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Ironic that the article uses Keynes as an example for an admirable virtue that Keynes didn't really employ himself. Keynes didn't actually change his mind, he s

by codexb 3y ago

Ironic that the article uses Keynes as an example for an admirable virtue that Keynes didn't really employ himself. Keynes didn't actually change his mind, he simply changed his arguments to justify a consistent belief that deficit spending was the answer to virtually all economic woes.

ajross 3y ago
I really don't think "deficit spending was the answer to virtually all economic woes" is a remotely correct characterization of Keynes' theories or contributions. Frankly that's just a libertarian strawman, and deploying it in a thread notionally about rational discourse seems sort of unserious.
- knodi123 3y ago
  > and deploying it in a thread notionally about rational discourse seems sort of unserious. You should see the guy above complaining that woke liberals want to declare math to be white supremacy.
- codexb 3y ago
  Forgive me for not writing a full dissertation dissecting all the terrible ideas that Keynes had. I think my characterization is a pretty accurate shorthand to summarize his primary contribution to economic theory, and the theory that he is best known for championing (in America at least). Either way, it's irrelevant what Keynes actual theory was; the point of my argument is that he continued to offer proposal after proposal and excuse after excuse for why his theory didn't actually work in practice (to end the Great Depression) instead of changing his mind and accepting that he was just wrong.
imtringued 3y ago
It's actually just a stopgap and since it generates inflation much sooner than monetary policy you also have to do less of it to achieve the same outcome. If you understand his liquidity preference theory and his Bancor proposal, then you would understand that the irrationality of deficit spending mirrors the irrationality of the system. Why bother with deficit spending if the system worked even if you leave it alone? Oh right the problem is that the system won't work if you leave it alone. Thus any attempt to bring it back to rationality will look as irrational as the system that is being fixed. The system leaves an irrational gap that needs to be closed with a filler that takes on the shape of the irrationality. Anyone who thinks that Keynes wasn't aware of the temporary nature of deficit spending doesn't know Keynes and instead fell for some caricature of him. The answer to neutralising liquidity preference is to charge symmetric fees to both positive and negative money balances that are immediately available. The Bancor plan was an implementation of that concept for trade/current account balances between nations. If your country generates too many export surpluses, then it has an incentive to reduce the surplus. If your country has an port surplus it also has an incentive to reduce the surplus. Thus there is an automatic stabilising mechanism that requires no intervention whatsoever. Countries can voluntarily join the Bancor system and although you might object that a perfect implementation requires strong capital controls, as long as there are political levers to encourage or discourage exports/imports, no capital controls are necessary. Balanced trade between nations means that the inequality between nations would quickly disappear because poorer countries are no longer building up foreign debt and richer countries are no longer piling up favours that they can use as geopolitical poker chips to go against the people's wishes in the poorer country. Alas there is no Bancor system. So deficit spending it is. Politicians love deficit spending so at least you can accomplish a tiny massively distorted fragment of the original plan instead of nothing at all. Applying symmetrical liquidity fees to domestic balances would result in intervention free full employment at which point the vast majority of neoclassical predictions would become true. If unemployment is nonexistent then there will be fewer unemployment benefits to pay out, which in turn means taxes can be cut, which in turn means that the purchasing power of workers goes up, which in turn means a lot of public spending becomes unnecessary. The one thing it wouldn't fix is that the rent will still be too damn high but since people have jobs they can afford to pay rent.
- codexb 3y ago
  > Thus any attempt to bring it back to rationality will look as irrational as the system that is being fixed. The business cycle isn't irrational. It's a rational outgrowth of the basic fact that there is a lag between investment and the realized gains (or losses) from that investment. The only thing needed to deal with this problem is a reliable and relatively quick system for liquidating debt. > Anyone who thinks that Keynes wasn't aware of the temporary nature of deficit spending I've heard this argument before and it still doesn't save him. If a theory includes a provision that is never actually recommended in practice, it's not really part of the theory. Even if conceded this point (that deficit spending was temporary and would be replaced by austerity at-some-unnamed-point-in-the-future-when-everything-was-amazing), his theory on deficit spending is still wrong, because it assumes that the malinvestment (rational or irrational) that lead to the business cycle will somehow be improved by what will likely be *even more malinvestment* in the form of deficit spending.

