The Instigator
Dimensions
Pro (for)
Losing
0 Points
The Contender
FuzzyCatPotato
Con (against)
Winning
12 Points

In the long run, Keynesian economic policies have proven to be ineffective

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Post Voting Period
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after 4 votes the winner is...
FuzzyCatPotato
Voting Style: Open Point System: 7 Point
Started: 6/29/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 896 times Debate No: 58345
Debate Rounds (4)
Comments (7)
Votes (4)

 

Dimensions

Pro

The first round is for acceptance, and arguments must have evidence to substantiate them. Also, some definitions to clear up any confusion:

Long-run: The period of time in which all prices, especially wages, are flexible, and have achieved their equilibrium levels.

Keynesian: Acting along the lines of the Keynesian school of economic thought, which is based upon the work of British economist John Maynard Keynes. Keynesian economics follows demand-side theory, and focuses on influencing aggregate demand through active stabilizing policies.

Proven to be ineffective (In this context): Failed to achieve long-run economic growth, which would be shown in long-run economic measurements and observations.

I hope to have an enjoyable and enriching debate, and good luck to my opponent!
FuzzyCatPotato

Con

2C0A: I accept.

2C0B: Let me remind everyone that the full Burden of Proof (BOP) is on the Pro side. I (Con) do not need to prove that Keynesian economics are effective, merely negate Pro's evidence, though proving so would win me the debate.

2C0C: For the definition of "long run", I request a method to determine if an economy is in equillibrium, and if not, then how close it is to equilibrium.

2C0D: For "Keynesian", whether reemployment programs (ie, the CCC) apply, whether poverty and unemployment assistance programs (food stamps) apply, and whether all government-run programs (NHS) apply.

2C0E: For "ineffective", which indicator(s) are accepted.

2C0F: I'm going away for Monday-Wednesday. Please post as late as possible, to allow me time to respond.
Debate Round No. 1
Dimensions

Pro

Dimensions forfeited this round.
Debate Round No. 2
Dimensions

Pro

Dimensions forfeited this round.
Debate Round No. 3
Dimensions

Pro

Dimensions forfeited this round.
FuzzyCatPotato

Con

Unfortunately, my opponent has forfeted all rounds.

As Con, I do not have to prove anything, because the Burden of Proof (BOP) rests on Pro. Therefore, because Pro has not proven anything, I have fulfilled my duty and should automatically win.

That said, I will make the case for one signficant benefit of Keynesian economic policies:

Contention One: Keynesian economic policies mitigate economic recessions, which is efficient

Subpoint A: Keynesian economic policies support the use of central banks as stabilizing entities, which prevents economic collapse

As Thomas Piketty, author of one of the most exhaustive accounts of income and capital from the 1700s until 2010, states:

"The main reason why the crisis of 2008 did not trigger a crash as serious as the Great Depression is that this time the governments and central banks of the wealthy countries did not allow the financial system to crash and agreed to create the liquidity necessary to avoid the waves of bank failures that led the world to the brink of the abyss in the 1930s. This pragmatic monetary and financial policy, poles apart from the 'liquidationist' orthodoxy that treigned nearly everywhere after the 1929 crash, managed to avoid the worst. (Herbert Hoover, the US president in 1929, thought that limping businesses hat to be "liquidated," and until Franklin Roosevelt replaced Hoover in 1933, they were.) The pragmatic response to the crisis also reminded the world that central banks do not exist just to twiddle their thumbs and keep down inflation. In situations of total financial panic, they play an indispensable role as lender of last resort - indeed, they are the only public institution capable of averting a total collapse of the economy and society in an emergency," [3].

This is clearly an "active stabilizing polic[y]", and thus qualifies as Keynesian. Furthermore, it certainly "is based upon the work of British economist John Maynard Keynes," [4]. Central banks add money to (or increase demand in) struggling economies in times of crisis (such as the present one) by either assuming bad debts (removing negative money), lending more freely (allowing more money into the system, because lendees will be more willing to take out loans at low interest rates), or simply providing companies money. All of this helps keeps companies afloat and prevent recessions.

This also has a second benefit: If nobody is sure about whether THEIR bank will collapse, will they keep money in it or take their money and run? By keeping banks and businesses afloat, this prevents panic mentality, which severely contributed to the 1929 collapse.

Subpoint B: Keynesian economic policies directly increase demand, which prevents economic collapse

As Jason Furman, Chairman of the Council of Economic Advisors, stated in 2008:

"The economy appears to be slipping into a potentially serious downturn. The Federal Reserve has cut rates by 1.75%, but lags in the effect of monetary policy mean that much of the benefit of these rate cuts will not be felt until 2009. Fortunately, Congress and the president appear set to fill in some of the gap before 2009. It is likely that in May, June and July the U.S. Treasury will mail out $100 billion worth of checks to working households. If past experience is any guide, at least $50 billion of these funds will be spent — which together with multiplier effects will add about 3% to the annualized growth rate in the third quarter of this year. If extended unemployment insurance or food stamp increases are added to he final package, as demanded by many in the Senate, the macroeconomic benefits would be somewhat larger," [2].

