The Instigator
DoubtingDave
Pro (for)
Winning
84 Points
The Contender
RationalMadman
Con (against)
Losing
0 Points

Austrian Economics vs. Keynesian Economics

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Post Voting Period
The voting period for this debate has ended.
after 14 votes the winner is...
DoubtingDave
Voting Style: Open Point System: 7 Point
Started: 12/22/2012 Category: Economics
Updated: 3 years ago Status: Post Voting Period
Viewed: 3,089 times Debate No: 28538
Debate Rounds (5)
Comments (12)
Votes (14)

 

DoubtingDave

Pro

Resolved: Austrian economics is superior to Keynesian economics.

NOTE: This debate is impossible to accept. If you want to accept it, please message me.
  1. Definitions:
    1. Austrian Economics: A school of thought that is associated with little government interference in the marketplace, the primacy of property rights and is generally associated with libertarian ideology.[1]
    2. Keynesian Economics: An economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability. [2]
    3. Superior: Better than, of better quality, producing better results.
  2. Rules
    1. Rounds
      1. Acceptance only.
      2. Opening arguments only (please don't rebut)
      3. Rebuttals and Defense
      4. Rebuttals and Defense
      5. Closing statements only (1K character maximum).
    2. Other rules and clarifications
      1. If special circumstances arise, one side may ask the other to wait out his or her remaining time.
      2. No forfeiting or plagarism is acceptable.
      3. Please structure and format your arguments in a way that is easy to follow.
      4. Failure to abide by any points above will result in an automatic loss.
  3. References
    1. http://economics.about.com......;
    2. http://www.investopedia.com......;
RationalMadman

Con

Definitely accept.
Debate Round No. 1
DoubtingDave

Pro

Thank you for accepting this debate. I wish you and all our readers a Happy Holiday’s. I will be defending the Austrian Economic Theory thought this debate.

Introduction

Keynesian Economic Theory (KET hereafter or KT) is built on the principle that productive activity is influenced by aggregated demand (total spending in the economy) and that demand does not necessarily equal aggregated supply. Instead, it is influenced by a host of factors sometimes behaving erratically; including, but not limited to, inflation, employment, and productivity.

Advocates of Keynesian Economics favor a mixed economy between the private sector and the public sector and with strong government intervention during a recession. The KET has stood as the policies of FDR and Obama.

C1) Economic Stimulus

Keynesian Economists believe that there should be a strong government involvement in offsetting the effects of a depression or a recession by stimulating the economy. We saw examples of government stimulation during the Great Depression and the 2008 Great Recession. However, when government attempts to stimulate the economy, it creates economic uncertainty that paralyzes business decisions. During the Great Depression, John Keynes wrote [1]:

You are engaged on a double task, Recovery and Reform…. Even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to put other motives in their place. It may over-task your bureaucratic machine, which the traditional individualism of the United States and the old "spoils system" have left none too strong. And it will confuse the thought and aim of yourself and your administration by giving you too much to think about all at once.

These failures are easily manifested in simple graphics[2]:

  1. During the 1930s, New Deal lawmakers doubled federal spending--yet unemployment remained above 20 percent until World War II.
  2. Japan responded to a 1990 recession by passing 10 stimulus spending bills over 8 years (building the largest national debt in the industrialized world)--yet its economy remained stagnant.
  3. In 2001, President Bush responded to a recession by "injecting" tax rebates into the economy. The economy did not respond until two years later, when tax rate reductions were implemented.
  4. In 2008, President Bush tried to head off the current recession with another round of tax rebates. The recession continued to worsen.
  5. Now, the most recent $787 billion stimulus bill was intended to keep the unemployment rate from exceeding 8 percent. In November 2009 it topped 10 percent.

Conclusion

The Keynesian theory that government needs to be involved in stimulating the economy has failed. Throughout the past, we have seen stimulus packages fail and unemployment sky rocket, despite record-setting government spending.

C2) Austerity

Austerity measures is defined as a state of reduced spending and increased frugality in the financial sector. These measures refer to the measures taken by government to reduce expenditures in an attempt to shrink their budget deficit. [3]

These measures apply to solving debt crisis and are characterized by lower spending via reduction in the amount of benefits and public services. Because spending is lower, times of Austerity are period of low or reduced government spending, they are often at a point of low taxes as well.

According to John Keynes, “The boom, not the slump, is the right time for austerity at the Treasury.”[4] Contemporary Keynesian economists argue that budget deficits are appropriate when the economy is in recession, to reduce unemployment and help spur GDP growth.

