General

Re: Permanent Keynesian Refutation Thread

Wheylous — Mon, 29 Oct 2012 15:16:13 GMT

If I recall correctly, FoTH's final project was one largish post on Mises and he never got to the other parts of his refutation. He also tackled some pretty inconsequential parts of Mises's theory.

Re: Permanent Keynesian Refutation Thread

SkepticalMetal — Mon, 29 Oct 2012 14:58:26 GMT

@ Rugged Free-Marketeer

Thank you for not joining the crowd by saying "Marxism is dead." We need more anti-Marxist arguments. It's anything BUT dead.

Re: Permanent Keynesian Refutation Thread

Smiling Dave — Mon, 29 Oct 2012 14:43:11 GMT

My impression is that very few (if any) people here have actually read Marx. It's kind of hard to refute someone that you haven't read.

We're counting on you, FOTH. Refute Marx like you did Mises and Hazlitt.

Re: Permanent Keynesian Refutation Thread

Fool on the Hill — Mon, 29 Oct 2012 03:21:25 GMT

My impression is that very few (if any) people here have actually read Marx. It's kind of hard to refute someone that you haven't read.

Re: Permanent Keynesian Refutation Thread

Rugged Free-Marketeer — Sun, 28 Oct 2012 04:33:19 GMT

Slightly off-topic, but it'd be nice to have a ''permanent marxism refutation'' thread. Does one already exist by any chance?

Re: Permanent Keynesian Refutation Thread

impala76 — Fri, 20 Jul 2012 20:00:15 GMT

Hi, nice to meet you.

The problem is explained in the paragraph above the one you quote. A conclusion that surprises me is that "The results suggest that social spending has a significant short-term effect on output, especially during downturns" although the multiplier associated with social spending is 0.6. But a multiplier of less than 1 necessarily contradicts keynesian economics. So where's the trick ?

I thought a negative multiplier was supposed to be the problem; less than one just indicates that private spending fell, while government spending is basically transfers to people and wages for government employees. Negative multipliers indicate falling income.

Re: Permanent Keynesian Refutation Thread

Rodolphe Topffer — Tue, 10 Jul 2012 10:13:18 GMT

The problem is explained in the paragraph above the one you quote. A conclusion that surprises me is that "The results suggest that social spending has a significant short-term effect on output, especially during downturns" although the multiplier associated with social spending is 0.6. But a multiplier of less than 1 necessarily contradicts keynesian economics. So where's the trick ?

Re: Permanent Keynesian Refutation Thread

Smiling Dave — Tue, 10 Jul 2012 03:13:49 GMT

Page 6:

Assuming positive values
for δj, equations (2) and (3) produce opposite signs in the correlation of
social spending and growth, which implies that the simple OLS estimates of

δj are likely to be biased downward. In other words, the OLS estimates of
equation (1) may suggest there is no significant effect of social spending on
output, even if theoretically the effect is present and positive. To deal with
this endogeneity issue, we try to identify government spending shocks by
estimating a policy rule for social spending.

Put into simpler words, as presented by a dialogue between the ao-authors:

IMF guy 1: We will bravely go where the data leads us, come what may.

IMF guy 2: None of this silly Austrian theorizing, no a priori blinders placed on our eyes.

IMF guy 1: I'll drink to that.

[Time passes as powerful computers churn out results and the IMF guys sip champagne].

[The computer beeps. IMF guy 1 reads the output, turns pale].

IMF guy 2: Wazzamatter?

IMF guy 1: It says here that govt spending never helps the economy, even hurts it

IMF guy 2: But that contradicts our apriori theorizing.

IMF guy 1: Worse still, it means we lose our jobs if we let this secret leak out.

[ Dead silence. After a few moments, IMF guy1 brightens up].

IMF guy 1: We gotta reshuffle the equations till they give the right answer.

IMF guy 2: I'll drink to that.

