Comments

  1. Charles Martel says

    Thanks a lot, Book. This is like bait for Zach and abc. 

    Oh, boy: Another round of sneering from Harvard Boy and dead-on-arrival plagiarism from Zach.

  2. says

    Bookworm: I wish everyone would watch these short videos:

    Klaven: Keynesian economics, which says that government should get out of debt by spending money they don’t have.

    Is there any reason to watch the rest of the video when the first 30 seconds demonstrates ignorance of basic economics? 

  3. kali says

    Z, there is actually no consensus  that Keynesianism is the One True Way. Even among economists.
     
    BTW, every time I log into Amazon, it asks me to sell back my copy of Thomas Sowell’s _Basic Economics_. And the price keeps rising.

  4. says

    It is in fact true that Z is the one ignorant of basic economics. But the Left often likes to project their own weaknesses upon others. To be expected for humans that can’t go above the bottom 25% quartile of overall human ability.

  5. says

    Danny Lemieux: Why don’t you educate us and tell us explicitly what is wrong with it.
     
    We’ve already responded in detail in previous thread; indeed, in response to your own comments. 
      
    Taxes are already at one of their lowest points in modern history. The problem is the economic meltdown during the latter part of the Bush Administration. There is no easy solution because tax receipts have dropped precipitously, while everyone is hoarding cash due to deflation and the threat of deflation.
     
    Classically, and what Klavan is suggesting, the policy is to maintain the government budget in balance. So if the economy is growing, leading to increased tax receipts, cut taxes. If the economy is shrinking, causing reduced tax receipts, cut spending (or raise taxes). The problem is that this exasperates the market cycle, leading to booms and busts. Cutting taxes while the economy grows causes it to grow faster, leading to a bubble. When the bubble bursts, cutting spending (or raising taxes) accelerates the decline, leading to a dangerous, downward spiral.
     
    During the expansion of the Bush Era, for instance, taxes were cut leading to deficits, while overstimulating the economy. Instead of spending the money through tax cuts, the U.S. might have put that money aside for a rainy day, in a “lock box.” Even if there had still been a financial shock, the U.S. would have been in a much better position to respond to the crisis.
     
    Countercyclical policy means to run a surplus during times of plenty (seven fat cows), and run a deficit during times of famine (seven skinny cows). In a modern economy that means progressive taxes, which dampen growth as incomes rise, but reverses when the economy declines. Unemployment insurance and other safety net programs act as automatic stimuli. When there is a severe shock, this can require additional stimulus to stop the downward spiral in demand. Nevertheless, countercyclical policy can be and should be revenue neutral, with the money spent during the contraction being equal to the money saved during the expansion.

    Genesis 41
     
    Pharaoh had a dream: He was standing by the Nile, when out of the river there came up seven cows, sleek and fat, and they grazed among the reeds. After them, seven other cows, ugly and gaunt, came up out of the Nile and stood beside those on the riverbank. And the cows that were ugly and gaunt ate up the seven sleek, fat cows. Then Pharaoh woke up.
     
    Pharaoh said to Joseph, “I had a dream, and no one can interpret it. But I have heard it said of you that when you hear a dream you can interpret it.”
     
    Then Joseph said to Pharaoh, “God has revealed to Pharaoh what he is about to do. The seven good cows are seven years.  The seven lean, ugly cows that came up afterward are seven years of famine.
     
    “And now let Pharaoh look for a discerning and wise man and put him in charge of the land of Egypt. Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance.  They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine.”
     
    So Pharaoh said to Joseph, “I hereby put you in charge of the whole land of Egypt.”
     
    Joseph stored up huge quantities of grain, like the sand of the sea; The seven years of abundance in Egypt came to an end, and the seven years of famine began, just as Joseph had said. There was famine in all the other lands, but in the whole land of Egypt there was food.

  6. says

    kali: Z, there is actually no consensus  that Keynesianism is the One True Way. Even among economists.

    Yes, but nearly every developed country has automatic stabilizers, and also injected stimulus into the system. Even China, a developing nation, spent a larger portion of GDP on stimulus than the U.S., nearly RMB¥ 4 trillion (US$ 586 billion). That’s because the depth of the problem threatened then entire global economic system. 
     
    suek: Here’s an interesting graph: http://market-ticker.org/akcs-www?post=188500

    Multipliers only work under certain conditions. For instance, if the government spends during a normal economic expansion, it will compete with the private markets for capacity, leading to inflation. If the government borrows during a normal economic expansion, it will compete with private borrowers, leading to rising interest rates. However, if the government borrows when the economy is contracting and the capital markets are idle, then it can stimulate growth. Please note that interest rates and inflation are relatively low. 
     
