More Keynes, anyone? at Catallaxy Files

More Keynes, anyone?

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Ten depressing charts about the US economy. They’re all pretty gruesome but this one has a special appeal.

Sort of puts present circumstances in a proper historical context.

(Via Instapundit)

Written by Steve Kates

February 20th, 2012 at 12:10 am

Posted in Uncategorized

56 Responses to 'More Keynes, anyone?'

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Let me guess:
The Loch Ness Monster?

Winston Smith

20 Feb 12 at 12:15 am
Not exactly cutting edge commentary.

http://krugman.blogs.nytimes.com/2010/07/26/permanently-high-unemployment/

Daniel Barnes

20 Feb 12 at 6:56 am
A quote of a quote of a quote from the link above.

Mankiw’s broader point is that since we have seen nothing like this before except for the Great Depression, we should be humble and risk averse–and hence have the government stand back and wash its hands of the situation.

However, even a minor and hasty acquaintance with the Great Depression teaches that the belief that the government should stand back and wash its hands because the self-regulating market quickly returns to full-employment equilibrium is the most arrogant belief possible.

And even a minor and hasty acquaintance with the Great Depression teaches that having the government stand back and wash its hands is the most risky strategy conceivable.

PSC

20 Feb 12 at 7:10 am
And even a minor and hasty acquaintance with the Great Depression teaches that having the government stand back and wash its hands is the most risky strategy conceivable.

This is a children’s bedtime story.

FDR made the depression last for seven more years – on top of this graph, Keynes should be dead, buried, exhumed, beaten up and then cremated.

.

20 Feb 12 at 7:42 am
Mark Steyn, Contraception Misdirection
A universal birth-control mandate is a curious priority for a dying republic:

“Glenn Reynolds, the Instapundit, distills the current hysteria thus: “It’s as if we passed a law requiring mosques to sell bacon and then, when people objected, responded by saying ‘What’s wrong with bacon? You’re trying to ban bacon!!!!’”

Americans foolish enough to fall for the Democrats’ crude bit of misdirection can hardly complain about their rendezvous with the sharp end of that page-58 budget graph. People are free to buy bacon, and free to buy condoms. But the state has no compelling interest to force either down your throat. The notion that an all-powerful government would distract from its looming bankruptcy by introducing a universal contraceptive mandate would strike most novelists as almost too pat in its symbolism. It’s like something out of Brave New World. Except that it’s cowardly, and, like so much else about the sexual revolution, very old and wrinkled.”

JamesK

20 Feb 12 at 8:47 am
Keynes should be dead, buried, exhumed, beaten up and then cremated.

Apartt from ther violence implied here, what would you replace Keynes with?

This is a bigger problem than you might think.

MaryT

20 Feb 12 at 9:14 am
@MaryT, it’s ok because Hayek had arrived at his general policy for dealing with the Great Depression by at least 1975.

http://hayekcenter.org/?p=5233

Daniel Barnes

20 Feb 12 at 9:36 am
Fartleby – is that you?

It is you, isn’t it?

I can tell by the frequent typos and “I know better than you” attitude.

P.S. Don’t mess with Lizzie, she’ll make mincemeat of you.

Rabz

20 Feb 12 at 9:39 am
Apartt from ther violence implied here, what would you replace Keynes with?

The successful NZ approach undertaken by John Key.

.

20 Feb 12 at 9:44 am
The successful NZ approach undertaken by John Key.

So all the unemployed have to move to Bondi …

MaryT

20 Feb 12 at 10:13 am
Daniel Barnes

@MaryT, it’s ok because Hayek had arrived at his general policy for dealing with the Great Depression by at least 1975

provided this preventing “an absolute decrease in the stream of incomes, by all suitable means” clearly prioritised maintaining (real) final consumption expenditures, – this is worth thinking about.

MaryT

20 Feb 12 at 10:17 am
Actually, a lot of them are skilled workers, as Australia has higher worker productivity due to laissez faire policies you don’t approve of.

Australian productivity growth however, under increasing bureaucracy, particularly occupational licensing and departmental reproduction, is a concern.

Suck it up, big Mary.

.

20 Feb 12 at 11:03 am
FDR only lengthened the recession by his austerity budget in 1937!

Mr Kates still has not come to terms with the fact that after State and Regional governments cut back on their deficits the US stimulus was only large enough to stabilise unemployment.

