T Nation

Economic Theory


Bear (intended) with me as this was posted by econ prof to read. I was a little taken back by the eugenics a-hole. What I remember the 70's weren't really all that good. Anyhow, your takes and thoughts?


Good article. Spreading to Democrat friends on Facebook as we speak :stuck_out_tongue:


Actually no. I am not a big fan and got into bit of an argument w/my econ prof (she is from Europe). The Obama crazies and this guy think this shit will work. It didn't work in the 30's and when inflation hit high in the 70's and some 80's all went to shit. Anyone who will tell you the 70's or 80's were great decades were not talking from '74 to '83. Once again it took 25 years to come out the great depression. It was not the war or this eugenics assholes theory that brought us out of it.

There are two fears here, one you cannot spend your way out a depression/recession via Gov't and not have high/hyper inflation (Here is the theory, but remember Germany after WWI and it's hyper inflation). Two, want to lower unemployment, cut taxes that is a given. Be ready!!


I'm not a fan either, this article doesn't exactly seem pro-Keynesian so... are we disagreeing or what?


Interesting link. I like NPR a lot. Some points that I thought were interesting were 1) the amount of time spent on attacking his person rather than his theories. While somewhat interesting, not entirely relevant, I don't think. Also I found it interesting how they seemed to pose interest rates against increased govt spending. I'd never heard it put that way before.

They way I learned it, playing with the interest rate was a faster and better technique, but increasing (or decreasing) government spending could also be used. No one ever denied the drawbacks or limitations to either technique. The folks on NPR seemed to believe playing with interest rates replaced the other theory... I don't really think that's the case. Overall an interesting link. Thanks for sharing.


It all comes down to whether or not a person or group of persons will be better off if they consume more than they produce. The Keynesian solution does not address the supply side of the equation -- i.e, production. Keynes assumed incorrectly that more consumption would always lead to production but this is not necessarily the case. Keynesians are more prone to offering financial incentives to consumers via tax credits (redistribution) over giving tax breaks to producers. This creates a situation where demand outstrips production and will lead to a diminished supply and ultimately to price increases. Luckily in the US we can rely on foreign creditors (for now) to trade us real goods for paper.

With respect to government spending consumption destroys real productivity to prop up whatever it is government needs to consume; for example, diverting capital away from the market to build bombs. This is an extreme example because bombs cannot be considered capital goods. By definition they are used to destroy things which automatically reduces productivity. In this respect government spending can only be considered capital consumption which ultimately reduces wealth. A less extreme, albeit still valid example would be how government manages roads. We can never be sure whether the roads government builds are necessary without a way to measure their "utility". This can only be done with profits and losses. So while we all may benefit from the use of roads we have no way to know if they are overproduced or not.