifics were elusive. Contracyclical fiscal policy was actually popularized by Alvin Hansen IIRC, and the more extreme functional finance favored by Post-Keynesians was formulated by Abba P. Lerner.
Gravityloss 11y ago
There's is some government spending that has to be done anyway, but can be shifted in time so it's done when there's a recession. Things like bridge rebuilding or warships. Of course, if you're in recession for 8 years, you start running out of such things.
- guessthat 11y ago
  What are you suggesting here? Forgoing the building of civilian infrastructure and military assets until a recession is what? Also, if you have data supporting your hypothesis, I would be very interested to see it.
- acjohnson55 11y ago
  Funny thing is, there's plenty of rebuilding we could be doing, which would be quite stimulative, but it's politically unpopular because it would involve some tax and spend upfront, which would put a bit of a pinch on people in the middle and upper classes. Ironically, those same people stand to benefit from the lower classes having more discretionary income.
- brc 11y ago
  But if something is worth doing, it's worth doing now. If you had an idea for a great startup, you wouldn't wait for a few years. You'd do it as soon as it was ready.
  - Gravityloss 11y ago
    Not necessarily. Hypothetical of two alternatives: 1. Do a small renovation to a bridge and it will stay usable for five more years, or 2. Do something more comprehensive (teardown + rebuild), after which you don't have to do anything for 20 years If there's a temporary high in building costs, it makes sense to do 1. If there's a temporary low, it makes sense to do 2.
tootie 11y ago
No economists believe that ridiculous straw man nor is it relevant to this article.
- calibraxis 11y ago
  Many do. Not the sectarian economists hired to develop capitalist theology, but the ones you take seriously when you need to run a real capitalist economy. Here's a lucid explanation: "If you take an economics course, they’ll teach you, correctly, that if the government spends n dollars to stimulate the economy, it doesn’t really matter what it’s spent on: they can build jet planes, they can bury it in the sand and get people to dig for it, they can build roads and houses, they can do all sorts of things—in terms of stimulating the economy, the economic effects are not all that different.² In fact, it’s perfectly likely that military spending is actually a less efficient stimulus than social spending, for all kinds of reasons. But the problem is, spending for civilian purposes has negative side effects. For one thing, it interferes with managerial prerogatives. The money that’s funneled through the Pentagon system is just a straight gift to the corporate manager, it’s like saying, “I’ll buy anything you produce, and I’ll pay for the research and development, and if you can make any profits, fine.” From the point of view of the corporate manager, that’s optimal. But if the government started producing anything that business might be able to sell directly to the commercial market, then it would be interfering with corporate profit-making. Production of waste—of expensive, useless machinery—is not an interference: nobody else is going to produce B-2 bombers, right? So that’s one point." — Noam Chomsky, "Understanding Power"
  - vezzy-fnord 11y ago
    Funnily enough Chomsky is implicitly assuming that government spending has a crowding out effect, which is an idea popular with economists who are "hired to develop capitalist theology," as you label them. But, probably not. Even "social spending" opens up lots of procurement opportunities for the corporate manager. There might be some crowding out in real terms (government having political authority to exclude activity it deems to be an interference), but it'll be offset by the likely benefits of ensuing expansion, corporate welfare grants and workforce mobilization. The problem with Chomsky here and many others is that they have the causality backwards. They see corporations as evil entities that spontaneously emerged from the ground to usurp the state, when in fact they were explicitly cultivated by states looking for economic growth.
jjoonathan 11y ago
