HELL YEA!
Keynes puttin the smack down on Ausrian Maco-posers!
http://www.youtube.com/watch?v=d0nERTFo-Sk
Keynes puttin the smack down on Ausrian Maco-posers!
http://www.youtube.com/watch?v=d0nERTFo-Sk
Keynes v. Hayek rap smackdown
- Thread starter ermackey
- Start date
Are you kidding med?
Did you watch ALL the video?
Are you seriously a Keynesian?
BTW, the appropriate place for this post would be the Grim Bottom.
This post was edited on 4/4 10:10 PM by original hambone
Yes. Without Keynes there is no modern Macroeconomic theory. While classic Keynes has problems, his foundation is still solid and widely accepted. That being said, Hayek is also valid. The problem with Keynes is that government is eager to spend during bad times and reluctant to contract spending. As a result, Hayek is correct. However, Hayek is also flawed. Before Keynes, the boom and bust cycle was much more frequent and deeper. To this extent, the use of government deficit spending (through tax cuts or spending) can stimulate the economy out of a depression.
There are also political economic aspects to both theories that I would rather steer clear of because they were not mentioned in the rap and will convoluted the discussion. Both have valid points there too.
While I lean Keynes, both have their appropriate time and place, IMO.
First off, how much formal education do you have in economics and when was it? How much practical experience do you have with, economics, finance, and investing? For example, what percentage of your income is derived from investments?
When did Keynesian theory become the dominant theory? Which economic theory do you believe caused stagflation? And, why didn't Nixon, Ford and Carter use Keynesian theory to pull us out of stagflation. How did Keynesian theory work for Reagan?
When and what was the precipitating fact that caused Keynesian theory to fall out of favor and to be replaced by Hayek?
Is there any doubt in your mind that Hayek's theory leads to greater economic growth? And Keynesian theory leads to an increasingly ineffecient economy?
How is Hayek flawed?
In your opinion, is Obama a disciple of Keynes or Hayek?
What is your opinion on Heckscher-Ohlin theory? If you believe it's invalid, why so?
This sentence... "While classic Keynes has problems, his foundation is still solid and widely accepted." I would say, Yes it is... by liberal idealogues.... and Paul Krugman... That's an oxymoron isn't it...
This post was edited on 4/5 11:44 AM by original hambone
I am a PhD in Public Policy with a great deal of knowledge in the field. I have also completed additional coursework from the University of London and the University of Alaska Fairbanks to sharpen my knowledge in specific areas. I am also an Econ instructor in for the University of XXXXXXXXXXXX with four years of experience and multiple publications in exchange theory. My focus is Bounded Rationality and Rational Choice Theory.
I am going to try to answer your question as basic as I can. Masters students spend years answering these questions. I will try in a few paragraphs.
First, Keynian worked for all of them. We are yet to have a true Hayek disciple. Until Reagan, all of the Presidents followed Classic Keynes. It wasn't until stagflation that a new branch termed "Neo-Keynesian" emerged. They are more popularly termed "supply siders" in the press and political spheres even though Supply Siders are more specific (Arthur Laffer and the Laffer Curve for example). They still believe in the founding theories of Keynes and use his measures (GNP, GDP, Inflation, Multiplier Effect, etc...). The difference was that they believed in one part of Hayek was correct and that was to free capital in order to free sticking prices. In the case of stagflation, the high taxes discouraged investment and US productivity was falling behind. As a result, our companies like US Steel were going out of business and were only staing afloat with government subsidies. The Neo Keynesians wanted to see if cutting taxes would free capital, encourage private investment in US companies, and increase productivity. To do this, they relied on good old fashioned deficit spending at the highest rate in US history to influence the economic spending they desired. They also quit rising interest rates to squeeze inflation. These interest cut rates discouraged saving (Keynes) and encouraged spending in the form of investing. Their blending of Hayek philosophy with Keynsian means is why they are termed Neo-Keynesian. It also worked. As interest rates and taxes dropped, people invested in the stock market. Ths led to modernization and increased efficiency. This led to growth and higher revenues. However, this was also the last time this worked, showing the limitations. Also, the revenues created were greatly exceeded by the deficit spending. It is also interventionist (Keynesian) in using a defict to stimulate growth. They just used a different tool (tax cuts).
Like I said, I am not a classic Keynesian either. I tend to bounce between Neo and New Keynesian Theory, depending on the situation. I do lean more New Keynesian. But it is a slight lean.
As for your question about economic growth, it depends. This is where I refer you to the laffer curve because the relationship between taxes and growth is not linear. Furthermore, you still need government as part of the growth model. Roads transport goods efficiently, health inspectors build market credibility, police powers reduce fraud and create social stability for trade, a military to defend resources and project economic power, etc...). Therefore, Macro-economically, you need a healthy government and private sector to achieve growth. No roads and your product can not be transported, for example.
