Sunday, September 2, 2012

Neither Structure nor Aggregate Demand

The Paul Krugman theme over the past four years have been pretty consistent and, to be honest, easy to understand. Economies around the world, including our own, are hampered by a lack of what he calls "aggregate demand," or a lack of overall spending, and until those reactionaries and members of Goldstein's Army (the Very Serious People) are vanquished, economic stagnation will remain the norm.

In the Krugman view, there are two competing philosophies. The first is the Keynesian way of thinking, which is promoted by the Good People. The second is the "Structural Unemployment" group, which is run by monsters and worshipers of Goldstein. Since the Keynesian viewpoint is obvious in terms of accuracy and truth, the only reason others would hold to another way of thinking is because they are evil and enjoy watching others suffer.

There are some people, however, who hold to the "structural" view and at least Krugman is charitable toward Edward Lazear, who presented a paper at the recent Fed conference at Jackson Hole. Apparently, Lazear is an exception to the Krugman rule that anyone who disagrees with the Keynesian thesis is evil; Lazear only is misguided.

But what if there is a third theory out there, one that examines demand from a different point of view, and instead of saying that there is a mismatch between individuals and the jobs available lays the current mess at the feet of massive malinvestments that became exposed in 2007 and 2008, and then have grown in the intervening years, thanks to government spending and regulation. Yes, Krugman refers to the third view, the Austrian Theory of the Business Cycle as nonsense and then mislabels it a "hangover theory."

With all respect to Pete Boettke and the "Coordination Problem" group, the current situation in the economy is a classic Austrian example. The "structure" and "coordination" people do have a short-run point. That is, after the original set of malinvestments are exposed and abandoned, then there would be a short period of higher unemployment when the factors of production, including labor, are re-directed away from the malinvestments and toward those lines of production that would be profitable.

(In the classic Austrian view, the malinvestments generally occur in the lines of capital goods and away from consumer goods, as there is a "mismatch" between interest rates and the general time preferences of individuals, the "mismatched" caused by government or central bank intervention. The recession is the time when the factors are redirected to more profitable uses in line with individual time preferences within the economy. During that time, there are both "mismatches" and issues of coordination between labor and other factors.)

I agree with Krugman that the current situation is not in the "mismatch" camp, although even he admits that in the early days after the meltdown of 2008 there was some "mismatch" evidence. However, where Krugman and I part ways (if we ever were on the same path at all) has been government and Fed policies since that fateful September 2008. Krugman holds that government has not spent enough, regulated enough, or bullied enough, and that if Washington engaged in massive new spending schemes, such as preparing for imaginary "space aliens," all would be well.

The Austrians, on the other hand, believe that far from cleaning up the original mess, Washington simply made the mess even bigger. Keynesians, after all, do not believe that booms are periods when resources are pushed in the wrong direction and cannot be sustained. Instead, they believe that as long as government pours money into the economy, the boom can be sustained indefinitely. In fact, Keynesians hold that unless government ratchets up the spending, the economy will be mired permanently in depression because a market economy always moves toward under-consumption and stagnation.

In Keynes's view -- which coincides with Krugman's -- market economies (and especially the more complex and prosperous ones) are inherently flawed. Writes John H. Williams in a 1948 review of The General Theory:
It was not a coincidence, or a misinterpretation of Keynes, that the first great development of the theory by his disciples was the stagnation thesis, that the war was regarded as a superlative demonstration of what could be accomplished to sustain employment by a really adequate volume of effective demand, and that the weight of expectation of Keynesian economists was that we would relapse after the war into mass unemployment unless vigorous antideflation measures were pursued. There is no better short statement of the stagnation thesis than that given by Keynes: “The richer the community, the wider will tend to be the gap between its actual and its potential production; and therefore the more obvious and outrageous the defects of the economic system…. Not only is the marginal propensity to consume weaker in a wealthy community, but, owing to its accumulation of capital being already larger, the opportunities for further investment are less attractive.”
Thus, wealth led to poverty because wealthier people were likely to save more, which would cause "aggregate demand" to spiral downward. It was as inevitable as a sunrise following early morning darkness.

Yet, let us count the ways that the government has intervened in this recession to turn it into a full-blown depression. First, the government has both pushed easy money policies AND pushed strict regulations against private lenders (while simultaneously trying to make lending easier in housing). Far from letting the worst of the malinvestments be permitted to be closed out, the government has tried to keep them going, using vast amount of resources in the process.

Second, it has poured hundreds of billions of dollars into "green energy" subsidies that are malinvestments on their faces. Government attempts to create electricity through wind and solar and has pushed inferior fuels such as ethanol that are much more costly than conventional methods and fuels, which means that hundreds of billions of private and tax dollars have been funneled into lines of production that are not and cannot be sustainable unless government intervenes even more and makes conventionally-produced electricity either illegal or so costly that only then puts the "alternative" sources on a level playing field. Some playing field.

Third, the Obama administration has continued the unwise bailout programs of the Bush administration, including the rewriting of contracts when it created "Government Motors." (I have no doubt that Bush, had he been in office, would have done the same thing, and it would have been the wrong thing.)

Keynesians believe that once resources become unemployed, they cannot become employed again in a market economy unless government intervenes first. That it is not true and history bears out that fact means nothing. After all, Keynesianism is a theory in which government intervention always is the solution.

88 comments:

CPBrown said...

"Keynesians believe that once resources become unemployed, they cannot become employed again in a market economy unless government intervenes first."

The massive reduction in government spending WWII is a direct refutation of that hypothesis.

I've always thought the "aggregate demand" (AD)issue was a tautology:

Lack of AD causes recessions which seemingly also cause a reduction of AD.

CPBrown said...

that is, after WWII

Zachriel said...

CPBrown: I've always thought the "aggregate demand" (AD)issue was a tautology:

Lack of AD causes recessions which seemingly also cause a reduction of AD.


That's not a tautology. Not even sure why you would think so, as it depends on the fact that aggregate demand causes a drop in production.

Rather, it's a claim that a particular effect can also be a cause. So a drop in aggregate demand causes a drop in production. This results in layoffs, which depresses aggregate demand.

Zachriel said...

CPBrown: The massive reduction in government spending WWII is a direct refutation of that hypothesis.

Not at all. There was a great deal of pent up demand due to rationing during the war. Even ordinary people had significant savings, which helped maintain demand when the war ended. Military production was switched from bombs and tanks to refrigerators and cars.

In addition, the military wasn't simply disbanded, but maintained their presence overseas for many years, indeed, until today. Furthermore, returning soldiers were provided education and loans to help them get reestablished. Overall, it was an orderly transition that led to what is known as the Age of Affluence.

Zachriel said...

William L. Anderson: Keynesians, after all, do not believe that booms are periods when resources are pushed in the wrong direction and cannot be sustained. Instead, they believe that as long as government pours money into the economy, the boom can be sustained indefinitely.

Actually, Keynes advocated for countercyclical policy.

Zachriel said...

William L. Anderson: Apparently, Lazear is an exception to the Krugman rule that anyone who disagrees with the Keynesian thesis is evil; Lazear only is misguided... During that time, there are both "mismatches" and issues of coordination between labor and other factors.

Did you read Lazear & Spletzer's paper? They found the cause of current unemployment is not structural, but consistent with cyclical economic forces.

Mike said...

Did you read Lazear & Spletzer's paper?

Well I read it. It’s the same old neo-keynesian, laboratory analysis complete with pretty math equations to try and make themselves look really, really smart. The economy is not a high school science experiment that can be manipulated by changing the dials on the inputs. It’s a living ecosystem.

Here is one of my favorite lines from the paper.
“Additionally, the current recession does not appear fundamentally different from prior
ones, except that it is worse.”

The only part of that sentence they got right is “it is worse”

BTW the phrase “aggregate demand” as if it is some independent thing is the height of intellectual laziness. Aggregate demand is the sum of individual demand. So are we to believe there is a lack of individual demand? Human demand is virtually insatiable. We have a debt and income problem, not a demand problem.

Zachriel said...

Mike: “Additionally, the current recession does not appear fundamentally different from prior
ones, except that it is worse.”