I don't buy it. Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value, people base their opinions on those of others (+delay), leading to "inertia," leading to oscillation. The government might exacerbate the oscillations, but the lion's share of responsibility lies with the market. Complaining that the oscillations happen because the market "just isn't free enough" represents a delusion about the qualities of free markets. As for make-work, it's a compromise that nobody is happy with, but it is a compromise, and that's its value proposition. Some want to let the market clear without intervention by any means necessary, regardless of the social cost, based on (arguably misplaced) faith that this will ultimately make things better. Others think it's ridiculous that periodically attacking the foundation-tier Maslow needs of large swaths of the population is "a feature not a bug," and demand (arguably unsustainable) social policy to fix it. Make-work lies between the "free-market reckoning" and "re-distributional cash grant" extremes and so once the dust of democratic process has settled it's the thing that actually happens even though both sides see it as a poor alternative to their favored solution. > The Baltic dry should be studied in conjunction with other indicators such as yield curves and indications of credit tightness. The Baltic dry should be studied in conjunction with the reliable unreliability of the market in general. Since markets are as inherently unavoidable as physics or politics, we cannot simply wish them away. Instead, we should develop social policy to decouple the markets for well-understood core needs-providing infrastructure from the global economy in order to place bounds on the social cost of market corrections, which could then be allowed to happen (otherwise) unimpeded.
- vezzy-fnord 11y ago
  What you're describing might explain fluctuations, but it's inadequate and incomplete for the business cycle. Virtually no one, not even Keynesian or other left-economists support make-work. It's mostly an idea favorable to laymen, or often done for more nationalistic rather than economic reasons. FDR was inspired by William Trufant Foster's and Waddill Catchings' policy advice for instance, who had Keynesian-esque underconsumptionist views but did not derive these from any economic theory per se. Even ardent Keynesians will advocate a more sophisticated proposal of what amounts to government-owned employment agencies that combine private contract procurement with state investment projects, with the intention of having the unemployed serve as buffer stocks of labor to meet some form of output target. But not quite brute make-work. (Actually the "quantifying value" problem makes no sense. It's not as if there is some objective essence called "value" that people seek. Value is largely denominated in units of currency. I suppose what you're getting at is the importance of monetary policy?)
trevelyan 11y ago
Yup. Lets go back to gold so that when times get tough people can go to the mines and dig it up instead.
sbardle 11y ago
Central banks are the problem. They have destabalised the global economy by constantly lowering interest rates and creating asset bubbles to promote the illusion of growth. Central bankers are politically appointed in many cases so they have no interest in cooling an economy. It messes up the business cycle and creates the conditions for even bigger booms and busts. Alternative currencies like Bitcoin will rise in popularity and may hold the key to a less manipulated financial system in the longer term - but I fear we will have another financial crisis before the new alternative currencies have gained traction. We shall see...
- RobertoG 11y ago
  Central banks and automatic stabilizers are what have avoided a bigger crisis this time. That doesn't mean that monetary policy is the right solution. The right solution is fiscal policy (government spending) but this is not happening because politics is dominated by crazy ideas about austerity and fiscal balances.
  - sbardle 11y ago
    I'm not so sure. Central banks helped cause the 08 crisis by lowering interest rates after 9/11 and encouraging a housing bubble. Their response to the 08 crisis (bailing out the banks, ultra-low interest rates, QE) may have laid the ground for an even bigger crisis further down the road. All this is good news for alternative currencies IMO.