by codexb 3y ago

ajross 3y ago

I really don't think "deficit spending was the answer to virtually all economic woes" is a remotely correct characterization of Keynes' theories or contributions. Frankly that's just a libertarian strawman, and deploying it in a thread notionally about rational discourse seems sort of unserious.

knodi123 3y ago
> and deploying it in a thread notionally about rational discourse seems sort of unserious. You should see the guy above complaining that woke liberals want to declare math to be white supremacy.
codexb 3y ago
Forgive me for not writing a full dissertation dissecting all the terrible ideas that Keynes had. I think my characterization is a pretty accurate shorthand to summarize his primary contribution to economic theory, and the theory that he is best known for championing (in America at least). Either way, it's irrelevant what Keynes actual theory was; the point of my argument is that he continued to offer proposal after proposal and excuse after excuse for why his theory didn't actually work in practice (to end the Great Depression) instead of changing his mind and accepting that he was just wrong.

imtringued 3y ago

It's actually just a stopgap and since it generates inflation much sooner than monetary policy you also have to do less of it to achieve the same outcome. If you understand his liquidity preference theory and his Bancor proposal, then you would understand that the irrationality of deficit spending mirrors the irrationality of the system. Why bother with deficit spending if the system worked even if you leave it alone? Oh right the problem is that the system won't work if you leave it alone. Thus any attempt to bring it back to rationality will look as irrational as the system that is being fixed. The system leaves an irrational gap that needs to be closed with a filler that takes on the shape of the irrationality. Anyone who thinks that Keynes wasn't aware of the temporary nature of deficit spending doesn't know Keynes and instead fell for some caricature of him. The answer to neutralising liquidity preference is to charge symmetric fees to both positive and negative money balances that are immediately available. The Bancor plan was an implementation of that concept for trade/current account balances between nations. If your country generates too many export surpluses, then it has an incentive to reduce the surplus. If your country has an port surplus it also has an incentive to reduce the surplus. Thus there is an automatic stabilising mechanism that requires no intervention whatsoever. Countries can voluntarily join the Bancor system and although you might object that a perfect implementation requires strong capital controls, as long as there are political levers to encourage or discourage exports/imports, no capital controls are necessary. Balanced trade between nations means that the inequality between nations would quickly disappear because poorer countries are no longer building up foreign debt and richer countries are no longer piling up favours that they can use as geopolitical poker chips to go against the people's wishes in the poorer country. Alas there is no Bancor system. So deficit spending it is. Politicians love deficit spending so at least you can accomplish a tiny massively distorted fragment of the original plan instead of nothing at all. Applying symmetrical liquidity fees to domestic balances would result in intervention free full employment at which point the vast majority of neoclassical predictions would become true. If unemployment is nonexistent then there will be fewer unemployment benefits to pay out, which in turn means taxes can be cut, which in turn means that the purchasing power of workers goes up, which in turn means a lot of public spending becomes unnecessary. The one thing it wouldn't fix is that the rent will still be too damn high but since people have jobs they can afford to pay rent.

codexb 3y ago
> Thus any attempt to bring it back to rationality will look as irrational as the system that is being fixed. The business cycle isn't irrational. It's a rational outgrowth of the basic fact that there is a lag between investment and the realized gains (or losses) from that investment. The only thing needed to deal with this problem is a reliable and relatively quick system for liquidating debt. > Anyone who thinks that Keynes wasn't aware of the temporary nature of deficit spending I've heard this argument before and it still doesn't save him. If a theory includes a provision that is never actually recommended in practice, it's not really part of the theory. Even if conceded this point (that deficit spending was temporary and would be replaced by austerity at-some-unnamed-point-in-the-future-when-everything-was-amazing), his theory on deficit spending is still wrong, because it assumes that the malinvestment (rational or irrational) that lead to the business cycle will somehow be improved by what will likely be *even more malinvestment* in the form of deficit spending.