That's an important question, whether it is qualitatively different, or only quantitatively.

Mike: Aggregate demand is the sum of individual demand. So are we to believe there is a lack of individual demand?

That's right. Many people and businesses are saving or paying down debt rather than making expensive purchases or investments.

Mike: Human demand is virtually insatiable.

Economic demand is more than beggars and horses. Demand includes not only the desire, but the wherewithal to pay a certain price for something.

http://www.merriam-webster.com/dictionary/demand

http://www.investopedia.com/terms/d/demand.asp

http://en.wikipedia.org/wiki/Demand_(economics)

http://www.investorwords.com/1396/demand.html

Mike said...

Zac,
First spare us the citations lest you wish to become LK jr.

“Demand includes not only the desire, but the wherewithal to pay a certain price for something”
Thus it’s an income and debt problem.

“That's an important question, whether it is qualitatively different, or only quantitatively.”

It is structural as a result of passing the tipping point on serviceable debt loads. It is different. Public sector spending will not solve the problem only worsen it. All the progressive neo-Keynesian fidgeting is self delusional.

Zachriel said...

Mike: First spare us the citations...

You misused the term "demand" in an economic context, hence the citations.

Mike: Thus it’s an income and debt problem.

Not entirely. Uncertainly means people seek safety. If they were sure of their jobs and prospects, many would spend more with the same income and debt.

Mike: It is structural as a result of passing the tipping point on serviceable debt loads.

If debt was the proximate cause of unemployment, then you would expect interest rates to be much higher.


Mike said...

Zac
I used “demand” in the real world human behavior context. Human beings are the economy regardless of academic definitions.

“If debt was the proximate cause of unemployment, then you would expect interest rates to be much higher.”

Nice sleight of hand. I never said it was the proximate cause of unemployment which has many variables.

As for interest rates, you’re just messing with us right? You really think that interest rates can provide any real credible insight given central bank manipulation.

Zachriel said...

Mike: I used “demand” in the real world human behavior context.

Then this statement is nonsense.

Mike: Aggregate demand is the sum of individual demand.

While aggregate demand is an economic term having to do with the desire and ability to buy a product at a certain price, the latter, you say, is only the desire, regardless of ability to pay.

Mike: I never said it was the proximate cause of unemployment which has many variables.

What are you saying is the "result of passing the tipping point on serviceable debt loads"?

In any case, if the U.S. were passing the tipping point on serviceable debt loads, then interest rates should be much higher.

Mike said...

Zac,
I have a demand for a private jet to travel with. I can’t afford it. If I could I would get one. Simple enough for you? Your head is stuck in academic definitions. Perhaps substituting the word desire would make it easier for you.
Absent central planning of bankers, interest rates would be higher than current levels. Have you not been paying attention to Fed policy/actions the last four years?

Zachriel said...

Mike: I have a demand for a private jet to travel with. I can’t afford it. If I could I would get one. Simple enough for you?

Quite clear, which is why "Aggregate demand is the sum of individual {desire}" is nonsense. The former term entails the willingness and ability to pay, the latter does not. You are adding oranges to get a bushel of apples.

Mike: Absent central planning of bankers, interest rates would be higher than current levels.

They'd be higher even with intervention, if the central banks didn't have credibility.

Mike said...

Zac,
You’re stuck in an academic feedback loop rather than grasping how an economy works with real human beings.
“…if the central banks didn't have credibility.”
Thank you so much for stating that. You have revealed your mindset that helps explain your posts here.

Tel said...

Zac: Economic demand is more than beggars and horses. Demand includes not only the desire, but the wherewithal to pay a certain price for something.

You have just equated demand with supply right there. Of course this creates a true statement, but seemingly a rather pointless statement when it tells you nothing about what could go wrong, nor how to fit anything.

Zachriel said...

Tel: You have just equated demand with supply right there.

Well, not quite. Supply is the amount of something sellers are willing and able to sell at a certain price.

Tel: Of course this creates a true statement, but seemingly a rather pointless statement when it tells you nothing about what could go wrong, nor how to fit anything.

In classical theory, the relation between supply and demand determine price. This relationship can be studied empirically.
http://en.wikipedia.org/wiki/Supply_and_demand

Lord Keynes said...

(1) Regarding Keynes and the post-WWII era, both you and John H. Williams have no idea what you're talking about. Keynes most decidedly did not think that "stagnation" would follow WWII:

“Keynes harshly rejected the risk of post-war stagnation, holding that because of Social security there would be a large reduction in private saving and so that would be no problem.” (Colander, D. C. and H. Landreth [eds]. 1996. The Coming of Keynesianism to America: Conversations with the Founders of Keynesian Economics, E. Elgar, Cheltenham. p. 202).

(2) The Austrian business cycle theory is false, flawed and worthless:

(i) The classic Hayekian ABCT holds that central bank fiat money or fractional reserve banking-induced increases in credit (unbacked by commodity money) drives down the monetary rate of interest, causing it to go below the unique Wicksellian natural rate of interest. This causes malinvestment in capital goods sectors. However, the unique Wicksellian natural rate of interest does not exist, and is a pure fantasy:

http://socialdemocracy21stcentury.blogspot.com/2011/06/natural-rate-of-interest-wicksellian.html

http://socialdemocracy21stcentury.blogspot.com/2011/06/austrian-business-cycle-theory-and.html

http://socialdemocracy21stcentury.blogspot.com/2011/06/austrian-business-cycle-theory-and.html

(ii) The ABCT does not explain reckless lending by banks to people for mortgages or consumer goods, and nothing about financial or real asset bubbles, and nothing about financial crises. The irrelevance of ABCT to the real estate bubble of the 2000s and financial crisis of 2008 can be seen in a passage in Rothbard’s Man, Economy, and State (2004 [1962]: 994–1008).

(iii) The theory is also ridiculously flawed by its inability to model what happens in an open economy, through international trade.

If that isn't bad enough, the development of any boom in the business cycle is dependent on a myriad of factors, and whatever future profit any particular capital goods project will deliver can only be a matter of subjective expectation in the present. A rise in interest rates may decrease the demand for credit and raise the burden of servicing debt, but, if there is a mutual expectation that a particular investment might deliver future profit by the bank and business, it is normal for businesses to refinance their investment loans or have the loans rolled over by banks.

Lord Keynes said...

(iv) As Robert Vienneau has argued, there is no necessary reason why lower interest rates would cause production to be re-oriented to higher-order capital goods anyway, and even classifying capital structure into well-defined higher orders is dubious in itself (see Vienneau 2006 and 2010).

Vienneau, R. L. 2006. “Some Fallacies of Austrian Economics,” September
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=921183

Vienneau, R. L. 2010. “Some Capital-Theoretic Fallacies in Garrison’s Exposition of Austrian Business Cycle Theory,” September 4
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1671886

(v) ABCT assumes that credit flows primarily to producers engaged in capital goods investments. It is obvious that this is a grossly simplistic and unrealistic assumption in the modern world. Credit today is a complex composite of flows to create consumer loans, loans to speculators on assets or primary commodities, and loans for capital goods investments. When booms in business cycles are primarily driven by credit flows to speculators who blow asset bubbles, the dynamics of the boom are different from those of booms in (allegedly) unsustainable high-order capital goods investments, as assumed by ABCT. Minsky's financial instability model is a far better explantion of such business cycles

(3)
"Keynesians believe that once resources become unemployed, they cannot become employed again in a market economy unless government intervenes first."

No, they don't. And you demonstrate your contemptible ignorance of Keynesian economics.

Keynesians say that, if the private sector does not provide the sufficient domestic investment or consumption spending (or foreign sector in the case of export booms), then government must step in.

Tel said...

Zac: "In classical theory, the relation between supply and demand determine price. This relationship can be studied empirically."

Supply is exactly and precisely equal to demand in each and every empirical transaction you are ever going to measure.

There's a theory that a supply curve crosses a demand curve, and it's a theory without empirical basis because only the point of sale can ever be measured. I'm sorry but once you have ruled out the potential demand that people would like to have but are either unwilling or unable to buy, then all you have left to look at are actual sales. Every time you have an actual sale, one side buys and the other side sells, the transaction balances by definition.