On your Marx

20 Feb 12 at 11:15 am
FDR only lengthened the recession by his austerity budget in 1937!

What was the textbook fairy multiplier here? -20?

.

20 Feb 12 at 11:18 am
I see no problem with labour productivity – it has a longrun average of 2% a year (which is also the efficiency dividend in the public service).

With population increase this gives a good 3% overall increase as a long-run outcome. Australia can live within these means.

As the ABS says:

Graph 15.11 shows the average annual rate of growth in labour productivity for market sector industries over the period 1997-98 to 2007-08. Over this period, the average annual growth rate of labour productivity for all industries was 2%.

Most industries increased their labour productivity. Over the period 1997-98 to 2007-08, the industries with the highest average annual growth rates in labour productivity were Communication services (6%), Agriculture, forestry and fishing (4%) and Wholesale trade (3%). Negative growth was seen in the Electricity, gas and water supply (3%) and Mining (1%) industries.

Maybe you mean capital productivity? or multifactor productivity?

People often sprout “productivity” without saying what they mean. In this case productivity is just propaganda for special interests.

ABS

MaryT

20 Feb 12 at 11:31 am
Daniel,
I hope you realised Hayek gave up on liquidationism in 1937. He then supported a form of public works spending.

here is a quote.
“Even though there are many concerns about organizing public works ad hoc during a depression, everything speaks in favour of having public agencies perform during a depression whatever investment activities need to be carried out in any case and can possibly be postponed until then. It is the timing of these expenses that presents a problem, since funds are often extremely hard to raise in the midst of a severe depression and the accumulation of reserves in good times generally faces the objections mentioned above. There is little question that in times of general unemployment the state must intervene to mitigate genuine hardship either by disbursing unemployment compensation or, as in earlier times, by legislation to help the poor.

On your Marx

20 Feb 12 at 11:44 am
@On Your Marx, I was aware that Hayek was against liquidationism before he was for it….;-)

Daniel Barnes

20 Feb 12 at 11:54 am
I see no problem with labour productivity – it has a longrun average of 2% a year

This is because you are a heartless fool.

.

20 Feb 12 at 11:57 am
you have that the other way round.

There are a number of reasons put forward for his changing position,

I think it was Hitler coming to power after his strong support for Bruning and his deflationary dperession policies

On your Marx

20 Feb 12 at 11:57 am
And you don’t mind Hitler’s economic policies, right Marx?

JC

20 Feb 12 at 11:59 am
Haven’t looked at it much to be honest.

the UK between the wars is my great interest

On your Marx

20 Feb 12 at 12:03 pm
Hitler Tooze and Gellately
The shit has hit the fan.

.

20 Feb 12 at 12:05 pm
Freidman said this
“… I think the Austrian business-cycle theory has done the world a great deal of harm. If you go back to the 1930s, which is a key point, here you had the Austrians sitting in London, Hayek and Lionel Robbins, and saying you just have to let the bottom drop out of the world. You’ve just got to let it cure itself. You can’t do anything about it. You will only make it worse. You have Rothbard saying it was a great mistake not to let the whole banking system collapse. I think by encouraging that kind of do-nothing policy both in Britain and the United States, they did harm.”

and Hayek admitting his mistake said this…

Although I do not regard deflation as the original cause of a decline in business activity, such a reaction has unquestionably the tendency to induce a process of deflation – to cause what more than 40 years ago I called a ‘secondary deflation’ – the effect of which may be worse, and in the 1930s certainly was worse, than what the original cause of the reaction made necessary, and which has no steering function to perform. I must confess that forty years ago I argued differently. I have since altered my opinion – not about the theoretical explanation of the events, but about the practical possibility of removing the obstacles to the functioning of the system in a particular way

Hayek , like Keynes, could change his mind if the circumstances changed. He just took longer to do it.

On your Marx

20 Feb 12 at 12:41 pm
Homer,

Can you discuss macroeconomics without bringing up the Third Reich?

We were discussing Australia, New Zealand, Britain and the UK. Your professed area of interest is Britain.

Yet you insist on talking about Hitler.

.

