Quote:
Originally Posted by ..
PJ have you switched sides!? -- You quote a communist in a thread about economy?
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Well, just because he may have had communist sympathies doesn't mean he was wrong about everything!
Quote:
Originally Posted by WTF
We appear to be headed the way of England.
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Well, we appear to be headed where Britain has gone in the past. But now even Britain realizes that it must change course and has decided it can no longer afford to "go the way of Britain!"
Earlier in this thread, someone mentioned the recent British austerity plan. Economists such as Krugman and the aforementioned Joe Stiglitz are screaming from the rooftops that it's suicide and will plunge the U.K. back into serious recession or depression. But that's clearly not what happened the last time it was tried:
http://money.cnn.com/2010/06/25/news...tune/index.htm
Note that 346 "noted economists" then said fiscal restraint would be ruinous for the economy. No doubt most of these "noted economists" were of the Krugman/Stiglitz ilk; that is, neo-Keynesians who always advocate big increases in spending as the cure for almost any economic ill.
If it worked as well as they think, the wonderfulness of the idea would be self-evident across Europe.
In my opinion, the problem is that far too many academic economists believe in the fiscal multipliers inherent in those old macro models developed 40 or 50 years ago. Recently Mark Zandi said that the fiscal multiplier for food stamps and other transfer payments such as extensions of unemployment insurance was about 1.73.
But that's not the way it works when those seemingly rigorous models bump up against the real world, and that's particularly the case when the extra spending is obviously unsustainable and creates angst about ensuing deficits. The problem is compounded when business decision-makers realize that the unsustainable extra spending is not going to result in meaningful changes in patterns of production, as is the case with our squandered $800 billion stimulus package passed in 2009.
The ECB recently commissioned robustness analysis of these models and determined that the real fiscal multipler tends to be only about 0.50, not 1.5 or greater as it had long been assumed by many academic economists.
And these are the guys who serve governments that want to justify large amounts of social spending!
In other words, the whole economic doctrine rests on a set of fallacies. But we listen to people like these "noted economists" (such as Krugman and Stiglitz), who themselves never seem to learn anything from history, instead trusting in outdated and discredited macro models.
I assume that's why PJ appropriately invoked the Einstein quote.
(This looks like a perfect time for those who understand very little about economics and economic history, and who always seem not to be able to craft an intelligent, cogent argument about the subject, to toss in another comment about how they think that one of their favorite left-wing academic economists is "far brighter" than I am!)