Zachriel said...

Tel: Supply is exactly and precisely equal to demand in each and every empirical transaction you are ever going to measure.

There is never oversupply or undersupply of a product? There are no warehouses full of excess product? Famines are imaginary?

Tel: There's a theory that a supply curve crosses a demand curve, and it's a theory without empirical basis because only the point of sale can ever be measured.

Yes, and you can actually test the quantity of sales at various prices. For instance, what do you think would happen if your store doubled the price of iPads? Would you sell a larger number, or would you sell fewer?

Dennis said...

According to Keynesian economics, if you doubled the price of iPads you would actually sell more, since people would rush to buy them before the price went up even further, right?

Mike said...

Zac,
You just referenced an example that makes the point Tel and I was trying to make with you. (doubt you will acknowledge it)

You referenced famines. There are a lot of hungry people in the world without the economic income to pay for it. Thus according to your academic definition, there is no demand for food by this group. According to you they might desire food, but economically they don’t “demand” it. Can’t you see how nonsensical that is in the real world?

Mike said...

I see LK is back. No doubt motivated by the alleged heresy and transgression committed against his idol.
LK when the political/economic philosophy you so fervently embrace causes the painful reset that is coming, the honorable thing for you to do is come onto this Blog and simply say;

“I’m sorry, I was wrong.”

I will not hold my breath. You will not connect the dots and to the extent they are connected for you, your response will be “we didn’t do enough.”

Hiram J Goldstein II said...

Bush probably would have bailed out GM, but I don't believe for a moment that he would have used the bailout to stiff the secured creditors and buy off the UAW precisely because no Republican has a reason to give the UAW so much as one red cent.

Zachriel said...

Dennis: According to Keynesian economics, if you doubled the price of iPads you would actually sell more, since people would rush to buy them before the price went up even further, right?

No. They would probably buy fewer overall, though if there were expectations of a continued global rise in prices, purchases may be frontloaded in time.

It's easy to test. Just double the prices in your store. You will make more per unit!

Mike: You just referenced an example that makes the point Tel and I was trying to make with you.

We provided the example in the context of undersupply, that is, not enough available food for everyone, something that used to occur with some frequency in human history.

Mike: There are a lot of hungry people in the world without the economic income to pay for it.

Very true.

Mike: Thus according to your academic definition, there is no demand for food by this group. According to you they might desire food, but economically they don’t “demand” it.

That's right. Wishes aren't horses.

Mike: Can’t you see how nonsensical that is in the real world?

Wishes aren't horses is the real world. Regardless, you added oranges to make bushels of apples.

Mike said...

Zac,

You're stuck in a bad remake of Groundhog Day. Can't get out of you closed feedback loop to expand your understanding.

You never answered a question.

What do you do for a living?

Zachriel said...

Mike: Can't get out of you closed feedback loop to expand your understanding.

Sorry, Mike. That's not an argument. Feel free to address the topic.

Mike said...

Zac,
The “argument” has been made; you either don’t understand it or refuse too. I’ll restate due to the uninitiated aspect of your reply.

There is not an “aggregate” demand problem. The human condition is such as there is virtually an insatiable demand by people. There is an income and debt problem. That is, the inability of people to satisfy their demand needs, wants, desires. If they had the ability there would be demand.

YOU choose to play word games with the argument. YOU refuse to acknowledge the nonsensical nature of “aggregate” demand because to recognize so would put a hole in a critical foundation of your neo-Keynesian philosophy. YOU choose to take solace in citing traditional academic definitions as if they hold a monopoly and are the final word. YOU refuse to acknowledge that in the REAL world of human behavior, demand and desire can be interchangeable. YOU refuse to acknowledge that in the REAL world, there is plenty of demand that never makes it to the formal marketplace and thus ignored as if it doesn’t exist by mocking this aspect of human activity with “wishes aren’t horses “. YOU refuse to acknowledge that maybe what you have been taught is incomplete or wrong in this area.

YOU continue to not answer my question.

YOU may continue with your broken record reply and not answer my question. So be it.

Zachriel said...

Mike: There is not an “aggregate” demand problem. The human condition is such as there is virtually an insatiable demand by people.

Simply redefining the term doesn't make the phenomenon disappear.

Mike: There is an income and debt problem. That is, the inability of people to satisfy their demand needs, wants, desires. If they had the ability there would be demand.

That is incorrect, as we pointed out above. If people were more confident in their jobs and businesses, and their future prospects, many would certainly spend more even with the same income and debt. Instead, people are seeking safety. When that happens, economic demand drops.

Mike: YOU refuse to acknowledge the nonsensical nature of “aggregate” demand ...

You have not only rejected the term "aggregate demand", but the classical definition of "demand". At the present time, people desire economic safety (liquidity) rather than things (consumption) or risk (investment).

Anonymous said...

Zachriel: There was a great deal of pent up demand due to rationing during the war. Even ordinary people had significant savings, which helped maintain demand when the war ended...In addition, the military wasn't simply disbanded, but maintained their presence overseas for many years, indeed, until today. Furthermore, returning soldiers were provided education and loans to help them get reestablished.

That argument sounds both Austrian and Keynesian to me. Austrian in the sense that after a long period of austerity, the private sector had accumulated savings to the level where it made economic sense to invest in capital goods; Keynesian in the sense that the government had been leveraging up during the war while the private sector was deleveraging and then there was an orderly transition while the sectors reached a new equilibrium.

I'm interested in hearing if others can parse it better than I can and show why it makes either the Austrian or the Keynesian case.

Zachriel said...

There are two people on the road to town; a beggar, and an old man with several gold pieces he keeps hidden inside his coat. They pass a horse for sale.

The beggar wishes for a horse, but has no money. The old man, who has experienced hard times, would rather walk and save his money, just in case.

The farmer selling the horse knows that the beggar and old man don't represent economic demand. They only represent economic demand when they have a desire to buy along with the willingness and ability to pay.

Later on, a young man spends his last bit of gold on the horse and soon passes the beggar and old man on the road, tipping his fancy hat as he passes. The three meet again at the tavern. Only one of them eats.

Hiram J Goldstein II said...

@Everyone trying to argue with Zac, of course he's in a feedback loop. Keynesianism is about manipulating statistical quantities by exploiting their definitions.

Zachriel said...

Anonymous: That argument sounds both Austrian and Keynesian to me.

Grossing private savings quadrupled from 1939 to 1945, and personal savings reached 25% of disposable income.

Even though GDP exploded, personal consumption, especially durable goods, lagged during the war. The war effort soaked up production, so there were limited consumer goods available.

Anonymous: the private sector had accumulated savings to the level where it made economic sense to invest in capital goods

It made sense because the government loosened controls, and stopped buying military goods.

In any case, the stimulus from this pent-up demand, the slow military draw-down, and government reintegration programs, helped minimize the impact of a sudden end to the Great Stimulus.

Mike said...

Zac

Answer my question. 3rd request

Zachriel said...

Mike: Answer my question. 3rd request

Sorry, our spam-filter dropped your question.

Mike: What do you do for a living?

It's irrelevant.

TheRightRadical said...

Not at all. There was a great deal of pent up demand due to rationing during the war"

Isn't this a form of "austerity" which we are told to hate with a passion? So which is it?
We have to live on limited supplies of gas, food, and the rest of the neccesities of life, in order to achieve a higher standard of living?
Or is living on limited supplies of gas, food, and other neccessities of life. The nirvana of the Krugman fallacy that "WWII ended the depression"?

Even ordinary people had significant savings, which helped maintain demand when the war ended."
You mean the "paradox of thrift" is a myth?

Military production was switched from bombs and tanks to refrigerators and cars."
I mean really? Why even retool? Why deflate the bubble in military spending? (or the stock market bubble or the real state bubble or the government bond bubble)
Since all that matters is the is the raw numbers that make up GDP?
According to Samuelson that's all that mattered for the Soviet economy, and it made life wonderful there! He's one of your guys too isn't he?

