6 ms·

Once the 1970s happened and Keynes was accepted, the Revolution was over, wasn't it? My macroeconomics courses in the 2000s basically said, "Yeah, stagflation

by mbg721 4y ago

Once the 1970s happened and Keynes was accepted, the Revolution was over, wasn't it? My macroeconomics courses in the 2000s basically said, "Yeah, stagflation happened. How bout that," and went back to the G plus E plus I whatever.

Consultant32452 4y ago
The most important thing to know about the field of economics is the only people who get funding are the people who tell the public that the government should do whatever it was the government wanted to do. Example: you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economics. Why would that tank your career? Because big business has paid the government to pull the right levers to suppress your wages. The solution to a labor shortage is higher wages, but that can't be the government's response to their donors. Technically you can say the truth, but you better not be very loud about it.
- pydry 4y ago
  This is how the idea that raising the minimum wage would cause unemployment came to be and how the fact that (up to a fairly high point) it simply eats profits got suppressed.
- qeternity 4y ago
  > in a market economy > to suppress your wages Can't really tell where you're going with this. The solution to a labor shortage is higher wages. You seem to be suggesting that it should be an increase in minimum wage. In a market economy, you absolutely wouldn't need this if you had a labor shortage...the market would resolve on its own. But we don't have that. We have an economy where millions are paid by the govt to do nothing. This then becomes what employers are competing with.
  - deleted 4y ago
    [deleted]
  - folli 4y ago
    I don't completely understand. Wouldn't that just mean that the employers need to compete with the government, i.e. raise wages? So than the market should resolve this on its own as well?
- makomk 4y ago
  "you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economic" The Economics 101 answer is clearly wrong or at least incomplete in this case. Think about it this way: if people's wages increase in real terms by definition this means they can buy more with their wages. Producing stuff requires, amongst other things, workers. Suppose we're in a situation like the current one where unemployment is low and businesses across all sectors cannot find enough workers to keep up with consumer demand. What happens if they all try and solve this by increasing wages across the board? Well, their workers have more money to spend so this increases consumer demand even more - and remember, the problem we were trying to solve was that this was already too high compared to supply. What it doesn't do much for is the supply of workers, since there's not some big pool of potential workers who could be working but aren't. It's not going to encourage people to work longer hours either since when would they have time to spend the money? Basically, it makes the whole problem worse, and that's why the Fed and central banks around the world are freaking out right now.
  - tsimionescu 4y ago
    Your analysis is also very simplistic. A labor shortage is potentially an opportunity for the economy to re-rorient itself and for wealth to be redistributed. Companies producing goods that are more in demand will afford higher wages, while companies that produce less in-demand goods will not, and can ramp-down their production or go bankrupt. To take an extreme hypothetical - let's say there was a massive shortage of food workers. As the price of food increases, so would the wages for food workers, until they will start pulling people from other industries, which can no longer offer competitive salaries. This could lead to something like ad-tech eventually start losing low-level workers to agri-business. Essentially, the mistake in your argument is to assume that demand is high and inflexible around the board. In reality, certain industries have higher demand than others, and many workers can change industry, even in the short term, if incentives are high enough. However, companies used to cheap labor and high margins are not willing to give up their profits and reduce their margins, so they are begging the state to find a way to force people to keep working for them for nothing.
    - 4y ago
- melagonster 4y ago
  In past, president Reagan complaint economist have conspiracy, why all of them give same advice.
alfiedotwtf 4y ago
> Keynes was accepted Yes, but for how long.
- mbg721 4y ago
  Until you can get a bullet in your head for questioning him, like always.
  - cjbgkagh 4y ago
    It is a brave soul who gets in the way of massive government spending.
  - culi 4y ago
    What are you saying? You know what replaced Keynesian economics in the 70s? Monetarism in the vein of Milton Friedman The same Milton Friedman that, along with the rest of the Chicago Boys, guided the policies of Augusto Pinochet. Generally regarded as one of the most brutal dictators South America has ever faced...
    - kgwgk 4y ago
      [flagged]
      - andrekandre 4y ago
        > You know who became vegetarian because of his concern for animal suffering? Hitler citation please (like, with non-hearsay evidence)
        kgwgk 4y ago
        [flagged]
    - colinmhayes 4y ago
      Pinochet's economic policies were regarded as extremely successful, basically his turn around of the economy is what allowed him to be so brutal to his political enemies. Unfortunate, but it's hard for me to say the chicago boys actions in Chile can be regarded as failure.
culi 4y ago
Do you mean "and Keynes was over"? Keynesian economics got big in the 30s and was killed by the stagflation of the 1970s
- culi 4y ago
  Not sure why this is being downvoted. This is just well-estatblished history. Keynesian economics came out of the Great Depression of the 1930s and was the leading economic theory until stagflation posed a major theoretical challenge for it and monetarism took over instead
  - sideshowb 4y ago
    Yeah that was a problem with Keynes, sure. Don't mention the oil crisis
  - notahacker 4y ago
    Strictly speaking it depends what you consider to be "Keynesian" economics (But yeah, your comment was a lot more accurate than the one it was replying to) Stagflation killed the Phillips-curve "Keynesianism" which emerged after Keynes' death as wasn't actually in the General Theory: the idea that inflation was inversely proportional to unemployment so you could get rid of the latter if you had enough of the former. It didn't kill off the more generally useful idea of macroeconomic modelling or the assumption government policy could mitigate recessions. . Similarly, strict monetarism (the idea that the government could easily stabilise things by ensuring the money supply was at a certain level) didn't survive the realisation the banking system made the money supply flex and so the result was interest rates and other monetary aggregates bouncing around all over the place , but the basic idea that controlling inflation was possible and a priority for central banks persisted once governments switched to fixing interest rates instead.
Bloating 4y ago
70's stagflation UNaccepted Keynes

by mbg721 4y ago

Consultant32452 4y ago

The most important thing to know about the field of economics is the only people who get funding are the people who tell the public that the government should do whatever it was the government wanted to do. Example: you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economics. Why would that tank your career? Because big business has paid the government to pull the right levers to suppress your wages. The solution to a labor shortage is higher wages, but that can't be the government's response to their donors. Technically you can say the truth, but you better not be very loud about it.

