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No economist calls themselves a scientist. They call themselves economists. The term 'austerity' is meant to apply to a government living within its means. Th

by brc 14y ago

No economist calls themselves a scientist. They call themselves economists. The term 'austerity' is meant to apply to a government living within its means. These days it is applied to a government with single digit debt growth instead of double-digit growth. Kind of like how eating balanced meals is now called dieting. It's true that you can avoid unemployment by borrowing money to pay people to dig holes and fill them in again. What is also true is that, without production there is no consumption. Digging up holes and filling them in is not production, ergo, consumption will not rise. TLDR; J.B. Say was right. Keynes was wrong.

tankenmate 14y ago
And yet all the countries that have slashed government spending and backstopped private debt have also taken a nose dive in GDP. Eppur si muove. TLDR; Keynes advocated government spending on infrastructure (increased collective efficiency) not pointless hole filling.
- Tichy 14y ago
  Here is why this government spending recommendation is just a head fake: assuming the economy can be in a functional state at all, it is obviously true that if the government would spend money on the right things, it could create a functional economy. The real problem of economics however is resource allocation, or in this case, what should the government spend the money on. The proponents of government spending don't give any details - they don't solve the problem at all. They just market themselves as prophets by spouting trivial truths (spending money on the right things is good). You'll answer "spending money on infrastructure" but that is not good enough. Even for roads there is a point when enough is enough (imagine every square meter of the country covered in roads). To fix the economy, you have to devise a mechanism of efficient resource allocation. Just saying "let the government decide" is not an answer.
  - eli_gottlieb 14y ago
    Put simply, you are outright lying. Advocates of Keynesian spending advocate its usage for public goods and commons goods, the two known categories where "the government" is clearly more efficient than markets. Does that mean no decisions remain in the realm of politics and everything turns into a technocratic utopia run by Economics majors? No. But that's because in any case there is no such thing as an apolitical economic policy of any kind. All of it, right down the property laws themselves, is political. In fact, it's generally the very core of politics.
    - Tichy 14y ago
      "public goods and commons goods, the two known categories where "the government" is clearly more efficient than markets." Could you give me a reference for that? I am not an expert in economics, and that claim seems very doubful to me. Unless you are saying governments are good in spending money - yes, they are (getting rid of money, I mean). The rest of your post, I am not sure what you are going on about. Yes, property laws are political (and some countries famously got rid of them, which for now has to be considered a failure). But what does that have to do with Keynesian spending? Also I admit I am not an expert on Keynes, but I suspect that puts me on par with most other people who have an opinion on it and advocate to just print more money.
      - eli_gottlieb 14y ago
        http://en.wikipedia.org/wiki/Public_goods http://en.wikipedia.org/wiki/Public_goods The rest of your post, I am not sure what you are going on about. Yes, property laws are political (and some countries famously got rid of them, which for now has to be considered a failure). But what does that have to do with Keynesian spending? Also I admit I am not an expert on Keynes, but I suspect that puts me on par with most other people who have an opinion on it and advocate to just print more money. Actually, advocating printing money is not a Keynesian position, it's a Modern Monetary Theory position. But anyway, I'm arguing against your assertion that political decisions cannot and should not be made about the economy.
        14y ago
tomp 14y ago
Actually, austerity means the government using a lot of it's money to bail out failing banks and other private institutions and then saying it has no more money for the people and social services.
tsotha 14y ago
Nobody knows if Keynes was right - he advocated going into debt during recessions and then paying off the debt in periods of growth. The problem is the way large groups of people vote governments take on debt during recessions... and then take on even more debt during periods of growth. That is to say, while his prescription may have been sound economically (I doubt it, but let's say it is for the sake of argument), politically it's just an excuse to pile on ever larger debts.
nl 14y ago
The term 'austerity' is meant to apply to a government living within its means. No, it is meant to apply to a government radically cutting spending during a recession. It's true that you can avoid unemployment by borrowing money to pay people to dig holes and fill them in again. What is also true is that, without production there is no consumption. Digging up holes and filling them in is not production, ergo, consumption will not rise. And yet Keynesian stimulus worked in Australia[1]. Australia was able to implement it properly because the Australian economy had run years of surplus budgets prior to the financial crisis. The jibe about digging holes is disappointing and ignorant. The Australian program involved a one off payment to tax payers for immediate effect (which ended up supporting the retail sector at Christmas time), traditional infrastructure spending on "ready to go" projects (roads etc) for effect in a couple of months and a very large school building program where building usually started 6-9 months after the initial crisis. These programs were production and - more importantly - all supported employment. TLDR; Keynesian economics works just fine when the government runs expansionary budgets when growth is needed and surpluses when growth is robust. [1] http://en.wikipedia.org/wiki/National_fiscal_policy_response_to_the_Great_Recession#Australia http://en.wikipedia.org/wiki/National_fiscal_policy_response...

by brc 14y ago

tankenmate 14y ago

And yet all the countries that have slashed government spending and backstopped private debt have also taken a nose dive in GDP. Eppur si muove. TLDR; Keynes advocated government spending on infrastructure (increased collective efficiency) not pointless hole filling.