by brc 11y ago

netcan 11y ago

I absolutely will not defend Keynes or any other idea in economics, inasmuch as they can possibly be implemented in the political process that decide on economic policies. That said, I do not think this is a case of a bad economist. Economics theory is theory... theory that attempts to quantify societal behaviour, various cooperation dynamics, measurable output, etc. None of them know how to deal with various problems like "quality" & "technology" even though all economists admit they are pretty important. These theories usually have money playing a central role in some way). Anyway, they're theories about people acting together in big groups economics calls markets. Political dynamics is another piece of the puzzle. So is every other meme in society. In some place homosexuals are allowed by society. In some places it is banned. Why now? Why not in 1750 or 2235? There are theories about how to quantify and predict here too, but obviously the ability of theories about such things are not up to the task of making consistent predictions. Asimov's "psychohistory" is a fictional discipline which is basically economics, historical determinism, political science etc. The fictional twist is that these theories can make consistent predictions within very usable margins of error.

fnordfnordfnord 11y ago
Have a look at what Keynes wrote in 1930. "Economic Possibilities for Our Grandchildren." http://www.econ.yale.edu/smith/econ116a/keynes1.pdf http://www.econ.yale.edu/smith/econ116a/keynes1.pdf
acjohnson55 11y ago
The printing money concept is due to the monetarists, not Keynes. Keynes would recommend deficit spending.
- deleted 11y ago
  [deleted]
- vezzy-fnord 11y ago
  Monetarism is just a theory of the transmission mechanism going from money supply->price level->output, with some variations. Their policy proposals have been quite diverse. Keynes himself had differing policy recommendations, as well, but ultimately settled on what he called "socialization of investment" where the state would fill in certain entrepreneurial activities that the private sector is deemed to be lacking, though the specifics were elusive. Contracyclical fiscal policy was actually popularized by Alvin Hansen IIRC, and the more extreme functional finance favored by Post-Keynesians was formulated by Abba P. Lerner.

Gravityloss 11y ago

There's is some government spending that has to be done anyway, but can be shifted in time so it's done when there's a recession. Things like bridge rebuilding or warships. Of course, if you're in recession for 8 years, you start running out of such things.

guessthat 11y ago
What are you suggesting here? Forgoing the building of civilian infrastructure and military assets until a recession is what? Also, if you have data supporting your hypothesis, I would be very interested to see it.
acjohnson55 11y ago
Funny thing is, there's plenty of rebuilding we could be doing, which would be quite stimulative, but it's politically unpopular because it would involve some tax and spend upfront, which would put a bit of a pinch on people in the middle and upper classes. Ironically, those same people stand to benefit from the lower classes having more discretionary income.
brc 11y ago
But if something is worth doing, it's worth doing now. If you had an idea for a great startup, you wouldn't wait for a few years. You'd do it as soon as it was ready.
- Gravityloss 11y ago
  Not necessarily. Hypothetical of two alternatives: 1. Do a small renovation to a bridge and it will stay usable for five more years, or 2. Do something more comprehensive (teardown + rebuild), after which you don't have to do anything for 20 years If there's a temporary high in building costs, it makes sense to do 1. If there's a temporary low, it makes sense to do 2.

tootie 11y ago

No economists believe that ridiculous straw man nor is it relevant to this article.

calibraxis 11y ago
Many do. Not the sectarian economists hired to develop capitalist theology, but the ones you take seriously when you need to run a real capitalist economy. Here's a lucid explanation: "If you take an economics course, they’ll teach you, correctly, that if the government spends n dollars to stimulate the economy, it doesn’t really matter what it’s spent on: they can build jet planes, they can bury it in the sand and get people to dig for it, they can build roads and houses, they can do all sorts of things—in terms of stimulating the economy, the economic effects are not all that different.² In fact, it’s perfectly likely that military spending is actually a less efficient stimulus than social spending, for all kinds of reasons. But the problem is, spending for civilian purposes has negative side effects. For one thing, it interferes with managerial prerogatives. The money that’s funneled through the Pentagon system is just a straight gift to the corporate manager, it’s like saying, “I’ll buy anything you produce, and I’ll pay for the research and development, and if you can make any profits, fine.” From the point of view of the corporate manager, that’s optimal. But if the government started producing anything that business might be able to sell directly to the commercial market, then it would be interfering with corporate profit-making. Production of waste—of expensive, useless machinery—is not an interference: nobody else is going to produce B-2 bombers, right? So that’s one point." — Noam Chomsky, "Understanding Power"
- vezzy-fnord 11y ago
  Funnily enough Chomsky is implicitly assuming that government spending has a crowding out effect, which is an idea popular with economists who are "hired to develop capitalist theology," as you label them. But, probably not. Even "social spending" opens up lots of procurement opportunities for the corporate manager. There might be some crowding out in real terms (government having political authority to exclude activity it deems to be an interference), but it'll be offset by the likely benefits of ensuing expansion, corporate welfare grants and workforce mobilization. The problem with Chomsky here and many others is that they have the causality backwards. They see corporations as evil entities that spontaneously emerged from the ground to usurp the state, when in fact they were explicitly cultivated by states looking for economic growth.