In addition, the military wasn't simply disbanded, but maintained their presence overseas for many years, indeed, until today.
Pure bull. We had over 12 million men under arms at the end of WWII, by 1950 that number had dropped to less then 1.5 million. A drop of 88% in five years, would be more "disbanding" then "maintaining", but feel free to make up facts as it relates to your ideology of death. I guess you never heard of the "I wanna go home riots of 1946"? But then forcing and manipulating people to do and act as you want them too. Is what people like you are all about isn't it?

Furthermore, returning soldiers were provided education and loans to help them get reestablished"
This is what government loves to do. (and idiot mouth pieces like you love to propagandize about) It loves to rip you off intially, then give you a few crumbs later, and tell you how wonderful they are.
In 1940 the average income in the US was $1368 per year. In 1943 the salaries for enlisted men ranged from $50-75 a month, in other words no where near what the average income was in 1940!
Of course the bargin for the government continued, as it paid around a $100 month for using the GI bill benefits, but only 51% of veterans took advantage of the program.
Of course the caveat here, is this was a "educational benefit" and it directed funds towards one of governments favorited groups (higher education).
Of course government directing funds into favorited industries, and organizations is known as Fascism, as practiced by Hilter's Germany, Mussolini's Italy, and Saddam's Iraq, along with the other hundreds tinpot dictators throughout history.

But I guess it doesn't matter the company you keep. So wear your ablatross proudly, you filthy animal.

Mike said...

Zac,
@3:56pm

It very relevant.

I for instance am in the financial business and currently run a business. I have helped start one and sell it. I have served on Boards in the private and non-private sector and in the capacity as advisor to a Board.

That experience and education on a real world street level adds character and context to my formal education. That’s why it’s relevant.

NOTE: Let the record reflect you refuse to answer the question

Zachriel said...

TheRightRadical: Isn't this a form of "austerity" which we are told to hate with a passion?

WWII was a massive public works project which was preceded by nation-building public works projects. That's not what is normally meant by austerity in public spending today.

TheRightRadical: We have to live on limited supplies of gas, food, and the rest of the neccesities of life, in order to achieve a higher standard of living?

People lived with rationing in WWII because their children were fighting fascism overseas.

TheRightRadical: You mean the "paradox of thrift" is a myth?

The paradox of thrift is in reference to recessions, not economic expansions.

TheRightRadical: Since all that matters is the is the raw numbers that make up GDP?

A lot more than GDP matters.

TheRightRadical: Pure bull. We had over 12 million men under arms at the end of WWII, by 1950 that number had dropped to less then 1.5 million.

That's right. The process took several years, with 1946-47 having the largest change.

Zachriel: Furthermore, returning soldiers were provided education and loans to help them get reestablished

TheRightRadical: This is what government loves to do.

Most economists credit the G.I. Bill with helping veterans reenter society, and helping build the middle class.

Mike: I for instance am in the financial business and currently run a business.

Not sure how that matters, but okay.

Mike said...

Zac,

I explained the relevence of what one does for a living in my 4:46.

Are you evading or just being obtuse?

Tel said...

TheRightRadical: Isn't this a form of "austerity" which we are told to hate with a passion?

Ha ha, the word "austerity" only applies to governments, don't you know? It has nothing to do with people. Better update your Newspeak dictionary before someone comes around to offer you some correctional services :-)

Tel said...

Zac: There is never oversupply or undersupply of a product? There are no warehouses full of excess product? Famines are imaginary?

Would you explain your empirical process for measuring this oversupply and undersupply? Which transactions are you measuring to discover the excess product? What price can we use to indicate a famine?

Also useful if you can explain how to measure the difference between oversupply and insufficient demand, in an empirical manner of course.

Zac: The farmer selling the horse knows that the beggar and old man don't represent economic demand. They only represent economic demand when they have a desire to buy along with the willingness and ability to pay.

So based on this exact definition of "demand", how can a famine can exist at all? By your own example, hungry people don't represent demand unless they have the willingness and ability to pay. Thus, by your own definition, there is no excess demand for food during a famine. It's a nonsensical conclusion, but as everyone is trying to explain, you have a nonsensical definition of "demand".

Zac: We provided the example in the context of undersupply, that is, not enough available food for everyone, something that used to occur with some frequency in human history.

Again, there is exactly sufficient food available to fulfil exactly 100% of "demand" as you go about defining demand. Wishes aren't horses you know. Since demand is 100% filled, how do you empirically measure this "undersupply" that you speak of?

Can you say how large the undersupply might be in this situation?

TheRightRadical said...

WWII was a massive public works project which was preceded by nation-building public works projects. That's not what is normally meant by austerity in public spending today."
So then you're finally admitting that there is scarcity? That when the government consumes resources then there is less for us little people to consume, that are not connected to, or work for government? That's a first for a Krugmanzian.

People lived with rationing in WWII because their children were fighting fascism overseas.
And mainly this is so because another "progressive" engaged in another public works project called World War I.

The paradox of thrift is in reference to recessions, not economic expansions."
Yes, which is why we must bubble up, for coming the Alien attack. We will take the scarce resources that you admit too, and use them build pyramids, because the public is just too stupid, when they save money in troubled economic times. Flat out wonderful advice from the very same people that caused by the very same troubles in the first place.

A lot more than GDP matters."
That's not what Samuelson said about the Soviets. He said they were tremendously successful. He did write the first textbook in Economics you ever read right? But then being a quack, and consistently wrong is in y'alls DNA. Haven’t you ever listened to Bernanke? Or Krugman for that matter?

That's right. The process took several years, with 1946-47 having the largest change.”
The process was short actually. The war ended in September 1945, and by 1950, there were 10.5 million less servicemen, over the course of barely five years. Meaning every year; a city the size of San Diego was absorbed into the economy. So you are full of crap. But then you’re a death cult ideologue so what does one expect?

Most economists credit the G.I. Bill with helping veterans reenter society, and helping build the middle class."
You miss the whole point. The government made out on the deal tremendously. Since they got labor for under market value, but then being a statist hypocrite means that laws like mininum wage are only imposed on the landscraper, or the guy who wants his washed. They then slickly then put together this program, which through inflation, and attrition was a bargain for the government. As a side benefit they got to funnel tax dollars into one of the politicians’ favorite industry’s. (The guaranteed home loan was also good for developer's, another major contributor to politicans)
Do you really think the politicians cared if it helped the economy twenty years down the road? They just didn’t want all these underpaid trained killers coming home to riot. See: “Riot, Bonus Army”. you really don’t know much do you?

Zachriel said...

Tel: Would you explain your empirical process for measuring this oversupply and undersupply? Which transactions are you measuring to discover the excess product?

One reason there can be over or under supply is because of the delay between inception and delivery of a product. Manufacturers have to anticipate how much they need to produce to meet expected demand. When they are wrong, it can lead to a mismatch between supply and demand. It's a very common phenomenon in markets, so it's odd you would question it. When a quantity of supply causes to price to drop to cost or below, then the product can be considered in oversupply.

It's an important issue in business and economics.

Business Week: Solar Glut Worsens as Supply Surge Cuts Prices 93%: Commodities

Bernard Markstein, economist: "The market went almost immediately from having not enough supply to having an oversupply of homes."

Financial Times: Construction of new homes in the US dropped by 10.6 per cent in April as oversupply in the housing market sapped demand for new buildings

Tel: What price can we use to indicate a famine?

We were referring to famines caused by underproduction, that is, not enough food for everybody. They were common in history before the modern era.

You might consider the great famine of 1315-1317. Years of good weather led to a significant increase in population, then when the weather turned bad, crop yields plummeted, life expectancy dropped, and millions died.

Oh, and yes, the price of food skyrocketed. When the price of food is beyond the reach of a large segment of the population, then there is a threat of widespread starvation.

Tel: So based on this exact definition of "demand", how can a famine can exist at all?

Because famines aren't defined by economic demand, but by widespread starvation.

Tel: Thus, by your own definition, there is no excess demand for food during a famine.

Economic demand for food was very high, the price being pushed far too high for many peasants. It's as if you never visited an open market where people bid and sell.

Tel: It's a nonsensical conclusion, but as everyone is trying to explain, you have a nonsensical definition of "demand".

Not matching other senses of a word wouldn't make the definition nonsensical. What you are doing (and what Mike did above) is called conflation.