Re: Permanent Keynesian Refutation Thread

Rodolphe Topffer — Tue, 10 Jul 2012 02:02:38 GMT

A recent, very interesting study :

The Effects of Social Spending on Economic Activity: Empirical Evidence from a Panel of OECD Countries

The aim of this paper is to assess the short-term effects of social spending on economic activity. Using a panel of OECD countries from 1980 to 2005, the results show that social spending has expansionary effects on GDP. In particular, we find that an increase of 1 per cent in social spending increases GDP by about 0.1 percentage points, which, given the share of social spending in GDP, corresponds to a multiplier of about 0.6. The effect is similar to that of total government spending, and it is larger in periods of severe downturns. Among spending subcategories, social spending on health and on unemployment benefits have the greatest effects. Social spending also positively affects private consumption, while it has negligible effects on investment. The empirical results are economically and statistically significant, and robust.

...

We also estimate the impact of government spending in nine different social policy areas: old age; survivors; incapacity related; health; family; active labour market programme; unemployment benefits; housing; and other policy areas.

The results suggest that social spending has a significant short-term effect on output. In particular, we find that an increase of 1 per cent in social spending increases GDP by about 0.1 percentage points after one year, which, given the share of social spending in GDP, corresponds to a multiplier of about 0.6. The multiplier is only slightly larger than the one obtained using the same empirical approach for total government spending. While one could expect a significantly higher multiplier for social spending, the results suggest no significant difference. The reason is to be found in the large heterogeneity in the components of social spending and their effects on output. In particular, among the nine different policy areas considered, only health, unemployment benefits and survivors have statistically significant effects.

We also find that the effect of social spending on output is larger in periods of severe downturns, while it is similar between countries with low and high debt-to-GDP ratios, and between countries with large and small levels of trade openness.

First, I have no reason to believe that social spendings on unemployment benefits should be advantageous.

A study by Brigitte Dormont, Denis Fougère and Ana Prieto, "The Effect of the Time Profile of Unemployment Insurance Benefits on Exit from Unemployment," cited in "Le chômage, fatalité ou nécessité ?" written by Cahuc & Zylberberg, focusing on the french labor market during the late 1980s and the 1990s, indicates that the exit rate from unemployment is accelerating with the approach of the end of the 'rights' to unemployment benefits, and that this exit rate from unemployment was considerably higher for individuals with higher earnings. These data strongly suggest that people take advantage of the system by not seeking a job.

... if the debt-to-GDP ratio is high, agents can expect future consolidation measures and therefore reduce current consumption in response to an increase in government spending. To test this hypothesis, we re-estimate equation (8) by constructing 0+ (0–) as a dummy variable that takes the value 1 when the debt-to-GDP ratio is above (below) 60 per cent, and 0 otherwise. The results are reported in the third column of Table 4 and suggest that the effect of social spending on output is not statistically different between countries with high and low public debt.

Also, I'm not convinced by the use of such dummy variable as a reliable method. Any thoughts ?

Re: Permanent Keynesian Refutation Thread

mustang19 — Tue, 05 Jun 2012 15:41:05 GMT

Liquidity traps don't actually exist ala Krugman - central banks can easily use NGDP targeting to boost AD.

That's like saying "the perfect storm doesn't exist."

It's a matter of degree. The effectiveness of monetary policy can be constrained in high liquidity preference periods (like recently).

Re: Permanent Keynesian Refutation Thread

justinx0r — Tue, 05 Jun 2012 15:39:11 GMT

This thread is funny. Actual Keyniasnism has been dead since the 70s. Liquidity traps don't actually exist ala Krugman - central banks can easily use NGDP targeting to boost AD. Empirically fiscal policy has little effect on the economy - countercyclical monetary policy is the only real tool to smooth over recessions.

Re: Permanent Keynesian Refutation Thread

nomar — Mon, 04 Jun 2012 02:29:18 GMT

a country to be "freer" economically not to say anything about the level of civil and political freedom of its citizens. Therefore, Hong Kong and Singapore are now the "most free" in this sense in the world, but at the same time, its citizens not only have no guarantee of many basic rights, but also see them being repeatedly violated by the state. There are these two city-states complaints of abuse of law which we know only in the regimes of Cuba and North Korea.

Also, you say the state to protect private property and require debtors to honor their debts, whatever the cost over the life of defaulting, is a matter of "justice." First, the definition of justice is controversial among lawyers - so it is very hasty and naive on their part have to say what she means so compelling. Moreover, unlike what happens in socialist or theocratic tyrannies spread around the world, in developed capitalist democracies and developing the notion of justice that has been most widely accepted is the one given by John Rawls: do justice seen as promoting equity .

