The blogger formerly known as Jane Galt, Megan McArdle, has an interesting question.
Which raises an interesting question: what if Keynesian stimulus works, but no one can ever actually afford to do it, short of something like World War II, where the government can tap into a patriotic outpouring of national savings by issuing bonds with negative real yields.
This is just another hurdle for Keynesianism. Even if it could work (unlikely), can we afford it? But it doesn’t stop there. Even if we can afford it, would we want to pay the vast amounts of money necessary? What are the costs and benefits of Keynesianism? During the GFC the government seemed to argue that avoiding recession at any price was money well spent.
(HT: Marginal Revolution)
this is very amusing.
let us examine this from a different perspective.
If fiscal policy doesn’t work then how did the Baltic countries, Hungary, Ireland all experience a depression whilst other countries didn’t.
this is another hurdle for the mad party who make it up.
Butterfield, Bloomfeld % Bishop
31 Aug 10 at 9:08 am
Seems to me that Keynesianism done properly is just common sense. Save money when times are good, and run down savings in tough times. Australia was well placed for bit of Keynes when the GFC struck, with government being in surplus. (This however does not justify wasting money, a la Gillard and the BER.)
The US, unfortunately, was already deep in debt when trouble started. In that situation, Keynesianism might well cause more damage than good. Did Keynes ever advocate massive stimulus from a position of heavy debt?
Braddles
31 Aug 10 at 9:43 am
Sinc, Brian at LP has a post asking for input by economists about measuring waste in the BER, and debt, citing Stiglitz, the Orgill report and Lateral Economics. I thought the discussion would be improved if you made an appearance. I would certainly enjoy seeing some genuine debate, rather than the reading the respective circle-jerks here and at LP and trying to match up the arguments myself.
Jarrah
31 Aug 10 at 10:12 am
Jarrah – I have posted on all of those topics. I’m under the pump right now (moving office due to asbestos scare) and finishing three papers before I go on leave next week. So not able to engage in huge debate right now, but I’m not changing my mind or position on any views.
Sinclair Davidson
31 Aug 10 at 10:25 am
I know you’ve posted on all of those topics. In detail and often convincingly. That’s why I suggested it to you. But there’s more to life than blogging, and I hope your leave is relaxing, etc.
Jarrah
31 Aug 10 at 10:38 am
http://online.wsj.com/article/SB10001424052748703959704575454431457720188.html
pedro
31 Aug 10 at 1:16 pm
“Did Keynes ever advocate massive stimulus from a position of heavy debt?”
This is the key point in the real world and most politicians can’t be trusted on this (apart from Peter Costello).
They all need to be overseen by a couple of grandmothers of Dutch or Scottish ancestry.
MAGB
1 Sep 10 at 9:49 am