-
demand
http://www.merriam-webster.com/dictionary/demand

1
a : an act of demanding or asking especially with authority {a demand for obedience}
b : something claimed as due {a list of demands}
2
archaic : question
3
a : willingness and ability to purchase a commodity or service {the demand for quality day care}
b : the quantity of a commodity or service wanted at a specified price and time {supply and demand}
-

We are using the economic definition in a discussion of economics.

Zachriel: We provided the example in the context of undersupply, that is, not enough available food for everyone, something that used to occur with some frequency in human history.

Tel: Again, there is exactly sufficient food available to fulfil exactly 100% of "demand" as you go about defining demand.

At the high market price. At that price, though, many peasants couldn't afford food. Wishes aren't horses.

Tel: Can you say how large the undersupply might be in this situation?

As food is not an option, we would hope there to be sufficient food to feed the entire population.

Zachriel said...

TheRightRadical: So then you're finally admitting that there is scarcity?

"Finally"? Where have we said otherwise? Most resources are limited in quantity.

TheRightRadical: That when the government consumes resources then there is less for us little people to consume, that are not connected to, or work for government?

Not always, but as a general rule, the government crowds the private sphere.

TheRightRadical: Flat out wonderful advice from the very same people that caused by the very same troubles in the first place.

The bubble in the securities shadow market occurred during the Bush Administration, and there were sufficient warnings about the scope of the problem.

TheRightRadical: That's not what Samuelson said about the Soviets. He said they were tremendously successful.

Sorry, you have us confused with someone else.

TheRightRadical: The process was short actually. The war ended in September 1945, and by 1950, there were 10.5 million less servicemen, over the course of barely five years.

Yes, considering the size of the demobilization, it was quite an accomplishment, something of which America can be proud.

TheRightRadical: Do you really think the politicians cared if it helped the economy twenty years down the road?

Whatever they did, it led to a period of prosperity known as the Age of Affluence.

Mike said...

Zac

You continue to evade. 4th request to answer my question

Mike said...

Zac

In your world economics can be can be sliced in to tidy dictionary definitions. How nice.

In the real world ask someone who wants or needs a new oven but doesn't have the money or credit for it if they would view it as a demand. Ask they producer of the over if that person represents an unfulfilled demand. Both would answer yes.

Accordingly to you it's not demand just a wish. I guess they should both write Santa for their wishes. He could be the middle man and convert them into "demand"

Conflate that.

TheRightRadical said...

The bubble in the securities shadow market occurred during the Bush Administration, and there were sufficient warnings about the scope of the problem. "
BS the stock market bubble cracked in March of 2000 when Clinton was still on the throne. Besides it's irrelevent who is in charge politically. It's the Fed, and Wall street that matters in every case of boom and bust (same as in the 19th Century under the government run and manipulated Gold Standard), and it accommodates every government spending program, whether it's war, welfare, or bailouts. Both party's are Keynesian, in fact the GOP was Keynesian before Keynesian was even born. You really need to learn history.

Sorry, you have us confused with someone else.
OMG! You have never heard of Paul Samuelson? That is truly remarkable! He was basically the Keynes of the second half of the
20th Century! Good God Man.

Whatever they did, it led to a period of prosperity known as the Age of Affluence.
Which died of multiple stab wounds on August 15, 1971. John Maynard Keynes was identified as the murder, and Lyndon Baines Johnson was his accessory. Richard Nixon refused to testify at the trial and both men walked.
Age was put aside and parasites quickly formed on his body. They were dying, and barely hanging on from the start, and really began to show signs of weakness in October 2008. Amazingly the parasites on the host of Affluence were called Keynesians ironically enough. The parasites have been given five to ten years more to live. It's amazing these parasites have held on this long but then these American types are known for their exceptionalism, and whole industries, and even try to devour whole countries.
A similar European species, cutely named Euro, was planted in 1999, but this particular late bloomer is given almost no chance at seeing it's 20th birthday.
Meanwhile Irving Fisher, and JM Keynes were seen drunk and necking in an ally behind Wall Steet.

Now tell me king of o'slobby. You have heard of Irving Fisher right?













TheRightRadical said...

Whatever they did, it led to a period of prosperity known as the Age of Affluence. "
Of course this is the opinion of economists, who were all trained in Keynesian economics. Giving their opinions on a government sponsored program, while teaching in a government funded university, or working in a government agency, or in some high flutin' Ivy league school with ties to the feds.
No conflict of interest there! Nope not at all!
Not one getting a government grant: oh tell us economist, how well did the GI bill work?
No chance of an economic professor teaching a class chalked full of GI bill receiptents.
Perhaps the main reason he still has his job. But I am supposed to believe, when he says it's such a great program! That he has an unbiased opinion.
So in the final analysis you can't really prove that it lead to an "Age of Affluence" anymore then if they had just been paid market level wages, as they should have, from the get go.
Of course when I served in the military, even though I wasn't making minimum wage. I still found it pretty easy to engage in the "paradox of thrift" and even during a recession. It just seemed the natural thing to do.

Tel said...

Zac, I'm well aware that there is more than one sense in which a word can be used, but from top to bottom I have been working precisely off your definition as constrained by "willingness and ability to pay". I have used no other definition, and you are the one who is busy conflating alternative meanings to the word whenever it suits you. I can prove this:

Zac: There was a great deal of pent up demand due to rationing during the war.

This completely contradicts, "willingness and ability to pay". Pent up demand is not possible under such a definition of demand. With a rationing system in force the people do not have ability to pay, thus the demand does not exist; by your own definition. Notice how you conveniently conflate the word "demand" when it suits you?

Zac: Economic demand for food was very high, the price being pushed far too high for many peasants. It's as if you never visited an open market where people bid and sell.

Once again you contradict your own definition of demand. If the price was too high for these peasants then they no longer satisfy the "willingness and ability to pay" constraint that you yourself imposed, thus the demand cannot be "very high" at the same time. You are the one conflating the word, not me, I'm just sticking with only one definition, the definition you provided.

And this conversation:

Tel: Supply is exactly and precisely equal to demand in each and every empirical transaction you are ever going to measure.

Zac: There is never oversupply or undersupply of a product? There are no warehouses full of excess product? Famines are imaginary?

Zac: The farmer selling the horse knows that the beggar and old man don't represent economic demand. They only represent economic demand when they have a desire to buy along with the willingness and ability to pay.

Tel: So based on this exact definition of "demand", how can a famine can exist at all? By your own example, hungry people don't represent demand unless they have the willingness and ability to pay.

Zac: Because famines aren't defined by economic demand, but by widespread starvation.

So famines are not defined by demand, and yet you use famines as an example of a situation where supply is insufficient to meet demand. Once again, you arbitrarily change the ground when it suits you. If supply does not equal demand during a famine then the constraint of "willingness and ability to pay" have been violated.

The only way you are going to get out of this is to admit that it is quite legitimate to talk of "demand" not in terms of the actual transactions that do take place, but in terms of the potential transactions that might take place should things be different (i.e. to presume that the wishes are indeed horses). Since that's the position that Mike started with, and indeed that's a position you also adopt when you feel the inclination,
you might as well just apologize to Mike now.

By the way, the dictionary definition [3b] that you quoted above was "the quantity of a commodity or service wanted at a specified price and time" and this of course also presume that either some wishes are horses or some horses are wishes depending on which price you care to choose. You have not only repeatedly contradicted yourself, but also contradicted the references you bring up in your own defence.

Zachriel said...

Mike: In your world economics can be can be sliced in to tidy dictionary definitions.

Not at all, but a fallacy of ambiguity is still a fallacy. Not sure why you continue to insist on your definition of demand, but perhaps you should simply use the word desire to avoid confusion. Notice we have switched to saying "economic demand" so that you won't continue to be confused.

As regards your original statement, aggregate demand refers to economic demand, so it's important when discussing the term that you keep that in mind.

TheRightRadical: the stock market bubble cracked in March of 2000 when Clinton was still on the throne.

The stock market returned to 1998 levels, so it was hardly an undoing of the entire period. In any case, real wealth was created during the Clinton Administration, and the U.S. economy underwent an important restructuring for the information age that is evident today.