Another thing: it would be a matter of "fairness" to the state the debtor pay what you owe, even taking her home where she lives to pay off the debt, the same should apply in relation to business owners who owe the state. This would be "justified" in taking them ALL to cover his tax debts, right?

Picking up the rankings, you say the countries with the highest rate are precisely those that the state does not have great strength, unlike countries with high levels of poverty where there is corruption and attacks on civil liberties.

Dude, you gotta be kidding, right? Or brainwashing cult Misesian is even worse than I thought. Countries with better HDI are also "more free", according to the Index of Economic Freedom?

While in the place IEF "freer" the world is Hong Kong - where, in many respects, it is less civil and political freedom than Chavez in Venezuela, and corruption is no less evident - in the HDI index, the first Norway is the country (40th in the rankings of the IEF): a state of social welfare, which is not exactly the model that the cult of Saint Von Mises argues. A country that has several rigid labor laws, various social programs funded by the State based on the collection of taxes etc..

According to the ranking that you even suggested (apparently without analyzing it without the gauge of the faith), is in this country (Norway) that lives longer and better than in Hong Kong (13th in the HDI ranking) or Singapore (26th .)

Then come Australia (more consistently in 2nd in HDI, 3rd in IEF) - a country that in recent times, ended the spree of farmers and other "entrepreneurs" advancing over the aboriginal land, giving protection to these lands of natives, which implemented in recent decades a system of universal free health care, funded by an increase in income tax levied in the country, and where there is public funding of programs that reduce drug prices for the population as well as the price of the consultations medical.

Then we still have, in 3rd place ranking in the HDI, the Netherlands (15th in ILE). Let's see the other state welfare, which guarantees the fundamental rights of its citizens, provides broad protection to workers (even regulating the profession of a prostitute, who must have a formal contract, working hours respected and all) and so on. Since the Netherlands is followed by the United States in the HDI. And this country is in 10th place in the ILE. The U.S. has no free health service, while fragile labor laws (which allow someone to be fired without difficulty, even when you're on the verge of retiring, which badly affect the retirement plans of workers), among other points that, in regard to social rights, are seen as negative.

really do not know how you are repeating the mantra "The best places are exactly the freest economies", where:

1) That is wrong;

2) there is no clear relationship between greater economic freedom according to the criteria of the Index of Economic Freedom and the best Human Development Index. (The U.S. and Norway, p. Ex., Despite being so close to the HDI - and adopt models of state so different - they are separated by dozens of homes in the ranking of Economic Freedom, the last place in the 1st being that other ranking .)

Re: Permanent Keynesian Refutation Thread

Ancap66 — Thu, 31 May 2012 03:23:17 GMT

Joseph Stiglitz said the following in an article:

But it was not until government spending soared in preparation for global war that America started to emerge from the Depression.

http://www.vanityfair.com/politics/2012/01/stiglitz-depression-201201

So if you extract an enormous amount of wealth from a society, and employ people in that society to systematically destroy it overtime, that society becomes relatively wealthier as a result.

Re: Permanent Keynesian Refutation Thread

sallystrothers — Thu, 24 May 2012 03:32:54 GMT

If Keynesian exonomics works so well I would like to understand why Zimbabwe is not a world super power? Why not Nazi Germany? Weimar? Surely the Confederate South would have won the Civil War if they just printed a little bit more money?

The Keynesian theory can sound as good as the theory of gravity but at what point do you believe real life? Let's apply the theory to a pride of lions on the plains. Ok, we're going to take one large herd of zebras and split it into five different herds so as to create more demand for zebras from the lions. The lions will see that there are more zebra herds and begin making more baby lions. Before there were 20 lions per herd and now there are only 4 lions per herd. We ceated wealth Keynesian style with a multiplier of 5!

If that doesn't work we can always destroy the herd to create jobs for the lions. Now they will have to spend more productive time looking for a different herd of zebras!

Re: Permanent Keynesian Refutation Thread

mustang19 — Fri, 18 May 2012 23:25:24 GMT

I did. Stimulus behaves differently during recessions and that is not mentioned.

Sorry. It is mentioned. It does not specifically cover the recent recession, however.