20 Feb 12 at 1:28 pm
Inspector Clouseau right again.

I am currently wrintg this from one of the levls of my house overlooking one of the small bays of the parramatta river.

Some people were discussing Hayek.

How ironic that a person who claims to be a Hayek fan knows so little about the man.

Ironic but not surprising.

On your Marx

20 Feb 12 at 2:05 pm
Marx

Dot is right. Please leave Hitler out of the discussions and quite honestly no one gives a shit if you were writing this looking at a padded wall in a psyche cell let alone a river basin.

JC

20 Feb 12 at 2:10 pm
Some people were discussing Hayek.

Could you please leave Hitler out of the discussion then? Thanks.

.

20 Feb 12 at 3:17 pm
Well can you two gentlemen tell us why Hayek realised he got it wrong on Germany then without mentioning the dreaded H word i am happy to hear it.

Few scholars of Hayek have problems of mentioning the dreaded H word in terms of realising why Hayek got it so wrong in terms of Germany

Indeed a lot of them seem to think to think it was the German experience and then the Sraffa debates that lead Hayek away from technical economics and towards philosophy.

Indeed it is this sphere he was at his best.

On your Marx

20 Feb 12 at 4:02 pm
Oh Jeez, Marx is back to his Hitler obsessions again.

I’m calling 000

JC

20 Feb 12 at 4:04 pm
Well can you two gentlemen tell us why Hayek realised he got it wrong on Germany then without mentioning the dreaded H word i am happy to hear it.

You are inferring that Hayek conceded that Hitler was a better economist than him.

I’m done. I’ve been feeding trolls all week. Bye.

.

20 Feb 12 at 4:05 pm
Marx, you flaming dickhead.

Indeed a lot of them seem to think to think it was the German experience and then the Sraffa debates that lead Hayek away from technical economics and towards philosophy.

Indeed it is this sphere he was at his best.

While the Nobel committee thought:

The Functional Efficiency of Economic Systems
von Hayek’s contributions in the field of economic theory are both profound and original. His scientific books and articles in the twenties and thirties aroused widespread and lively debate. Particularly, his theory of business cycles and his conception of the effects of monetary and credit policies attracted attention and evoked animated discussion. He tried to penetrate more deeply into the business cycle mechanism than was usual at that time. Perhaps, partly due to this more profound analysis, he was one of the few economists who gave warning of the possibility of a major economic crisis before the great crash came in the autumn of 1929.

von Hayek showed how monetary expansion, accompanied by lending which exceeded the rate of voluntary saving, could lead to a misallocation of resources, particularly affecting the structure of capital. This type of business cycle theory with links to monetary expansion has fundamental features in common with the postwar monetary discussion.

The Academy is of the opinion that von Hayek’s analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense. From the mid-thirties he embarked on penetrating studies of the problems of centralized planning. As in all areas where von Hayek has carried out research, he gave a profound historical exposé of the history of doctrines and opinions in this field. He presented new ideas with regard to basic difficulties in “socialistic calculating”, and investigated the possibilities of achieving effective results by decentralized “market socialism” in various forms. His guiding principle when comparing various systems is to study how efficiently all the knowledge and all the information dispersed among individuals and enterprises is utilized. His conclusion is that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information.

von Hayek’s ideas and his analysis of the competence of economic systems were published in a number of works during the forties and fifties and have, without doubt, provided significant impulses to this extensive and growing field of research in “comparative economic systems”. For him it is not a matter of a simple defence of a liberal system of society as may sometimes appear from the popularized versions of his thinking.

This is the trouble with most of you leftwing shysters. You pedantically pick on something that may have said once, which may not be of any real import and upgrade it to something resembling the entire mantra of say, Hayek’s work.

Oh look, look Hayek blew his nose in the middle of writing Road to Surfdom. It must suggest he doesn’t believe it.

Hayek was not known for supporting the broad elements of gangster-like Keynesian bullshit. He was a known and strong advocate of Austrian economics.

He was known for the things he received the Nobel, such as the study of the distortionary impact of monetary expansions on a nation’s capital structure…. just like the award blurb said.