    Government spending cannot subsitute for markets. However, it can stabilize a market panic and invest in essential infrastructure that private businesses won’t normally build.

  7. kali says

    Z: Yes, but nearly every developed country has automatic stabilizers, and also injected stimulus into the system


    “Everybody does it” is not an argument.

  8. Charles Martel says

    Ymar, he’s dragged out the Joseph’s dream story before; it’s his metaphor for Keynesian economics.

    He probably thinks that if he quotes scripture it will soften us Sky Fairy believers.

  9. says

    kali: “Everybody does it” is not an argument.

    Um, it was *your* point concerning consensus. Did you forget already? Economists around the world all reached the same conclusion — the global economy was collapsing, and stabilization would require a substantial stimulus. 

  10. says

    Btw, Z still thinks Iraq didn’t have WMDs, even though the intelligence consensus said they did. So when he tells you something about consensus, just assume it’s a lie. He knows it’s not true, but he’s going to use it as an excuse anyways.

  11. kali says

    Z: Um, it was *your* point concerning consensus. Did you forget already?

    erm, I was poking fun at your favorite argument, the appeal to false consensus.
     
    Z: Economists around the world all reached the same conclusion


    .  .  . like that one.

  12. says

    kali: Z, there is actually no consensus  that Keynesianism is the One True Way. Even among economists.

    Consensus is not the same as unanimity.

    kali: I was poking fun at your favorite argument, the appeal to false consensus.

    It’s a valid argument, in some ways. There is no consensus within economics generally. In response, we pointed out that among economists that mattered—those that actually had influence over policy—, there was a consensus. It’s not a false consensus when we can point to so many countries with very different political systems, and with widely different economic problems, all reaching the same conclusion. 

    There is considerable variation in views on economics. At the time of the financial meltdown, the problem was the global nature of the crisis, and the need for international coordination. Some countries, such as Germany preferred a smaller stimulus, and pointed to their own extensive automatic stimuli as their contribution. Being export oriented, if other countries stimulated their economies, then Germany would benefit anyway. Today, the problem is when to stop applying the stimulus, and there is a wide variation of disagreement on that, but the consensus is rapidly forming around cutting deficits. 

    But that’s not actually the discussion. Regardless of whether you agree with Keynesian Theory or not, Klavan misrepresented countercyclical policy. 

  13. Danny Lemieux says

    Like all models of highly complex systems (e.g. AGW), economic models have a way of fooling people into thinking that complex systems can be understood and controlled. Perhaps they satisfy a deeply ingrained psychological insecurity in people that let’s them deal with the horrors of chaos, whether real or imagined.

    Keynesian economics appear so logical, so pure…until they collide with reality. 

  14. says

    Suek, the Democrats aren’t fighting big business. They own big business. Something a lot of young freaks and idiots forgot to ask about it when sucking up the cream of their sugar daddies.

  15. Mike Devx says

    Zachriel says:
    Is there any reason to watch the rest of the video when the first 30 seconds demonstrates ignorance of basic economics?
     
    No, Z, there is no reason for you to.  Move along.  Nothing to see here for you.
    An intellectual ivory-tower specialist in centralized planning and counter-cyclical policy – who mumbles those words “counter-cyclical policy” as if they were a magical incantation – who has no real world experience, doesn’t have a chance in hell of understanding why Keynesian economics consistently fail.
     
    I’m not saying counter-cyclical pollcy can’t have its *temporary* benefits, but relying on it as your core strategy for growing an economy, rather than the free market, is dubious at best.  Why do I say you rely on it rather than on the free market?  Because you bring it up so much, while rarely bringing up the free market within the same context.  *What* you choose to discuss identifies your priorities.
     
     

  16. says

    Danny Lemieux: Like all models of highly complex systems (e.g. AGW), economic models have a way of fooling people into thinking that complex systems can be understood and controlled.

    It is false to claim that nothing can be known about complex systems. For instance, weather is a complex system, but we can say with some assurance that it will generally be warmer in Paris in July than in January. Another instance, monetarism makes claims about macroeconomics, too. 