Mike said...

Zac,

Not my definition. Real world definition. But you go ahead and continue playing word games as it reveals the disingenuous nature of your position

5th request. What do you do for a living?

Zachriel said...

TheRightRadical: Of course this is the opinion of economists, who were all trained in Keynesian economics.

Are you saying the U.S. didn't enjoy a period of relative prosperity after the deprivations of the Great Depression and WWII?

Zachriel: There was a great deal of pent up demand due to rationing during the war.

Tel: Pent up demand is not possible under such a definition of demand.

It was "pent up". They had the willingness and ability to pay, but there was nothing to buy.

Tel: With a rationing system in force the people do not have ability to pay, thus the demand does not exist; by your own definition.

Now you're just playing with the word "ability", which refers to having the money available. Of course, rationing distorts the market.

Tel: Once again you contradict your own definition of demand. If the price was too high for these peasants then they no longer satisfy the "willingness and ability to pay" constraint that you yourself imposed, thus the demand cannot be "very high" at the same time.

When economic demand is high compared to supply, then prices rise. There was plenty of economic demand, and people willing to pay almost any price for food that they could. Each potential buyer represents economic demand at the price they are willing and able to pay. Peasants still represent economic demand at the lower price, or when they complete a transaction for a small quantity of food at a high price. Think of an auction. In the case of a shortage of food, everyone is shouting and elbowing and clamoring, trying to buy whatever scrape they can. That's high demand.

Tel: The only way you are going to get out of this is to admit that it is quite legitimate to talk of "demand" not in terms of the actual transactions that do take place, but in terms of the potential transactions that might take place should things be different (i.e. to presume that the wishes are indeed horses). So famines are not defined by demand, and yet you use famines as an example of a situation where supply is insufficient to meet demand.

A famine is an example of a situation where there is not enough food for everyone. The price quickly rises above what the poor can afford. Once they spend whatever money they have on whatever little scraps they can find, then they are no longer market participants, and do not represent economic demand, even as they starve.

Tel: The only way you are going to get out of this is to admit that it is quite legitimate to talk of "demand" not in terms of the actual transactions that do take place, but in terms of the potential transactions that might take place should things be different (i.e. to presume that the wishes are indeed horses).

Of course you can talk about demand in its many senses, but you can't conflate the definitions in order to argue that aggregate demand is the sum of something other than what it is, the sum of economic demand.

Tel: Since that's the position that Mike started with,

Mike: Aggregate demand is the sum of individual demand.

Aggregate demand is a term of art, and refers to the sum of economic demand. He then defined individual demand as desire. He was adding oranges to get a bushel of apples.

Zachriel said...

Mike: Not my definition. Real world definition.

What is the definition of "aggregate demand"?

OFFTOPIC

Mike: 5th request. What do you do for a living?

It's irrelevant as we are not making an appeal to our personal authority. Our spam filter normally blocks irrelevancies, but when you mentioned a previous question, as a courtesy, we went ahead and dug through the spam. It was still spam.

Mike said...

Zac

I expained it has nothing to do with personal authority but understanding context.

You continue to evade.

I’m left to assume you are a public employee of some type or a Euro bureaucrat in Brussels with grandiose desires to lord over society with your wisdom.

Or did your “spam filter” edit out that too?

Or did your “spam filter” edit out that too?

Enjoy your ride on the merry go round. Tel did a great job dismantling your definitional nonsense yet you still stay on the ride.

6th request. What do you do for a living?

TheRightRadical said...

Are you saying the U.S. didn't enjoy a period of relative prosperity after the deprivations of the Great Depression and WWII?"

I didn't say that at all. I am saying that your reasons for why this existed are phony. It had to a lot with the U.S. being the last major economy standing, it had to do with changes in transportation (the jet age), the advent of the automobile, improvement is such things such as computerized process control, programmable logic controllers, improved quality control, the use of plastics, improvements in agriculture using industrial processes, new fertilzers, etc.
In essence it was refining the industrial revolution, which is still carrying on today. It had very little to do with the government programs you champion.

Zachriel said...

TheRightRadical: I am saying that your reasons for why this existed are phony.

We had said, "Overall, it was an orderly transition (WWII demobilization) that led to what is known as the Age of Affluence."

TheRightRadical: It had to a lot with the U.S. being the last major economy standing, ...

Yes, that is important, as exports helped lead the U.S. economy during that period.

TheRightRadical: it had to do with changes in transportation (the jet age), ...

Well, jets were important, but they weren't only available in the U.S.

TheRightRadical: the advent of the automobile, ...

The automobile predated the Age of Affluence. There was a conscious effort to motorize the American public, supported by government programs such as the development of the highway system.

TheRightRadical: In essence it was refining the industrial revolution, which is still carrying on today. It had very little to do with the government programs you champion.

Certainly, the education and reintegration of returning soldiers was important to the development of many of those industries, you mention. Half of returning vets used the education benefits of the G.I. bill, for instance. That resulted in a highly educated and disciplined workforce. That isn't to minimize the importance of markets.

TheRightRadical said...

Zac
Since your education in the field of economics is shallow at best. I think it is worthless for anyone to continue to argue with you. For you not know who Paul Samuelson, or Irving Fisher were is just flat out inexcusable. I can't believe any serious student of economics wouldn't at least know they very basics of the history of economy thought, and the people that promoted those thoughts. As I have told all the Keynesian theorists that come to this site. YOU ARE ALL IDEOLOUGES of a DEATH CULT.

Zachriel said...

TheRightRadical: For you not know who Paul Samuelson, or Irving Fisher were is just flat out inexcusable.

We didn't say we didn't know them, rather, you seemed to be ascribing their views to us.

TheRightRadical: As I have told all the Keynesian theorists that come to this site. YOU ARE ALL IDEOLOUGES of a DEATH CULT.

That's funny, especially when juxtaposed with "I think it is worthless for anyone to continue to argue with you."

Zachriel said...

TheRightRadical,

We mentioned some relevant facts above, including that half of returning soldiers made use of the G.I. Bill educational benefit. You didn't respond. Our readers can draw their own conclusion.

TheRightRadical said...

We mentioned some relevant facts above, including that half of returning soldiers made use of the G.I. Bill educational benefit. You didn't respond. Our readers can draw their own conclusion. "

What a hoot! I gave you that figure it's 51%. Of course you don't argue the fact that government got labor at below market rates.
Because that would burst you're bubble that the state, always and all cases acts altruistically. Which of course is a lie, since the state by it's very nature is a thief.
It has to steal, as it did in the case of the veterans. It stole from them a portion of their labor, by under paying them. As if they were indentured servants. If you can't see that, then there is not much else to say. You are blind ideologue, and not a free human being.
It's like the Global Warning scam that is going in enrich the few, at the expense of many, which I beleive that you have professional ties too, upon reviewing your past remarks.
The scam will no doubt cause needless deaths. Like the FDA does, that's why I call you and people like you members of a death cult.
SMASH THE STATE!

Zachriel said...

TheRightRadical: It stole from them a portion of their labor, by under paying them. As if they were indentured servants.

Is your argument concerning the draft? Or are you saying fighting in WWII was not necessary, even after Pearl Harbor?

We were discussing the post-WWII period. Not sure your point. You just seem to be throwing noodles to see what sticks.

TheRightRadical said...

Is your argument concerning the draft? Or are you saying fighting in WWII was not necessary, even after Pearl Harbor?