However, I believe that Keynes is wrong. I believe in low taxes and low government involvement within the economy. Consumers contribute ~70% of the GDP whilst investors contribute ~10-15%. These consumers and investors feel more secure when both spending and taxes are low. When these groups feel more secure, they spend more and thus stimulating the economy:

"Writing in the Wall Street Journal, Alesina points to the reason for these findings: Spending cuts “signal that tax increases will not occur in the future, or that if they do they will be smaller. A credible plan to reduce government outlays significantly changes expectations of future tax liabilities. This, in turn, shifts people’s behavior. Consumers and especially investors are more willing to spend if they expect that spending and taxes will remain limited over a sustained period of time."[5]

Here is some empirical evidence for this:

"I’ve studied every 3-year peace-time period since the U.S. founding in 1790, and in cases when federal spending declined, real GDP over the same years grew by 11%, on average, not materially different from the average growth rate recorded in periods of rising spending. Government spending cuts have not been bearish for growth. From 1840 to 1843 U.S. federal spending was cut by 51% while real GDP grew by 11%; from 1866 to 1896 spending declined 38% as GDP grew by 9%; from 1874 to 1877 spending fell 20% as GDP advanced by 9%; from 1899 to 1902 spending dropped by 20%, but GDP rose by 13%; finally, between 1921 and 1924 spending decreased 43%, yet GDP climbed by 23%. No 3-year spending cut has occurred since 1949, and since then, GDP growth has slowed."[6]

So, in reality, austerity measures are best all the time – especially in times of economic downturn for at least 3 reasons: first, if you want to stimulate the economy, you need to have consumer confidence (which we see austerity measure bring); second, investors are a huge part of stimulating the economy and helping businesses to grow feel more safe and comfortable when spending and taxes are both low; and third, it helps offset the debt that helps create these crises.

For these two contentions, I feel that Keynesian economics is officially dead. I am so busy during the holiday season that I have not been able to write out a full opening statement. In the next round, I will expand on these two contentions and add a few more.

Onto con.



[5] Quoted on http://debate.org...

[6] Ibid. Thank you Ron-Paul for these two quotes from your debate.

RationalMadman

Con

RationalMadman forfeited this round.
Debate Round No. 2
DoubtingDave

Pro

Extend arguments. As per the rules, all 7 points goes to me.
RationalMadman

Con

If you have a child, how would you raise it?

1) Be an Austrian and let them do whatever the heck they went assuming that their bad grades do not matter, never ever stepping in.
2) Be a Keynesian, disciplining them when they do wrong, guiding them to a reasonable extent to make sure they stay within guidelines for success

I'm sure you chose number 2.

If you are the manager of a business how would you run it?

1) Be an Austrian and let the employees do as they please, if the stats are bad you just smoke some marijuana and say "Don't worry, Be Happy" and assume the heads of respective departments will make good decisions despite consistent failure to do so.
2) Be a Keynesian, being very closely influential on the decisions being made, how employees are paid/treated, on the spending and cost-cutting decisions and overall being a very attentive leader of a successful business.

I'm sure you chose numbers 2.

In fact, in every single context other than economics, I'm sure any sane person would be a Keynesian (unless they are a hippy, who quite frankly didn't do much other than allow the punk era to arise).

Suddenly in economics it seems that neglect of duty as a leader, that liberalism (in the economic sense, not the sense of non-conservative) as opposed to socialism, is preferable.
Debate Round No. 3
DoubtingDave

Pro

My opponent failed to address my opening statements. As such, I request that you extend those arguments.

My opponent makes two analogies in the case for Keynesian economics: First by comparing children to the economy and second by comparing businesses to the economy. They are flawed because you don't raise a child the same way as you run an economy. The entire analogy is a false analogy.

The second analogy is slightly more relatvent, but contains two fallacies: The first, my opponent assumes that Austrians are greedy, selfish, haters of poor people who want to deprive their employees of rights and would fire my employees just to make a cent; the second, my opponent assumes that Keynesians are wonderful do-gooders who put work before the economy and before the employees.

These are of course, false. To make a case study, all what one has to do is look at nations where there is strong Austrian (or Austrian-like) economic run.

The first, we will look at Singapore. Singapore is largely laissez-faire with minimum government regulations and no minimum wage. The results: In spite of the economic collapse, the unemployment rate is less than 3% [1. http://www.heritage.org...;] with an overall monthly income of 9,618 - or $115K yearly [2. http://en.wikipedia.org...;].

Now, we will look at Hong Kong. With the most economically free on the Index to Economic Freedom [3. http://www.heritage.org...;], it has an unemployment rate of less than 5%. Milton Friedman called it "the world’s greatest experiment in laissez-faire capitalism" [4. http://en.wikipedia.org...;], even though in recent years, more regulations has been given on the economy - including a minimum wage. The case study proves that in order to produce prosperity, we need to give the private sector enough breathing room to grow.

I will expand more in the next round.
RationalMadman

Con

Well then, Let's go and ask the 95% employed people in Singapore and Honk Kong how many of them earn enough to feed their family sufficiently? How many can have a single holiday per year and still hope to afford decent education for their children. Oh! That's right! Your forgot CHINA! The king of Keynesian! ONLY 4.100000% http://www.bloomberg.com... So just shut up you arrogant pig with your "OH LOOK UNEMPLOYMENT RATE IN AUSTRIAN NATIONS IS AWEEESOME!" The reason it's awesome in those East Asian Nations is due to there being no minimum wage meaning the exploitation of beggars to work for factories manufacturing goods for Nike and the likes is very apparent, this is more a cultural PROBLEM being misrepresented by my opponent as anything to do with AUSTRIA OH!... 4.3% https://www.google.co.uk... THIS IS HIGHER THAN CHINA'S hahahahahahahaa\


so please give a substantial argument.