    Mike Devx: An intellectual ivory-tower specialist in centralized planning and counter-cyclical policy – who mumbles those words “counter-cyclical policy” as if they were a magical incantation – who has no real world experience, doesn’t have a chance in hell of understanding why Keynesian economics consistently fail.

    As countercyclical policy can be revenue neutral over time, Klavan misrepresented the theory, and like you, is confusing it with non-market theories, as here:

    Mike Devx: I’m not saying counter-cyclical pollcy can’t have its *temporary* benefits, but relying on it as your core strategy for growing an economy, rather than the free market, is dubious at best.

    Keynesian Theory IS market-based. Markets are the engines of most economic growth and innovation. 

  17. Danny Lemieux says

    Zach: For instance, weather is a complex system, but we can say with some assurance that it will generally be warmer in Paris in July than in January. 

    Somehow, I suspect that human beings (in the northern hemisphere, anyway) had that figured out long before people tried to develop complex models to predict the weather. Their common sense also told them that the standards of error around weather predictions for Paris in July or January were pretty high.

  18. says

    Danny Lemieux: Somehow, I suspect that human beings (in the northern hemisphere, anyway) had that figured out long before people tried to develop complex models to predict the weather.

    So we CAN make predictions about complex systems. That leaves nothing in your previous comment but hand waving. If you wish to make an actual objection, we’d be happy to read your reply. 

    (Interestingly, primitive peoples often ‘mapped’ the complex features of weather to another complex system, human behavior, such as Aeolus, Zeus and Poseidon.)

  19. says

    It’s not we can make predictions. It only applies to us and it only applies to locals. It doesn’t apply to the Zs or the corrupt bastos in AGW, the US government, or the UN. Difference.

  20. Danny Lemieux says

    Zach, I think the proper word for your response is “fatuous”. You add nothing to the understanding of complex systems and your “handwave” reference is simply projection.

    Meanwhile, the AGW crowd continues to demonstrate its grasp of complex systems by:

    a) Adding 3 mm to the height of sea levels because facts did not support the “model”
    b) Relying upon a Greenpeace hack to write the chapter on renewable energy
    c) Ignoring the critical role of solar cycles that are just now becoming recognized as major climate determinants? (incidentally, we on this blog have been writing about solar cycles and Maunder and Dalton Minimums for 2+ years now).

    …while the Keynesian crowd remains befuddled why the wasted $-trillions in supposed Obama stimuli have not only failed to boost the economy but instead put us and a good part of the rest of the world on the brink of an economic meltdown. We recognize it, apparently, but you don’t. 

    Your positions, Zach, are just not credible anymore.
     

    Here’s my question, Zach: what’s going to happen when all your beautiful, abstract models of how the world should work collapse completely in the face of facts, as they are now in the process of doing? Generally, people react in the following ways:

    1) They create a new world templates that better accommodate the facts at hand.

    2) They twist their rationales with the alacrity of Cirque du Soleil contortionists, albeit without beauty or grace,  in an vain (in all senses of the word) attempt to force-fit the facts to their ideology.

    3) They withdraw from the world in bitter recognition that the world has failed to conform to their expectations.

    4) They descend into mental mobius loops of paranoia, creating mythical rationales with which to persecute the imagined perpetrators of their misery (the Arab solution).

    5) They jump off buildings or bridges.

    Whatever you decide upon Zach, please do not choose (4) or (5): some of us actually appreciate your presence and wish you well.

  21. says

    Danny Lemieux: I think the proper word for your response is “fatuous”. You add nothing to the understanding of complex systems and your “handwave” reference is simply projection.

    Actually, we detailed the basics of countercyclical policy. Whether you agree that this policy has validity, it has great currency within economics, so it is no hand wave.
     
    Danny Lemieux: …while the Keynesian crowd remains befuddled why the wasted $-trillions in supposed Obama stimuli have not only failed to boost the economy but instead put us and a good part of the rest of the world on the brink of an economic meltdown.

    As we have pointed out repeatedly, the CBO disagrees. Their analysis indicates that just for the first quarter of 2011, the stimulus raised GDP ~2%, lowered unemployment by ~1%, and increased the number of full-time equivalent jobs by ~3 million.
    http://www.cbo.gov/publications/collections/collections.cfm?collect=12

    Again, you may not agree with these conclusions, but they are hardly “factuous.” Klavan misrepresented countercyclical (Keynesian) policy. We detailed why it was a misrepresentation. In reply, you point to the inherent unpredictability of complex systems. We point out that many aspects of complex systems are, indeed, predictable. That leaves you with no argument. Hence, you retreat to climate change and personal comments about paranoia and bridges. 
     

