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We do know how to increase aggregate demand. The formula: D = C + I + G + NE D = Demand C = Consumer spending on private goods and services I = Busine

We do know how to increase aggregate demand. The formula: D = C + I + G + NE D = Demand C = Consumer spending on private goods and services I = Business investment in capital goods G = Government expenditures on public goods & services NE = Net exports (Exports - Imports) Right now there is a huge economic opportunity to increase G due to historically low interest rates (cheap to raise debt) and stagnant wages (cheap labor). The economics are clear, but the way forward through fiscal policy roadblocks is not. Read for more details: https://sites.google.com/site/kocherlakota009/home/policy/thoughts-on-policy/2-19-16 https://sites.google.com/site/kocherlakota009/home/policy/th...

pjmorris 11y ago
Doesn't have to be G. Couldn't business treat labor as a capital good, increasing I? (ala Henry Ford paying his workers more to reduce turnover... with the side benefit of them becoming wealthy enough to buy the cars, increasing C.)
- skybrian 11y ago
  No, because employees can leave at any time. There was a time when labor was treated as a capital good, and it ended with the Emancipation Proclamation.
  - deleted 11y ago
    [deleted]
marcosdumay 11y ago
You are not getting very far with this equation. Returns on investment are mostly defined by the C/I relation (government spending can go on either side) (and yes, that is on average, and nominal), and this is the one that needs fixing.
wheaties 11y ago
Only if G isn't already overspent. In the US and several counties G is well over budget and has been for a long time. This combined with large liabilities coming down the pipeline and G should not be something we look to solve the issue.
- hackuser 11y ago
  > In the US and several counties G is well over budget and has been for a long time. I don't agree. G has been reduced considerably recently. Under Bill Clinton, G was higher and the U.S. ran a budget surplus. It's an old tactic: Cut taxes (now to historically low levels) and then say the country can't afford to pay for anything. The solution is to increase taxes. The U.S. economy is the largest in history (for the U.S. or any nation); the nation can afford more G than it ever could before. All the money is concentrated in the hands of a few, but as long as they pay their share the federal budget, at least, shouldn't be a problem.
- jbooth 11y ago
  Infrastructure spending in the US is backlogged for decades. Hard to argue we're overspending on that when we see a major bridge collapse disaster every 5 years. Bring that schedule forward through issuing more debt at record-low interest rates, and bang, you've solved several problems at once. People have jobs, they spend money, that helps the economy, and we get the infrastructure out of it as well. You'll even get some of that inflation that's been missing during the QE period, while all the fed economists looked at their macro textbooks in utter confusion.
  - joelhaus 11y ago
    For the reason you mention, there would be substantial upside from increased infrastructure spending & the timing is pretty close to optimal. What's interesting is that through greasing the wheels of the economy via infrastructure investments (e.g. better broadband, connected/wired roadways, upgraded utilities and transportation hubs) you would see productivity gains which, over time, would further diminish the value of labor. Have always been interested in how long-term goals of social/economic policy should influence short-term decision making, but there aren't any easy answers.
dbiebiebhe 11y ago
Yeah because a government that spends hundreds of billions on genocide is exactly the entity we want to spend more. Good fucking grief, HN is full of naïve idealists.

pjmorris 11y ago

Doesn't have to be G. Couldn't business treat labor as a capital good, increasing I? (ala Henry Ford paying his workers more to reduce turnover... with the side benefit of them becoming wealthy enough to buy the cars, increasing C.)

skybrian 11y ago
No, because employees can leave at any time. There was a time when labor was treated as a capital good, and it ended with the Emancipation Proclamation.
- deleted 11y ago
  [deleted]

marcosdumay 11y ago

You are not getting very far with this equation. Returns on investment are mostly defined by the C/I relation (government spending can go on either side) (and yes, that is on average, and nominal), and this is the one that needs fixing.

wheaties 11y ago

Only if G isn't already overspent. In the US and several counties G is well over budget and has been for a long time. This combined with large liabilities coming down the pipeline and G should not be something we look to solve the issue.

hackuser 11y ago
> In the US and several counties G is well over budget and has been for a long time. I don't agree. G has been reduced considerably recently. Under Bill Clinton, G was higher and the U.S. ran a budget surplus. It's an old tactic: Cut taxes (now to historically low levels) and then say the country can't afford to pay for anything. The solution is to increase taxes. The U.S. economy is the largest in history (for the U.S. or any nation); the nation can afford more G than it ever could before. All the money is concentrated in the hands of a few, but as long as they pay their share the federal budget, at least, shouldn't be a problem.
jbooth 11y ago
Infrastructure spending in the US is backlogged for decades. Hard to argue we're overspending on that when we see a major bridge collapse disaster every 5 years. Bring that schedule forward through issuing more debt at record-low interest rates, and bang, you've solved several problems at once. People have jobs, they spend money, that helps the economy, and we get the infrastructure out of it as well. You'll even get some of that inflation that's been missing during the QE period, while all the fed economists looked at their macro textbooks in utter confusion.
- joelhaus 11y ago
  For the reason you mention, there would be substantial upside from increased infrastructure spending & the timing is pretty close to optimal. What's interesting is that through greasing the wheels of the economy via infrastructure investments (e.g. better broadband, connected/wired roadways, upgraded utilities and transportation hubs) you would see productivity gains which, over time, would further diminish the value of labor. Have always been interested in how long-term goals of social/economic policy should influence short-term decision making, but there aren't any easy answers.

dbiebiebhe 11y ago

Yeah because a government that spends hundreds of billions on genocide is exactly the entity we want to spend more. Good fucking grief, HN is full of naïve idealists.