My analogy to children was perfect. A child to a parents is like an economy to a government, it is their full responsibility to make flourish until their time is up and a new election can replace them perhaps (like when child can go to university). This is totally neglected by my very rude and abrupt opponent.

So you can go and be a neglectful lazy government or a Keynesian one it's simple as that. I talk straight not like a coward.
Debate Round No. 4
DoubtingDave

Pro

Reminder that this round is for closing statements only.

Voting Guide

My opponent forfeited round 2 thus violating rule 2-2-2. Thus per 2-2-4, all seven points goes to me.


Conduct: The following statements certainly warrant a loss of conduct:

"This is totally neglected by my very rude and abrupt opponent."

"I'm sure any sane person would be a Keynesian (unless they are a hippy, who quite frankly didn't do much other than allow the punk era to arise)."

Grammar: My opponent's spelling and grammar has been horrendous and the format my opponent used is very difficult to follow. For example:

"A child to a parents is like an economy to a government.."

This should read, "a child to parents are"
Arguments: My opponent failed to address my arguments.

Sources: My opponent used very little sources throughout this debate and when used, were largely irrelavent to the discussion

Vote pro.
RationalMadman

Con

LOL My sources were all relevant to the debate. They were regarding unemployment rates... What a fool.

Look I don't care who you vote for but just realise I won the debate.
Debate Round No. 5
12 comments have been posted on this debate. Showing 1 through 10 records.
Posted by RationalMadman 3 years ago
RationalMadman
hmm I like this

"obscenity in CON's avatar = S&P to PRO" because not only did you mean S&G but your reason is just rubbish.
Posted by wrichcirw 3 years ago
wrichcirw
FF = conduct to PRO
obscenity in CON's avatar = S&P to PRO
Argument - do I really need to explain this? = PRO
Sources = PRO

Looks like the RatMan is back to troll us all. Hooray.
Posted by RationalMadman 3 years ago
RationalMadman
I successfully did it.
Posted by RationalMadman 3 years ago
RationalMadman
I requested to prove keynesian is best he said okay and challenged me
Posted by RationalMadman 3 years ago
RationalMadman
I was personally challenged to it by doubtingdave.
Posted by wrichcirw 3 years ago
wrichcirw
Hm. So, Ron-Paul was going to do this one, and I was hoping this debate was it.

Instead, it's a fvcking troll debate. Fvck you RatMan.
Posted by Koopin 3 years ago
Koopin
Good job Micro.
Posted by RationalMadman 3 years ago
RationalMadman
OH DEAR IT DIDN'T POST... fk
Posted by RationalMadman 3 years ago
RationalMadman
@doubtingdave, you fvcking wish.
Posted by DoubtingDave 3 years ago
DoubtingDave
@Muted

I know. Easy first debate.
14 votes have been placed for this debate. Showing 1 through 10 records.
Vote Placed by Wallstreetatheist 3 years ago
Wallstreetatheist
DoubtingDaveRationalMadmanTied
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Total points awarded:70 
Reasons for voting decision: Pro addressed the resolution by crafting an argument. Con forfeited, which equals an auto loss.
Vote Placed by wrichcirw 3 years ago
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Reasons for voting decision: see comment
Vote Placed by emospongebob527 3 years ago
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Vote Placed by tBoonePickens 3 years ago
tBoonePickens
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Reasons for voting decision: Clearly a one sided debate; seems like Con didn't even try.
Vote Placed by Heineken 3 years ago
Heineken
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Reasons for voting decision: Just in case 49 isn't enough....here is 7 more points. FF
Vote Placed by drafterman 3 years ago
drafterman
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Reasons for voting decision: FF
Vote Placed by RoyLatham 3 years ago
RoyLatham
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Total points awarded:60 
Reasons for voting decision: Easy win for Pro over a largely unresponsive opponent. Pro should avoid the too-large centered headings and yellow highlighting of his R2. Agreements on voting criteria between the debaters does not bind the voters. They are suggestions.
Vote Placed by jh1234l 3 years ago
jh1234l
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Reasons for voting decision: Conduct to PRO because CON forfeited, S/G to Pro because "a child to a parents" and "Honk Kong", Arguments to Pro because Con did not adequately address Con's arguments.
Vote Placed by twocupcakes 3 years ago
twocupcakes
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Reasons for voting decision: Pro...debate me next time. Pro wins debate obviously. Pro does not get sources because the source number 6 in round one cannot be verified.
Vote Placed by famer 3 years ago
famer
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Total points awarded:70 
Reasons for voting decision: RP said it all for me.