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The problem I have with the Keynesian argument is that it cannot be falsified . They can always claim that the government did not do "enough" to stimulate the e

The problem I have with the Keynesian argument is that it cannot be falsified . They can always claim that the government did not do "enough" to stimulate the economy . One only needs to examine the case of Japan which spent huge amounts of money on ultimately pointless stimulus which did not leave any lasting benefit to their economy . No amount of stimulus can jump start the economy back into its unsustainable ways of debt fueled over-consumption . What might really jump start the economy are technological innovations in areas like energy and not unfalsifiable economic dogma forced upon us by ivory tower economists. More information here : http://www.theatlantic.com/business/archive/2010/12/japan-and-the-limits-of-keynesianism/68619/ http://www.theatlantic.com/business/archive/2010/12/japan-an... EDIT : I would like to add the housing bubble was the deliberate result of Fed policy attempting to recover from the internet bust in 2000 . The crux of my argument is that there can be no real growth without an improvement in per person productivity and fair means of redistributing the resulting gains . The problem I see with stimulus is that we are allocating scarce resources according to arbitrary and unfalsifiable theories to achieve more growth but what ends up happening is that significant resources are used up in building bridges to nowhere and unused airports etc . Then the debt on those becomes a long term burden rather than a benefit.

aaronbrethorst 14y ago
Can't the same be said about any economic school of thought? Take, for example, this thread I found on Quora regarding austrian economics: http://www.quora.com/Austrian-School-Economics/Is-Austrian-economics-falsifiable http://www.quora.com/Austrian-School-Economics/Is-Austrian-e...
- thewarrior 14y ago
  Precisely the reason I quoted the real world example of Japan rather than go into some pointless argument full of economic jargon. To take the US economy to where it was before 2008 you only need to do one thing . Get housing prices back to their pre bubble highs . The reason being that everything else fed off of the housing bubble. Thing is that those prices were totally unsustainable and unaffordable and so those times arent coming back . Politicians can do their crazy horse dance all year and its still not coming back . In the end as I said in my parent post genuine progress comes through innovation .
roel_v 14y ago
To be fair though, and I myself am firmly in the Austrian school, is that the same is true for fiscal conservativeness. One can always say 'it didn't work because we didn't cut enough', since there is no chance that we'd ever cut all unemployment benefits / pensions / subsidies for whatever / ...
- thewarrior 14y ago
  Sadly you are correct . Economics is badly in need of some einstein to anchor it on some better theoretical foundations .I am reminded of the following joke : Soviet leader Leonid Brezhnev is making a speech. He finishes, then, as usual, asks for questions. After a long silence, a man finally asks, "Was communism invented by scientists or by communists?" Somewhat stumped, Brezhnev finally answers that it was invented by communists. "I thought so too," responds the man. "Scientists would have tested it on mice first." Fact is without witnessing it in action no economist at the time could have really predicted that communism would fail so hard.
eli_gottlieb 14y ago
No amount of stimulus can jump start the economy back into its unsustainable ways of debt fueled over-consumption . That's the symptom, not the cause. The proximate cause of the best was, indeed, rising private indebtedness, fueled by the stagnant and falling levels of real wages, and thus real household incomes. I don't think that falling wages leading to economic recession should surprise anyone, but the United States spent 30 years in the thrall of right-wing nutters who claimed it didn't work that way. How did they claim it didn't work that way? A structural shift was made in the economy, from basing household incomes and purchasing power on wages and business revenues to basing them on growth in asset prices. Problem is, any asset-price-based economic "growth" is inherently unstable and radically unequal. To create growth, such a system relies on increasing the gap between current asset-owners and those who do not yet own assets (not only poor people but wage-earners getting by without enough surplus to invest and young people starting out in life). Increasing that gap will, you guessed it, increase the debt loads people have to take on in order to join the asset-owning class (nee "capitalist class") whom the economy has evolved to serve. A decent link, but not the best: http://www.newamerica.net/publications/policy/america_s_exhausted_paradigm_macroeconomic_causes_financial_crisis_and_great_recession http://www.newamerica.net/publications/policy/america_s_exha...

aaronbrethorst 14y ago

Can't the same be said about any economic school of thought? Take, for example, this thread I found on Quora regarding austrian economics: http://www.quora.com/Austrian-School-Economics/Is-Austrian-economics-falsifiable http://www.quora.com/Austrian-School-Economics/Is-Austrian-e...

thewarrior 14y ago
Precisely the reason I quoted the real world example of Japan rather than go into some pointless argument full of economic jargon. To take the US economy to where it was before 2008 you only need to do one thing . Get housing prices back to their pre bubble highs . The reason being that everything else fed off of the housing bubble. Thing is that those prices were totally unsustainable and unaffordable and so those times arent coming back . Politicians can do their crazy horse dance all year and its still not coming back . In the end as I said in my parent post genuine progress comes through innovation .

roel_v 14y ago

To be fair though, and I myself am firmly in the Austrian school, is that the same is true for fiscal conservativeness. One can always say 'it didn't work because we didn't cut enough', since there is no chance that we'd ever cut all unemployment benefits / pensions / subsidies for whatever / ...

thewarrior 14y ago
Sadly you are correct . Economics is badly in need of some einstein to anchor it on some better theoretical foundations .I am reminded of the following joke : Soviet leader Leonid Brezhnev is making a speech. He finishes, then, as usual, asks for questions. After a long silence, a man finally asks, "Was communism invented by scientists or by communists?" Somewhat stumped, Brezhnev finally answers that it was invented by communists. "I thought so too," responds the man. "Scientists would have tested it on mice first." Fact is without witnessing it in action no economist at the time could have really predicted that communism would fail so hard.

eli_gottlieb 14y ago

No amount of stimulus can jump start the economy back into its unsustainable ways of debt fueled over-consumption . That's the symptom, not the cause. The proximate cause of the best was, indeed, rising private indebtedness, fueled by the stagnant and falling levels of real wages, and thus real household incomes. I don't think that falling wages leading to economic recession should surprise anyone, but the United States spent 30 years in the thrall of right-wing nutters who claimed it didn't work that way. How did they claim it didn't work that way? A structural shift was made in the economy, from basing household incomes and purchasing power on wages and business revenues to basing them on growth in asset prices. Problem is, any asset-price-based economic "growth" is inherently unstable and radically unequal. To create growth, such a system relies on increasing the gap between current asset-owners and those who do not yet own assets (not only poor people but wage-earners getting by without enough surplus to invest and young people starting out in life). Increasing that gap will, you guessed it, increase the debt loads people have to take on in order to join the asset-owning class (nee "capitalist class") whom the economy has evolved to serve. A decent link, but not the best: http://www.newamerica.net/publications/policy/america_s_exhausted_paradigm_macroeconomic_causes_financial_crisis_and_great_recession http://www.newamerica.net/publications/policy/america_s_exha...