JC

20 Feb 12 at 4:15 pm
The successful NZ approach undertaken by John Key.

Net government debt at nearly 25% of GDP, unemployment over 6% & a budget deficit >7% of GDP is somehow a success compared to Australia?

badm0f0

20 Feb 12 at 4:27 pm
New Zealand has a participation rate of about 68.5%, baddie. The Australian LFPR is about 65.3%.

They also got hammered by the earthquake.

Key’s policies were indeed successful.

.

20 Feb 12 at 4:38 pm
New Zealand has a participation rate of about 68.5%, baddie. The Australian LFPR is about 65.3%.

They also got hammered by the earthquake.

Key’s policies were indeed successful.

.

20 Feb 12 at 4:38 pm
Successful at increasing unemployment by 40%, doubling net government debt & turning the budget from surplus to large deficit.

badm0f0

20 Feb 12 at 5:30 pm
Bado

What you expect from Key.. my former trading assistant.

The kiwis obviously thought they were voting for a likeness of me. They pretty close, but he’s not me.

He’s doing a pretty decent job anyways.

I notice you’re ignoring the participation rate there. Why?

Jc

20 Feb 12 at 5:41 pm
badm0f0

is right.

Key elected in ’08. Debt to GDP in 2007 was 17.4%

Then he took the country towards bankruptcy;

2008 – 20.3%

2009 – 26.1%

2010 – 31.6%

Down the tubes, like most other capitalist countries.

MaryT

20 Feb 12 at 6:53 pm
Successful at increasing unemployment by 40%

Stop spinning the numbers baddie.

Australian unemployment is 3% higher if we use the same LFPR.

MaryT, Jinmaro etc thinks the earthquake didn’t have any impacts. It’s all John Key’s fault, however.

.

20 Feb 12 at 6:58 pm
Stop spinning the numbers baddie.

The only one spinning the numbers is you pal. The difference between the participation rates would be relevant if they had moved either way in respect of one another over the period in question. What has moved significantly differently is government debt, unemployment & the budget position. New Zealand’s performance has been worse & they were performing worse before the earthquake (if you want to take account of natural disasters fine but you should also account for the impact of the serious bush fires, cyclones and record floods Australia has suffered over the period).

badm0f0

20 Feb 12 at 7:47 pm
http://www.treasury.govt.nz/budget/forecasts/befu2011/026.htm

It is still too early to estimate with confidence the financial cost of the damage caused by the Canterbury earthquakes, and there will always be uncertainty around the exact cost. Nevertheless, information received over the past couple of months suggests that the Treasury’s initial assumptions made in late February remain reasonable[7]. Allowing for some double counting for cases where prior damage has been compounded, the Treasury estimates the combined financial cost of the damage caused by the two earthquakes to be around $15 billion – about 8% of GDP and 2.5% of the nation’s capital stock. Although there will be a significant boost to economic activity during the rebuild, it is clear that New Zealand’s wealth and living standards have suffered as a result of these earthquakes. Resources will be used to rebuild the capital stock rather than grow it.

Australia has not suffered anything like this.

If you are not comparing employment adjusted for participation rates, you are just mucking about. No serious economist cares for the unemployment rate without considering the participation rate.

The difference between the participation rates would be relevant if they had moved either way in respect of one another over the period in question.

Yes, ours went down, theirs recovered and is trending up after three and bit years of Key’s policies.

.

20 Feb 12 at 7:57 pm
Baddie,

It would be like us taking a 107 bn hit in incomes and almost another forty billion in lost plant and capital.

.

20 Feb 12 at 8:08 pm
Indeed a lot of them seem to think to think it was the German experience and then the Sraffa debates that lead Hayek away from technical economics

Homer P thinks that Hitler shamed Hayek in dropping economics. Incredible.

jtfsoon

20 Feb 12 at 8:12 pm
Yes, ours went down, theirs recovered and is trending up after three and bit years of Key’s policies

That’s not correct, both Australia & New Zealand have registered little change in the particpation rate in the past 4 years. New Zealand’s peaked in the December quarter 08 at 69% & was 68.2% in the same quarter 2011. Australia’s participation rate rose from 2008, peaked in the month of December 2010 at 66% & is currently 65.4% – roughly where it was in 2008.

badm0f0

20 Feb 12 at 9:24 pm
So you’re saying was elected in February, 2008?

Baddie: he became NZ PM in November 2008. It’s more like three years.

Australia’s participation rate peaked in April 2008.