jjoonathan 11y ago

I don't buy it. Boom & bust cycles are driven by the fundamental difficulty of quantifying value. Since there is no true value, people base their opinions on those of others (+delay), leading to "inertia," leading to oscillation. The government might exacerbate the oscillations, but the lion's share of responsibility lies with the market. Complaining that the oscillations happen because the market "just isn't free enough" represents a delusion about the qualities of free markets. As for make-work, it's a compromise that nobody is happy with, but it is a compromise, and that's its value proposition. Some want to let the market clear without intervention by any means necessary, regardless of the social cost, based on (arguably misplaced) faith that this will ultimately make things better. Others think it's ridiculous that periodically attacking the foundation-tier Maslow needs of large swaths of the population is "a feature not a bug," and demand (arguably unsustainable) social policy to fix it. Make-work lies between the "free-market reckoning" and "re-distributional cash grant" extremes and so once the dust of democratic process has settled it's the thing that actually happens even though both sides see it as a poor alternative to their favored solution. > The Baltic dry should be studied in conjunction with other indicators such as yield curves and indications of credit tightness. The Baltic dry should be studied in conjunction with the reliable unreliability of the market in general. Since markets are as inherently unavoidable as physics or politics, we cannot simply wish them away. Instead, we should develop social policy to decouple the markets for well-understood core needs-providing infrastructure from the global economy in order to place bounds on the social cost of market corrections, which could then be allowed to happen (otherwise) unimpeded.

vezzy-fnord 11y ago
What you're describing might explain fluctuations, but it's inadequate and incomplete for the business cycle. Virtually no one, not even Keynesian or other left-economists support make-work. It's mostly an idea favorable to laymen, or often done for more nationalistic rather than economic reasons. FDR was inspired by William Trufant Foster's and Waddill Catchings' policy advice for instance, who had Keynesian-esque underconsumptionist views but did not derive these from any economic theory per se. Even ardent Keynesians will advocate a more sophisticated proposal of what amounts to government-owned employment agencies that combine private contract procurement with state investment projects, with the intention of having the unemployed serve as buffer stocks of labor to meet some form of output target. But not quite brute make-work. (Actually the "quantifying value" problem makes no sense. It's not as if there is some objective essence called "value" that people seek. Value is largely denominated in units of currency. I suppose what you're getting at is the importance of monetary policy?)

trevelyan 11y ago

Yup. Lets go back to gold so that when times get tough people can go to the mines and dig it up instead.

sbardle 11y ago

Central banks are the problem. They have destabalised the global economy by constantly lowering interest rates and creating asset bubbles to promote the illusion of growth. Central bankers are politically appointed in many cases so they have no interest in cooling an economy. It messes up the business cycle and creates the conditions for even bigger booms and busts. Alternative currencies like Bitcoin will rise in popularity and may hold the key to a less manipulated financial system in the longer term - but I fear we will have another financial crisis before the new alternative currencies have gained traction. We shall see...

RobertoG 11y ago
Central banks and automatic stabilizers are what have avoided a bigger crisis this time. That doesn't mean that monetary policy is the right solution. The right solution is fiscal policy (government spending) but this is not happening because politics is dominated by crazy ideas about austerity and fiscal balances.
- sbardle 11y ago
  I'm not so sure. Central banks helped cause the 08 crisis by lowering interest rates after 9/11 and encouraging a housing bubble. Their response to the 08 crisis (bailing out the banks, ultra-low interest rates, QE) may have laid the ground for an even bigger crisis further down the road. All this is good news for alternative currencies IMO.