That gets me to supply side economics where the question was what was the tax equilibrium whereby revenue could be maximized. If you tax 0%, not taxes are collected. If you tax 100%, you eliminate worker incentives and no income. The taxes are somewhere in the middle. Supply-siders have now expanded that to include a growth and revenue equilibrium where taxes and growth can be balanced. The problem is that this equilibrium is affected by market forces and is not static. Therefore, the tax rate today may not be the optimum tomorrow. Even supply-siders believe in market intervention to stimulate the economy. They just tend to focus on tax-cut deficit spending rather than direct government spending (building infrastructure or stimulus checks).
There are very few Hayek people out there. Ron Paul comes pretty close because he wants the government out of monetary intervention. I know of no Hayek-based economies any more in the west. There are just differing degrees of Keynesian with different sprinklings of Hayek.
And in short, Hayek is flawed because it is not a realistic political option. People like interventionism. Republicans like the ability to deficit spend on the priorities just like Dems. FWIW, I am for a balanced budget amendment to limit this excess though. But that does not make me a Hayek disciple.
What I do like about Hayek is his political economy. While his claim that Keyneian would lead to fascism has never held true anywhere in the world (in contrast to Keynes predicting the start of WWII through his economic modeling), Hayek has a salient point on political economic capture of the state. An unhealthy democracy can lead to totalitarianism and we have seen that since he outlined his theory. However, that is not true in healthy democracies where the exchange economy is held separate from the political economy. For example, Europe is filled with Socialist Democratic states that are on-par with the freedoms we enjoy and have been for almost 100 years, despite a much more regulated and socialist exchange economy. In conclusion, Hayek's flaw is that the people nor the parties want to give-up Keynesian intervention power (and is, thus, impossible to implement) and that exchange economies have not translated into political totalitarianism as he predicted. His work does make a hell of a rhetorical device though.
As Richard Nixon said and repeated by Milton Friedman ... "We are all Keynsian now". That is because they recognized the paradox I just explained.
As for the Heckscher-Ohlin theory, I think it is generally correct. However, it has problems starting with transportation costs, taxation, and even cheap oil. We can also break the model down using monetary policy to inflate or deflate currency. But yes, given all equal, it is valid and is generally true. Like most things economic, there are so many variables you never really have a simple answer and there are almost always exceptions.
Remember, Stagflation was theoretically impossible - until it happened.
This post was edited on 4/5 12:18 PM by ermackey
Bravo, mackey. Excellent synopsis. I enjoyed reading that. Unfortunately, hambone is an ideologue you will never persuade. He is convinced almost all social programs and gov't intervention & spending are steps along the slippery slope to serfdom.
Thanks.
Instead of Hayek, I actually recommend Henry George. I think that he echos a bunch of Hayek's ideas, but proposes reforms that are actually possible. Not probable though, for the same reasons as Hayek.
I am rediscovering him myself. Here is a great book I encourage people to read. http://www.amazon.com/The-Prosperity-Paradox-ebook/dp/B005SXWS8G
I really want to teach a class on economic philosophy. To me, the philosophy is more interesting and honest than the "science" that can't really be proved. IMO, Hayek was right that most economic models are not proofs, but merely confirm existing biases. That doesn't mean that all economic research is bad. It just reminds us to look at it critically (adopt the opposite view and see if you can disprove your beliefs). Economic philosophy exposes values and engages students in trying to create economic solutions to fix problems. Some of it will make you nihilistic as you discover there are no solutions or the problem is too complex. However, learning these philosophies would serve students better IMO than a unit of Micro or a Political Econ class to critically think about problems and exercise critical theory.
IMO, Hayek is a lazy-man's economic theory and too politicized. Besides, he just hacked Von Mises when people were looking for an alternative theory to Keynes, Socialism, and Fascism. Haynes was smart (a genius in fact), but most people read him and think they understand economics. Milton Friedman learned new things until the day he died. So did all of us in 1929 and 2008.
Great. I'd love to read that book. Economics is not my field, but for a layman I like to think I'm pretty knowledgeable about it. I enjoyed the subject in college and understand the basic theories. I know enough history & theory to know that the current tea-party, right wing stuff doesn't work & why it doesn't work, but I don't enjoy getting into the weeds of economics--particularly the micro stuff. I'm comfortable discussing basic macroeconomics. Of course some of the economic discussion I see devolves into ideological discussion pretty quickly. That doesn't necessarily bother me except when people rely on logical fallacies & simple slogans to support their claims. I can usually tell when someone is throwing out BS & terms they don't really understand the meaning of & I can also tell when someone actually understands the subject. I can tell you do indeed know what you're talking about. (You're wrong that we should play ASU, though.
)
Please disregard what NEA says about me. He doesn't know enough about me to make any determination.
I don't care to carry any conversation
Some of the stuff you said I agree with. Other parts are inaccurate.
This post was edited on 4/6 1:52 PM by original hambone
I don't care to carry any conversation
Some of the stuff you said I agree with. Other parts are inaccurate.
This post was edited on 4/6 1:52 PM by original hambone
I see. What we have here is a good ole-fashioned Admin fight.
(ermackey leaves knife on floor, nods head at ne arkie and to hambone, and leaves room)
(ermackey leaves knife on floor, nods head at ne arkie and to hambone, and leaves room)
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