     

  22. Danny Lemieux says

    The reason I used the word “fatuous”, Zach, is because you gave a non-sequitur as an example. You conflate “seasons” with “weather” (“it will generally be warmer in Paris in July than in January”) in order to illustrate “complex systems”.

    There’s nothing at all complex about seasons. Seasons are dirt simple to understand, as they involve only two very well understood variables: the tilt of the earth and its rotation around the sun.  Weather, on the other hand, is a very complex system, which is why weather predictions more-than a day or two out are highly susceptible to error, never mind climate predictions that span decades.

    This is part of your rhetorical technique, Zach. It’s your fingerprint, just as we recognize ABC’s penchant for name dropping, false premises and wide leaps of logic.

    You’ve been educating us about these techniques and we’re catching on.

     
     

  23. Charles Martel says

    Danny, you have to understand that although Zach is a guest here (as are we all), and although all of his arguments are derivative and unoriginal, Zach gets to say when his argument has won.

    Once you understand that Zach determines what is allowed in this room and how arguments may be conducted, you will be in a better space.

  24. says

    Danny Lemieux: The reason I used the word “fatuous”, Zach{riel}, is because you gave a non-sequitur as an example. You conflate “seasons” with “weather” (“it will generally be warmer in Paris in July than in January”) in order to illustrate “complex systems”.

    Oh, gee whiz. Knowing that it will probably be hot in Paris in July is a weather prediction. 
     
    weather, the state of the atmosphere with respect to heat or cold, wetness or dryness, calm or storm, clearness or cloudiness. 
      
    Danny Lemieux: There’s nothing at all complex about seasons

    It’s one of many cycles involved in weather. Others include the diurnal cycle, the El Niño/La Niña-Southern Oscillation, the North Atlantic Conveyor. They interact, and it’s the interaction that creates the complexity. We chose a cycle with a well-known and uncontroversial effect on temperature in order to illustrate that within complex systems, there are a number of easily determined patterns. 
     
    Now to relate it to economics. When the financial meltdown occurred, it was predictable that there would be a sudden drop in demand. (Just because the system is complex doesn’t mean we can’t make any valid predictions.) The difficult question was how much of a drop, for how long, and what effect different government policies could have on the trend. But there were few economists who didn’t agree that the financial meltdown would lead to a drop in demand, and that is exactly what happened. 
     
    Virtually every important economy in the world used some sort of stimulus to temporarily replace demand in order to provide a floor below which the markets couldn’t fall. 

     

  25. says

    Z says a lot of things that just isn’t true. That includes his talk about having made his arguments. By the time you check and see that he made no such arguments, and barely can even write in complete sentences back then, you have another 50 comments from Z to read and “check’.

    See how Alinsky works. Obama didn’t get to be President by “discussing” things with people or “making arguments”, you know.

  26. Danny Lemieux says

    Oh, dear me, Zach. You really are thrashing about in the thickets, now.

    The whole point of Keynesian economics was that the government would step in and compensate for the loss in demand. It just didn’t work out that way.

  27. Charles Martel says

    “The difficult question was how much of a drop, for how long, and what effect different government policies could have on the trend. But there were few economists who didn’t agree that the financial meltdown would lead to a drop in demand, and that is exactly what happened.”

    Ah, the beauty of Zach’s art of misdirection. (Too bad for him that we are so on to it!) Obviously the “question” of the effect different government policies could have on the Great Recession has been answered: They’ve deepened it.  
    As for the sober assertion that “few economists disagreed” about demand dropping during a financial meltdown,” this is just filler designed to make Zach appear pensive and sober. It’s equivalent to saying “few mechanics disagreed that a drop in oil pressure would lead to engine damage.”

    Zach, please do two things: Tell us something we don’t already know. Even better, don’t try to tell us something we already know but that you claim isn’t true, namely, that those countercyclical nostrums you so fancy are helping destroy the U.S. economy.   

  28. says

    Danny Lemieux: The whole point of Keynesian economics was that the government would step in and compensate for the loss in demand. It just didn’t work out that way.

    The CBO says it did, basing its answer on detailed economic analysis. In reply, you say “did not,” i.e. hand waving. 
     