We were discussing the post-WWII period. Not sure your point. You just seem to be throwing noodles to see what sticks. ""

Typical for person like you. Zac to throw up a straw man argument.
Here are my points:

1)WWII servicemen were underpaid at the then market rates for labor, hence
2) They would not have needed a GI Bill. (Being paid at the market rate, most of which would have been saved. Would have provided a nice nest egg to do what they wanted upon completion of military service, which includes going to school or opening their own business or whatever, it would have been free choice, and not a government mandated, limited purpose like the GI Bill is)
3) Prior experience from the first European War that US Govt decided to engage in, was that those servicemen were underpaid as well, and so they were promised a Cash Bonus (put out many years in the future as a matter of fact, so the government could benefit from, as they did with WWII GI Bill, from inflation, and the natural attrition of veterans. This of course is a benefit for the government, since it gets cheap labor now, and pays less later. This of course is not natural since a real market requires you pay a future premium)
4) What is known in historically and politically, is the veterans of WWI staged a riot to get an early payment of the Bonus. The pols did not want a repeat of this so the offered up a GI Bill.
Hence the GI Bill was a matter of political expediency, and had only a minor impact on. What you call the "Age of Affluence" and was in no way visionary like you suggest it was.
This is true since logic can connect. It sowed the seeds that part of the “American Dream” is that everyone needs go to college, with the ramifications, and consequences that we still see to this very day. This is what Bastiat means when he speaks of “what is seen and unseen”. This dramatic cultural change with it’s seeds lead down by GI Bill. Has manifested itself at this stage in the American experience with the two trillion dollars in college debt we see today. In the long run it would have been better to just to pay them market wages, and prevented the future bubble caused by government we now see in the higher education sector.
But then again you are a Keynesian, the future does not matter to you people, and neither do the “ends” only the immediate “means” do, since they empower the state in the here and now.


TheRightRadical said...

Correction

1) Had they been paid at the then market rates of labor,
2)they would have not needed the GI Bill

Zachriel said...

TheRightRadical: 1)WWII servicemen were underpaid at the then market rates for labor, hence

A lot of people volunteered, so they must have thought the compensation was sufficient, room, board, uniform, gun, chance to travel, save the world, etc. As for those who were drafted, the U.S. was already running extremely high deficits. Many people wouldn't have endangered their lives for any price. Are you suggesting the government should have raised salaries sufficient to attract enough paid labor to fight WWII?

Seriously? You don't think the danger sufficient to compel service?

TheRightRadical said...

Yes Zac

If they are running off to save the World, and endanger their lives. The least you Keynesians could do, is pay them half decently.
Jesus, you guys are fucked up, when recession fighter Krugman wants to spend trillions, money is no object. But let a guy fight in the greatest public works program of all time, and you want to short change him. What a piker!

Besides like all Keynesian arguments, you are being counterfactual, for if they have to be drafted (legally enslaved) then obvisiously the pay is not enough to entice them to join voluntarily.
So in essence, you are saying because we have decided we have the right to draft you. We also reserve the right to pay you Chinese coolie wages.
That is so fair, so right, so compassionate. (which is what I always thought limp wristed lefties were all about)
You're some humanitarian Zac.

As far as the ones that joined voluntarily. I guess it's OK to force things like minimum wage, and union scale on private firms, but apparently government doesn't have to follow those same laws they lay down on the public. Even if one is fighting to the death to save the world.
You're a callous hypocrite with a heart of stone.

Zachriel said...

TheRightRadical: If they are running off to save the World, and endanger their lives. The least you Keynesians could do, is pay them half decently.

The fight against fascism in WWII was hardly a partisan issue.

TheRightRadical: you are being counterfactual, for if they have to be drafted (legally enslaved) then obvisiously the pay is not enough to entice them to join voluntarily.

That's what we said concerning draftees. Are you suggesting the government should have raised salaries sufficient to attract enough paid labor to fight WWII?

TheRightRadical said...

The fight against fascism in WWII was hardly a partisan issue. "


Since you haven't made any claim to counter my argument and insist on changing your argument with pooh, poohed claims of patriotism, that any old Neocon would use. I will take it that I win the argument.
Furthermore, to imply that the Roosevelt Admin. wasn't Keynesian is just flat out retarded.


That's what we said concerning draftees. Are you suggesting the government should have raised salaries sufficient to attract enough paid labor to fight WWII?"

No I am saying you're an asshole because you have no problem paying a guy on a government contact, union scale far above minimum wage, and much higher then non union workers for tasks like landscaping,painting or installing green energy. In the name of Stimulus.
While saying it's OK to draft, and FORCE a soldier to take much less, when he is risking life and limb.
Face it dude, you're a creep. Unlike me who would have paid them market rates for their labor, even if I had to draft them.

Zachriel said...

TheRightRadical: Since you haven't made any claim to counter my argument

What argument? You won't even answer simple questions so we can understand your position.

TheRightRadical: you have no problem paying a guy on a government contact, union scale far above minimum wage, and much higher then non union workers for tasks like landscaping,painting or installing green energy. In the name of Stimulus.

Huh? The question was "Are you suggesting the government should have raised salaries sufficient to attract enough paid labor to fight WWII?"

TheRightRadical: While saying it's OK to draft, and FORCE a soldier to take much less, when he is risking life and limb.

So you are saying countries should not have utilized the draft even after being attacked by fascists bent on domination?

TheRightRadical said...

F you I answered ALL and am victorious. You got NOTHING and guess what I flunked out of college, you limp wristed, lilly livered creep!
Of course I found another one of your Keynesian lies!!!!

http://www.thefreemanonline.org/columns/our-economic-past/the-myth-of-pent-up-demand-and-the-successful-reconversion-after-world-war-ii/

Mike said...

Zac said:

"You won't even answer simple questions so we can understand your position."

Those in glass houses Zac....

For the 8th time. What do you do for a living?

Zachriel said...

TheRightRadical: I answered ALL and am victorious.

Okay. Just a sanity check.

Zachriel said...
This comment has been removed by the author.
Zachriel said...

Gross personal savings:

1944 $54.3 billion
1948 $ 7.3 billion

Historical Statistics of the United States, Colonial Times to 1970; Sources and Uses of Gross Saving: 1929 to 1970; Bureau of the Census, United States, Congress House.

TheRightRadical said...

Gross personal savings:

1944 $54.3 billion
1948 $ 7.3 billion

I don't know what you're trying to pull here Zac, but I think you're lying again about the facts. The stunt you are trying to pull here: is saying the gross savings was less then 50 bucks per capita in 1948. To support these numbers there would have to be a stunningly negitive savings rate, which I can find no where.
So try again.
While I cannot find the numbers on line that Dr. Higgs (but I am trying to contact him for his source material) uses I will take the word of a esteemed college professor of over 40 years, with several books to his credit.
Vice a shallow, flip-flopping thinker(s), that is a believer in the economics of death and destruction that has brought us from the Age of Affluence to economic rocks, because of the harebrained schemes of crackpot Keynesian economists, who advised the national government for over seventy years.

Zachriel said...

TheRightRadical: The stunt you are trying to pull here: is saying the gross savings was less then 50 bucks per capita in 1948. To support these numbers there would have to be a stunningly negitive savings rate, which I can find no where.

Um, that is the gross personal savings rate. Per capita GDP exploded during WWII, but consumption was limited by the war, hence the savings rate rose. When the war ended, the increased income became available for consumption, so savings fell. The increase in consumption was equivalent to several hundred billion dollars per year in today's dollars.

Your own citation says the same thing. "Between 1945 and 1946, when personal consumption spending increased by $23.7 billion ..." In today's dollars that would be an increase of nearly $300 billion in consumption in just one year, a huge stimulus. Even then, it wasn't sufficient to forestall a recession, which was deep, but short-lived. Truman, following the greatest demobilization in history, could rightly say "As the year 1947 begins, the state of our national economy presents great opportunities for all. We have virtually full employment. Our national production of goods and services is 50 percent higher than in any year prior to the war emergency. The national income in 1946 was higher than in any peacetime year. Our food production is greater than it has ever been. During the last 5 years our productive facilities have been expanded in almost every field. The American standard of living is higher now than ever before, and when the housing shortage can be overcome it will be even higher."

TheRightRadical said...

Zachriel: There was a great deal of pent up demand due to rationing during the war. Even ordinary people had significant savings, which helped maintain demand when the war ended
Zac: Gross personal savings:
1944 $54.3 billion
1948 $ 7.3 billion

These are your statements no?
You're a terrible debater taking all sides of an issue. First you claim that it was people spending savings (because Keynesians hate personal savings) that caused the boom, then show saving figures that leads one to believe that there was tremendous decline in overall savings.
A person with some integrity would have stated:
"The Gross Savings per year were:
1944 $54.3 billion
1948 $ 7.3 billion
I really don't know what your points are because Higgs says it wasn't "pent up" based on spending savings (capital) it was a redirect of disposal income. Which I guess you agree with now?
Or are you now going back to the old Keynes canard that "demand" drives the economic bus?