Tichy 14y ago
Here is why this government spending recommendation is just a head fake: assuming the economy can be in a functional state at all, it is obviously true that if the government would spend money on the right things, it could create a functional economy. The real problem of economics however is resource allocation, or in this case, what should the government spend the money on. The proponents of government spending don't give any details - they don't solve the problem at all. They just market themselves as prophets by spouting trivial truths (spending money on the right things is good). You'll answer "spending money on infrastructure" but that is not good enough. Even for roads there is a point when enough is enough (imagine every square meter of the country covered in roads). To fix the economy, you have to devise a mechanism of efficient resource allocation. Just saying "let the government decide" is not an answer.
- eli_gottlieb 14y ago
  Put simply, you are outright lying. Advocates of Keynesian spending advocate its usage for public goods and commons goods, the two known categories where "the government" is clearly more efficient than markets. Does that mean no decisions remain in the realm of politics and everything turns into a technocratic utopia run by Economics majors? No. But that's because in any case there is no such thing as an apolitical economic policy of any kind. All of it, right down the property laws themselves, is political. In fact, it's generally the very core of politics.
  - Tichy 14y ago
    "public goods and commons goods, the two known categories where "the government" is clearly more efficient than markets." Could you give me a reference for that? I am not an expert in economics, and that claim seems very doubful to me. Unless you are saying governments are good in spending money - yes, they are (getting rid of money, I mean). The rest of your post, I am not sure what you are going on about. Yes, property laws are political (and some countries famously got rid of them, which for now has to be considered a failure). But what does that have to do with Keynesian spending? Also I admit I am not an expert on Keynes, but I suspect that puts me on par with most other people who have an opinion on it and advocate to just print more money.
    - eli_gottlieb 14y ago
      http://en.wikipedia.org/wiki/Public_goods http://en.wikipedia.org/wiki/Public_goods The rest of your post, I am not sure what you are going on about. Yes, property laws are political (and some countries famously got rid of them, which for now has to be considered a failure). But what does that have to do with Keynesian spending? Also I admit I am not an expert on Keynes, but I suspect that puts me on par with most other people who have an opinion on it and advocate to just print more money. Actually, advocating printing money is not a Keynesian position, it's a Modern Monetary Theory position. But anyway, I'm arguing against your assertion that political decisions cannot and should not be made about the economy.
      - 14y ago

tomp 14y ago

Actually, austerity means the government using a lot of it's money to bail out failing banks and other private institutions and then saying it has no more money for the people and social services.

tsotha 14y ago

Nobody knows if Keynes was right - he advocated going into debt during recessions and then paying off the debt in periods of growth. The problem is the way large groups of people vote governments take on debt during recessions... and then take on even more debt during periods of growth. That is to say, while his prescription may have been sound economically (I doubt it, but let's say it is for the sake of argument), politically it's just an excuse to pile on ever larger debts.

nl 14y ago

The term 'austerity' is meant to apply to a government living within its means. No, it is meant to apply to a government radically cutting spending during a recession. It's true that you can avoid unemployment by borrowing money to pay people to dig holes and fill them in again. What is also true is that, without production there is no consumption. Digging up holes and filling them in is not production, ergo, consumption will not rise. And yet Keynesian stimulus worked in Australia[1]. Australia was able to implement it properly because the Australian economy had run years of surplus budgets prior to the financial crisis. The jibe about digging holes is disappointing and ignorant. The Australian program involved a one off payment to tax payers for immediate effect (which ended up supporting the retail sector at Christmas time), traditional infrastructure spending on "ready to go" projects (roads etc) for effect in a couple of months and a very large school building program where building usually started 6-9 months after the initial crisis. These programs were production and - more importantly - all supported employment. TLDR; Keynesian economics works just fine when the government runs expansionary budgets when growth is needed and surpluses when growth is robust. [1] http://en.wikipedia.org/wiki/National_fiscal_policy_response_to_the_Great_Recession#Australia http://en.wikipedia.org/wiki/National_fiscal_policy_response...