    Charles Martel: Tell us something we don’t already know.

    Danny Lemieux asked why Klavan’s statement was in error. Apparently, he didn’t know, even though we have had that discussion before. We answered that query. 
     

  29. Charles Martel says

    Poor Zach. Don’t you ever get tired of pretending that you are smarter than we are? I was referring to your typical statements of the obvious, where you try to sell us on the idea that you are saying something insightful or portentious.

    No sale!

  30. Danny Lemieux says

    Zach, the CBO can only work with the informational guidelines and assumptions presented to it by Congress and is always subject to revision as the new information comes in:

    Here is the most recent CBO report, 

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    http://www.cbo.gov/ftpdocs/121xx/doc12185/05-25-ARRA.pdf
    Here’s are some key takeaway points from the Report summary:

    The effects of ARRA (i.e., the stimulus) on output peaked in the first half of 2010 and have since diminished, CBO estimates. The effects of ARRA on employment and unemployment are estimated to lag slightly behind the effects on output; CBO estimates that the employment effects began to wane at the end of 2010 and continued to do so in the first quarter of 2011.

    However, if you look at page 9-10 of this report, you can see that it is replete with caveats that address its high degree of error. As it reads….

    In analyzing ARRA’s economic effects, CBO drew heavily on versions of the commercial forecasting models of two economic consulting firms, Macroeconomic Advisors and Global Insight, and on the FRB-US model used at the
    Federal Reserve Board. Those models assume that the economy has an underlying potential output determined by the size of the labor supply, the capital stock, and technology. They also assume that actual output can change relative to potential output because of shifts in aggregate demand for goods and services from households, businesses, and the government. With those basic assumptions, the details of interactions among economic variables in the models are based largely on historical relationships, informed by theories of how those variables are determined (for example, the theory that total consumption depends mostly on disposable income, wealth, and interest rates).
     
    Because they emphasize the influence of aggregate demand on output in the short run, the macroeconometric forecasting models tend to predict greater economic effects from demand-enhancing policies such as ARRA than some other types of models do

     
    But then, there is an alternative: you can pick up a financial newspaper like the IBD, Financial Times or Wall Street Journal to learn how well the stimulus worked…or you can get out of your armchair and take a tour through a typical U.S. city and look around, talk to people.

    Overall, this CBO hardly instills confidence in the effects of the Obama stimulus and its Keynesian underpinnings. But, hey…it doesn’t matter: the important thing is that you, Zach, know that the stimulus has been a success. The rest of (all 97% of us…a consensus!) just happen to disagree.

  31. Charles Martel says

    Danny, Zach doesn’t live in the United States, therefore is free to pontificate about it without actually having to live in it or experience what its citizens are experiencing.

    The beauty of a second-hand life is that there are no icky exceptions or irregularities to intrude. All is blissful theory, thanks to our impeccable and ever-accessible Internet sources.

  32. says

    We appreciate that you are actually attempting to address the secondary point (the primary point being Klavan’s misrepresentation of Keynesianism, whether you agree with Keynes or not).
      
    Danny Lemieux
    : the CBO can only work with the informational guidelines and assumptions presented to it by Congress …

    That’s a bit of a misstatement. If they are making projections based on a given scenario yes, but 
     
    Danny Lemieux: and is always subject to revision as the new information comes in:

    CBO also bases its work on *data*.  
     
    Danny Lemieux: The effects of ARRA (i.e., the stimulus) on output peaked in the first half of 2010 and have since diminished, CBO estimates.

    That’s right. The stimulus is winding down, so obviously, its direct effects will fade away.  
     
    Danny Lemieux (quoting): Because they emphasize the influence of aggregate demand on output in the short run, the macroeconometric forecasting models tend to predict greater economic effects from demand-enhancing policies such as ARRA than some other types of models do.

    Continuing, “the models that CBO uses generally produce results that are roughly in line with the consensus of private-sector forecasters, as compiled in the Blue Chip Economic Indicators.” In other words, they are near the consensus of people who make market decisions, with theoretical support.
      
    Danny Lemieux: But then, there is an alternative: you can pick up a financial newspaper like the IBD, Financial Times or Wall Street Journal to learn how well the stimulus worked…

    The stimulus can have had a positive effect, but still leave the economy negative. A $0.8 trillion stimulus is small compared to the size of lost equity. 
     

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