Demand is infinite of course (even in famines).
The whole idea of economy is to fill as many as demands as possible with the scarce resources on hand.
One side believes that the best way to do this is be as free as possible. I subscribe to this view.
You subscribe to the view that there must be state invention to direct scarce resources (centrally plan) in order to achieve some goals your side has, which are never defined.
We argue that your way creates inefficiencies, undermines freedom, and undermines peace.
We have the historical facts, as well as the future on our side.
Your ideology is in a richly deserved long descent into the ashcan of history.
Enjoy the ride.




Calgacus said...

One side believes that the best way to do this is be as free as possible. I subscribe to this view.
You subscribe to the view that there must be state intervention to direct scarce resources (centrally plan) in order to achieve some goals your side has, which are never defined.


Actually, genuine Keynesian/Institutional/MMT economists largely agree with this. Economies "should" be as free as possible.

But money always & everywhere IS a state intervention. And therefore "free markets" are a state intervention. So the state has a responsibility to return unemployment - the demand for money in return for work - to its natural rate of zero, by spending enough of the money it demands in taxes and prices for things the government sells (e.g. gold, if there is a gold standard).

I'm listening if you have a better idea than a democratic government democratically deciding what to spend - an informed, rational democratic government would at the very least give the governed a Job Guarantee at a fixed wage, as the government certainly guarantees taxation and the prices which are driven by it.

Zachriel said...

TheRightRadical: First you claim that it was people spending savings (because Keynesians hate personal savings) that caused the boom, then show saving figures that leads one to believe that there was tremendous decline in overall savings.

Do try to keep up. GDP exploded during WWII, but personal consumption lagged. Instead, the new income was saved because of rationing, patriotism and uncertainty. Incomes rose, but demand was 'pent up'.

The result was that at the end of the war, even ordinary people had significant savings, and with the advent of Social Security, less reason to worry about the future. So, people reduced their rate of savings. This caused an explosion in personal consumption. Per your own citation, nearly $300 billion (2012) dollars in a single year in a much smaller economy. The demand was 'unpent'.

TheRightRadical: Or are you now going back to the old Keynes canard that "demand" drives the economic bus?

Government demand dropped, and individual demand increased to replace it.

TheRightRadical: Demand is infinite of course (even in famines).

You must mean "demand".
http://upload.wikimedia.org/wikipedia/commons/thumb/7/7c/Air_Quotes.jpg/250px-Air_Quotes.jpg

Even then, desire is not infinite, but decreases with supply until you reach a point where you can't give it away.

TheRightRadical: You subscribe to the view that there must be state invention to direct scarce resources (centrally plan) in order to achieve some goals your side has, which are never defined.

Actually, we're discussing the utility of countercyclical policy, not investment, ...

... other than the importance of fighting WWII. By the way, you never did answer. So are you saying countries should not have utilized the draft even after being attacked by fascists bent on domination?

Zachriel said...

Calgacus: But money always & everywhere IS a state intervention.

"Whose image and inscription is this?"

TheRightRadical said...

Zac: Do try to keep up. GDP exploded during WWII"
Zac:A lot more than GDP matters."

Do you have any more pearls of wisdom?

Zac: The result was that at the end of the war, even ordinary people had significant savings"

Back to this old canard. There was a high amount of savings to be sure, which is available for capital investment, which will spur new production. Which is what Hayek always said.
Unlike Keynes who thinks you can get investment through debt via a government monopolized printing press, and creating demand through a bubble economy.
You'd have to be a child to believe your nonsense, which is what Krugman appears to be, and a spoiled, petulant one at that.

Zac; Government demand dropped, and individual demand increased to replace it.
Apples and Oranges, two totally different things. Government demand dropped hugely, and scarce resources were redirected towards real productive output. Peter Schiff has repeated said this is what needs to happen in current situation, but this is not allowed to happen because of Keynesian trained economists that advise and run our regime, who want to re-inflate the housing bubbles and create new ones in companies like Solyndra.


Zac: By the way, you never did answer. So are you saying countries should not have utilized the draft even after being attacked by fascists bent on domination?

"A total of 10.1 million men were drafted during World War II. At the beginning of the war, men rushed to enlist, but, from Hershey’s perspective, that ruined orderly conscription. He persuaded President Roosevelt in December 1942 to end voluntary enlistments except for men under 18 and over 38"

So what is this saying?
It is saying that you couldn't volunteer even you wanted too.
So you have no Goddamn idea if the thing was needed or not!
Here's what we do know though. The government didn't give up on the Program, and it continued the draft decades after the war
It continued to pay those drafted Chinese coolie wages, and between 1965-1972 it sent a conscripted Army to Vietnam where nearly 60,000 were killed, and over 4 million seriously wounded.
Also the US military has not updated doctrine since 1865 (the US war for southern independence). We should have, and still should adapt to newer doctrine, of which was developed from 1919 through the 1940s mainly by Rommel, although MacArthur used much of the same doctrine aka "island hopping" in the Pacific.
The manpower requirements are smaller in maneuver warfare, when compared to fighting a war of attrition (which has been standard US fighting doctrine since the Civil War, WWI, and all of our current wars since up to and including Iraq, and the AF-Pak war).
So in conclusion I believe that a new fighting doctrine, higher pay, and patriotism, would have sufficed in beating the Axis powers, without conscription.
It also perhaps would have gone a long way in preventing the Vietnam tragedy.

Zachriel said...

TheRightRadical: There was a high amount of savings to be sure, which is available for capital investment, which will spur new production.

Buy War Bonds!


TheRightRadical said...

Buy War Bonds!"

So we can pay the soldiers better I say, unlike Zac who would pay them nothing if he could get away with it. Have you no shame?

You freakin swamped boat!
And a damn intellectual lightweight to boot!
I bet at the minimum you have a Master's, and maybe even a PhD, and yet totally outclassed by a proud college dropout!

TheRightRadical said...

I'm listening if you have a better idea than a democratic government democratically deciding""

SMASH THE STATE!
Is the only economic, political, and cultural policy any civilized person would need.

Bala said...

"But money always & everywhere IS a state intervention. And therefore "free markets" are a state intervention."

ROFLMFAO. This is absolutely priceless!!! And WHAT, if I may ask, is the basis of this ASSertion?

And the last bit is priceless. A "free market" is by definition a market without violent intervention. So in the words of the GREAT Calcagus, a market with extensive violent intervention is a market without violent intervention. Black is White.

Where's Orwell when you need him?????

Zachriel said...

TheRightRadical: SMASH THE STATE!

We're quite a bit more conservative than yourself. We see traditional institutions, despite all their flaws, as bulwarks against anarchy and the loss of freedom. Reform can be accompanied by unintended consequences, so careful consideration should be used.

Calgacus: But money always & everywhere IS a state intervention.

Bala: ROFLMFAO.

"Whose image and inscription is this?"

TheRightRadical said...

traditional institutions"

What like the FED?
It's traditional all right; it has been traditionally wrong, and disastrous, and so is Keynesian general theory, as our current world depression has shown.

anarchy"

You don't mean anarchy. You mean chaos. And in the past hundred years the three most chaotic societies; not surprisingly were the three with the most governmental authority, to embrace central planning. Have been Hitler’s Germany, Stalin's Russia, and Maoist China.
All three claimed it's main desire was to help the "common" man, and maintain order. What a Hobbesian view.
Oh by the way Zac, since you're all for the state drafting people. Was it right for Hitler and Stalin to draft soldiers?

the loss of freedom"

What a hoot. The comtemporary American state claims it has the right not only to detain you indefinitely, but to murder you on it’s whim, without trial.
And you have the nerve to call this "freedom"? Even Hitler, and Stalin had show trials.

You either are just a blind ideologue, or one of the biggest victims of "Stockholm" syndrome. I have met in quite a while. Hell it's probably both.
I have met in quite a while

Zachriel said...

TheRightRadical: What like the FED?

The U.S. Constitution, courts, elections, legislatures, the rule of law.