tag:blogger.com,1999:blog-6276561747841568697.post6252071850267653636..comments2024-03-27T05:23:48.855-04:00Comments on Krugman-in-Wonderland: Krugman's Deleveraging DilemmaWilliam L. Andersonhttp://www.blogger.com/profile/01802990642236807359noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6276561747841568697.post-43211516452674334212012-06-29T16:49:11.394-04:002012-06-29T16:49:11.394-04:00Funny. During the depths of the financial crises,...Funny. During the depths of the financial crises, I witnessed people taking, and offering to take, lower wages just so they could keep their jobs.Samnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-39272725872534411632012-06-29T14:12:23.620-04:002012-06-29T14:12:23.620-04:00You don't understand the argument- the general...You don't understand the argument- the general idea is that real falling wages COULD help solve the problem, but a number of factors prevent nominal wages from adjusting quickly (people with debt can't take lower wages, psychologically people resist working for less money, etc). <br /><br />Inflation works to help lower real wages without lowering nominal wages. If you believe lowering real wages can help- you must believe inflation can help because they work through the same channel. If lowering real wages can cause economic growth by increasing employment, then so can a spurt of inflation. Of course, this only works when unemployment is high.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-65343336432504884312012-06-29T08:32:48.959-04:002012-06-29T08:32:48.959-04:00No, Keynesians say that because people save less d...No, Keynesians say that because people save less during periods of inflation, they will spend more and, more important, the "marginal propensity to save" becomes smaller. The Keynesian Multiplier is made larger, the smaller the rate of savings or MPS.<br /><br />So, in the Keynesian view, more inflation does increase real GDP.William L. Andersonhttps://www.blogger.com/profile/01802990642236807359noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-42197329223529590362012-06-29T05:09:19.438-04:002012-06-29T05:09:19.438-04:00IN the post you say that Keynes argues that
if w...IN the post you say that Keynes argues that<br /><br /> if wages were lowered, workers would have less aggregate demand and unemployment would then increase. But this would not happen if their purchasing power was reduced by inflation.<br /><br />Did Keynes really argue that, aggregate demand is reduced in both cases is it not.Dineronoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-76562964602365817442012-06-28T15:22:41.007-04:002012-06-28T15:22:41.007-04:00Here's my analogy to explain Keynesians' p...Here's my analogy to explain Keynesians' penchant for inflation:<br /><br />Let's say you're at a 10 person poker tournament and all the participants get a starting stack of $2000 in chips. Total chips in play: $20,000. Minutes before the game begins, the host suddenly gives each player another $2000 in chips. Total chips in play: $40,000. You could say that table GDP has doubled, but is anyone better off (richer) for it? Since everyone has the same advantage vis a vis each other, nothing has actually changed.<br /><br />In a truly Keynesian poker game, however, only the good friends of the host would get extra chips. Half the players would each be limited to a $2000 stack, while the other half would get $6000 each. Now, the politically favored players have a huge advantage over half the table. Nonetheless, the Keynesian host would claim that he has doubled aggregate demand and therefore all players are richer.Dennisnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-33577009610434185802012-06-28T08:20:59.652-04:002012-06-28T08:20:59.652-04:00This is hilarious. Sorry, but what you essentially...This is hilarious. Sorry, but what you essentially are saying is that the Law of Scarcity holds when Keynesians want it to hold, and then it can be ignored when Keynesians decide that it is irrelevant.<br /><br />And speaking of demonization, just read some of Krugman's posts and columns and you will find that he not only demonizes people who disagree with him, but claims that their disagreement is founded upon their hatred for humanity and their desire to watch other people suffer. Small and dogmatic minds, indeed.William L. Andersonhttps://www.blogger.com/profile/01802990642236807359noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-64743039122015081582012-06-28T05:05:42.304-04:002012-06-28T05:05:42.304-04:00I think the essence of Keynesian theory is fluidit...I think the essence of Keynesian theory is fluidity, that we can adjust for any situation, and get out of any problem. Some minds can't grasp the nuances of the theory because their minds are too dogmatic. The notion that what works in one situation would be a complete failure in another and vica versa is just too radical for some to understand. They can't use every tool in our arsenal because the dogmatic mind has a tendency to demonize certain tools as always bad and others as always good. The reality is that certain tools that you might never use in one circumstance is the perfect solution in another. And the real evil is to have a knee jerk reaction to certain tools, or a mind that can't grasp how situations may differ.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-61487583224905854852012-06-27T23:47:55.742-04:002012-06-27T23:47:55.742-04:00Excellent post, Professor Anderson. I remember liv...Excellent post, Professor Anderson. I remember living through the inflation of the 1970's. Despite inflation rising in a very obvious and deliberate manner, unemployment steadily increased along with it, confounding Keynesians of the day. To combat the drastic decline in real wages, governments instituted wage and price controls, which resulted in shortages of everyday goods like gasoline.<br /><br />As the inflationary spiral threatened to literally explode by the late 70's, central banks were finally forced to act and raised interest rates to previously unheard of levels. It was then that unemployment really soared, and our economy took years to recover from its prior inflationary binge. That, I am afraid, is what we are in for in the future.Dennisnoreply@blogger.com