I am correct about the trend as well.

I said:

It would be like us taking a 107 bn hit in incomes and almost another forty billion in lost plant and capital.

You just ignored that, or think that our floods and bushfires are as bad, or worse.

.

20 Feb 12 at 9:37 pm
Australia’s participation rate peaked in April 2008

No it didn’t, April 2008=65.4% seasonal/65.3% trend
December 2010=65.8% seasonal/66% trend

You just ignored that, or think that our floods and bushfires are as bad, or worse

I never equated them or said they were worse, I simply said you had to account for those effects (the combined effects of those events were to knock off close to a couple of percent of GDP).

The earthquakes don’t explain New Zealand’s poor performance beforehand. Unemployment hit 6.9% in December 09.

badm0f0

20 Feb 12 at 9:54 pm
Now you’re ignoring the NZ participation rate, which you somehow think is an indicator of “poor performance”.

.

20 Feb 12 at 10:02 pm
err, they don’t have a mining industry of any significance.

entropy

20 Feb 12 at 10:05 pm
Yes entropy. Plus in the last 18? months they’ve copped a hit from natural disasters big enough to be the same as $147 bn loss in Australia. Imagine that in Australia. Imagine the colossal job losses. A $46 bn downer to the deficit, probably.

We have a massive mining boom and if our participation rate was the same – we’d have higher unemployment than NZ. Key’s policies have kept NZ going during the earthquake crisis and pushed the participation rate back up after the GFC.

.

21 Feb 12 at 12:06 am
Actually probably a lot more than a $47 bn credit against the deficit. Think of the extra welfare payments for one year alone. Probably closer to $70 bn.

.

21 Feb 12 at 12:08 am
Key’s policies have kept NZ going during the earthquake crisis and pushed the participation rate back up after the GFC

Unemployment went from 4.5% in December 08 to 6.9% in December 09 and was still at 6.7% a year later – before the earthquakes. The particpation rate dropped by nearly a full per cent over twelve months from the December 08 high & is still at the same now – which is, to be fair, basically the around the average it has been since 2006 (including through the GFC).

badm0f0

21 Feb 12 at 12:24 am
Bado

They also had years of leftwing government Key has to repair.

JC

21 Feb 12 at 12:28 am
Be realistic FFS baddie. They still had seven-eight months of Hulun’s budget and couldn’t possibly have an impact on the economy immediately even if the policies were passed on the first sitting day.

.

21 Feb 12 at 7:43 am
So dot dash

As the original question was “what would you replace Keynes with?’ and your little attempt at proposing the irrelevant Keys, has left you stranded up a creek without a paddle, maybe you could try a new answer?

Think first, though.

MaryT

21 Feb 12 at 9:08 am
what happened to Hayek.

We have him at his peak prior to 1932 after giving his lectures at LSE.

From this we have his disastrous support for deflationary depression in Germany that led to he cannot be mentioned
His debates with firstly Sraffa and then Kaldor from which he never recovered nor fully supported his RBCT again
His disastrous support for the BOF gold policies where he asserted it had nothing to do with the Depression.
He hotly debated this with Cassell and Hawtrey and was again on the losing side.

He also agrees he got it wrong on the US.

It is no wonder he changes his mind on what to do when confronting a depression.

It is also no wonder he changes tack and rarely go to technical economic issues again and rather travels freely along the philosophical road.

It is also of no surprise that ‘fans’ of Hayek here have no idea of any of this.

Friedman was quite disdainful of Hayek’s work however not having Keynes’s acid tongue he is rarely read on this.

On your Marx

21 Feb 12 at 9:33 am
As the original question was “what would you replace Keynes with?’ and your little attempt at proposing the irrelevant Keys, has left you stranded up a creek without a paddle, maybe you could try a new answer?

No you idiot, a real comparison of Australian u/e would be more like 8.1% with a 107 bn hit in incomes in 2010 and 46 bn of capital and plant wiped out.

You dullard.

.

21 Feb 12 at 12:24 pm
His debates with firstly Sraffa and then Kaldor from which he never recovered nor fully supported his RBCT again

Yes Homer, he never recovered – he only won the nobel. You assert Hitler caused him to lose the debate?

You maniac.

.

21 Feb 12 at 12:25 pm

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