pydry 4y ago
This is how the idea that raising the minimum wage would cause unemployment came to be and how the fact that (up to a fairly high point) it simply eats profits got suppressed.
qeternity 4y ago
> in a market economy > to suppress your wages Can't really tell where you're going with this. The solution to a labor shortage is higher wages. You seem to be suggesting that it should be an increase in minimum wage. In a market economy, you absolutely wouldn't need this if you had a labor shortage...the market would resolve on its own. But we don't have that. We have an economy where millions are paid by the govt to do nothing. This then becomes what employers are competing with.
- deleted 4y ago
  [deleted]
- folli 4y ago
  I don't completely understand. Wouldn't that just mean that the employers need to compete with the government, i.e. raise wages? So than the market should resolve this on its own as well?
makomk 4y ago
"you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economic" The Economics 101 answer is clearly wrong or at least incomplete in this case. Think about it this way: if people's wages increase in real terms by definition this means they can buy more with their wages. Producing stuff requires, amongst other things, workers. Suppose we're in a situation like the current one where unemployment is low and businesses across all sectors cannot find enough workers to keep up with consumer demand. What happens if they all try and solve this by increasing wages across the board? Well, their workers have more money to spend so this increases consumer demand even more - and remember, the problem we were trying to solve was that this was already too high compared to supply. What it doesn't do much for is the supply of workers, since there's not some big pool of potential workers who could be working but aren't. It's not going to encourage people to work longer hours either since when would they have time to spend the money? Basically, it makes the whole problem worse, and that's why the Fed and central banks around the world are freaking out right now.
- tsimionescu 4y ago
  Your analysis is also very simplistic. A labor shortage is potentially an opportunity for the economy to re-rorient itself and for wealth to be redistributed. Companies producing goods that are more in demand will afford higher wages, while companies that produce less in-demand goods will not, and can ramp-down their production or go bankrupt. To take an extreme hypothetical - let's say there was a massive shortage of food workers. As the price of food increases, so would the wages for food workers, until they will start pulling people from other industries, which can no longer offer competitive salaries. This could lead to something like ad-tech eventually start losing low-level workers to agri-business. Essentially, the mistake in your argument is to assume that demand is high and inflexible around the board. In reality, certain industries have higher demand than others, and many workers can change industry, even in the short term, if incentives are high enough. However, companies used to cheap labor and high margins are not willing to give up their profits and reduce their margins, so they are begging the state to find a way to force people to keep working for them for nothing.
  - 4y ago
melagonster 4y ago
In past, president Reagan complaint economist have conspiracy, why all of them give same advice.

alfiedotwtf 4y ago

> Keynes was accepted Yes, but for how long.

mbg721 4y ago
Until you can get a bullet in your head for questioning him, like always.
- cjbgkagh 4y ago
  It is a brave soul who gets in the way of massive government spending.
- culi 4y ago
  What are you saying? You know what replaced Keynesian economics in the 70s? Monetarism in the vein of Milton Friedman The same Milton Friedman that, along with the rest of the Chicago Boys, guided the policies of Augusto Pinochet. Generally regarded as one of the most brutal dictators South America has ever faced...
  - kgwgk 4y ago
    [flagged]
    - andrekandre 4y ago
      > You know who became vegetarian because of his concern for animal suffering? Hitler citation please (like, with non-hearsay evidence)
      - kgwgk 4y ago
        [flagged]
  - colinmhayes 4y ago
    Pinochet's economic policies were regarded as extremely successful, basically his turn around of the economy is what allowed him to be so brutal to his political enemies. Unfortunate, but it's hard for me to say the chicago boys actions in Chile can be regarded as failure.

culi 4y ago

Do you mean "and Keynes was over"? Keynesian economics got big in the 30s and was killed by the stagflation of the 1970s

culi 4y ago
Not sure why this is being downvoted. This is just well-estatblished history. Keynesian economics came out of the Great Depression of the 1930s and was the leading economic theory until stagflation posed a major theoretical challenge for it and monetarism took over instead
- sideshowb 4y ago
  Yeah that was a problem with Keynes, sure. Don't mention the oil crisis
- notahacker 4y ago
  Strictly speaking it depends what you consider to be "Keynesian" economics (But yeah, your comment was a lot more accurate than the one it was replying to) Stagflation killed the Phillips-curve "Keynesianism" which emerged after Keynes' death as wasn't actually in the General Theory: the idea that inflation was inversely proportional to unemployment so you could get rid of the latter if you had enough of the former. It didn't kill off the more generally useful idea of macroeconomic modelling or the assumption government policy could mitigate recessions. . Similarly, strict monetarism (the idea that the government could easily stabilise things by ensuring the money supply was at a certain level) didn't survive the realisation the banking system made the money supply flex and so the result was interest rates and other monetary aggregates bouncing around all over the place , but the basic idea that controlling inflation was possible and a priority for central banks persisted once governments switched to fixing interest rates instead.

Bloating 4y ago

70's stagflation UNaccepted Keynes