Unemployment benefits (and other programs that add money to the economy) increase economic growth by making people spend more, which allows employers to lay off fewer employees, which prevents the economy from shrinking.

Why is this efficient?

"We will eventually need to pay back this money, but an extra year of lower unemployment and higher output will put us in a better position to do so. That is the paradox of economics in a downturn. Normally, the only way to grow the economy is the old-fashioned way: delaying gratification through reduced deficits and increased savings to encourage more investment. But in a downturn, these steps would just compound the problem and worsen the vicious circle of rising unemployment, underutilized capacity and falling consumption," [2].

Preventing people from fearing loss of their job or from fearing unemployment keeps them spending. If you're worried that everything you have could fall apart, would you waste money spending on anything but the bare necessities? No.

And it's clearly obvious that ANY period of unemployment is inefficient. Whenever someone is working, they are adding value to something. If they aren't working, they aren't adding value -- at best, they are in stasis, not adding any money to the economy and not taking any away. Hence, reducing the periods in which people aren't working (ie, recessions) is efficient.

Consider the 1933-42 Civilian Conservation Corps program, which had twofold effects: First, the CCC provided a total of 9 million young men a job during the economic crisis, which allowed them to supplement their families with $25 dollars per month and prevented rampant unemployment [5]. Second, the CCC helped replant national forests, build service buildings, and construct roadways in remote areas [5]. Basically, the CCC gave a bump upwards to the economy when it needed it most, in addition to improving the economy (via infrastructure) in the long run -- as do many Keynesian policies.

As Timothy Siegal, economist at Forbes.com, states:

"Finally, in 1932 Hoover ran an economically significant deficit, and that was the turnR09;around year of the Great Depression. The stock market stopped going down and started going up. The economic contraction, which had been so destructive, began to grind to a halt and the stage was set for economic growth. Roosevelt continued the policy of deficit spending and by 1937 industrial production had regained its 1929 level. Unemployment, although still high, fell dramatically from 25% to just over 10%. The deficit spending from 1932 to 1937 stopped the horrific downward spiral that took place from October 1929 to July 1932. If that spiral had continued, as Mitchell’s ideas would have ensured, God only knows what the terrible consequences would have been. Thank goodness Hoover changed his mind and that Roosevelt continued the deficit spending policy," [1].


---

Summary:

Spending increases economic growth. There's just no way around this. And economic growth in the beginning of a recession is key to preventing said recession from becoming a depression.

(Sorry if everything is a bit unordered, I just wanted to get some sources in here.)


---

References:

[1] http://www.forbes.com...

[2] http://www.brookings.edu...

[3] Piketty, Thomas. "Capital in the Twenty-First Century," p. 472-3. London: The Belknap Press of Harvard University Press, 2014. Book.

[4] http://www.jstor.org...

[5] http://en.wikipedia.org...

Debate Round No. 4
7 comments have been posted on this debate. Showing 1 through 7 records.
Posted by FuzzyCatPotato 2 years ago
FuzzyCatPotato
@JMK
Aye.
Posted by JohnMaynardKeynes 2 years ago
JohnMaynardKeynes
From the looks of Dimension's comment, he hasn't the slightest idea of what Keynesian economics actually is.
Posted by FuzzyCatPotato 2 years ago
FuzzyCatPotato
If you ask airmax1227 nicely, you can get this debate restarted. =)
Posted by Dimensions 2 years ago
Dimensions
I'm going to post clarifications in comments:

2C0C: Equilibrium is when there is no surplus or shortage for the time being, as both supply and demand (Or the aggregation of both) are equal.

2C0D: Things like the CCC were never Keynesian, as Keynesianism focuses on the impact of government stimulus and the multipliers that the money goes through. Also, all government aid to people living in poverty (food stamps, welfare, etc.) are considered transfer payments, so they have no affect on GDP. This is because there is no purchasing of finished goods, just giving. Finally, all government-run programs may not be Keynesian economic policy, if an economic policy at all.

2C0E: Extending from the previous, Real GDP would be best. Remember to deflate it. You are also allowed to use measures such as Real GNP, Real NNI (Net National Income), Real adjusted NNI, Real GDP per capita, Real DPI (Disposable Personal Income), CPI, and PPI. Unemployment and inflation should also be considered. Remember, long run economic growth means full employment (Economic definition) too.

2C0F: I will post on Wednesday to give you time. Good Luck!
Posted by Dimensions 2 years ago
Dimensions
Things like minimum wage are just price floors, so they are not really a Keynesian economic policy, which deals with influencing aggregate demand. So... No.
Posted by FuzzyCatPotato 2 years ago
FuzzyCatPotato
One further question: stuff like minimum wage, y/n?
Posted by ChooseChoice 2 years ago
ChooseChoice
I agree with pro, keynesian economics has been proven to fail. Good luck on the debate.
4 votes have been placed for this debate. Showing 1 through 4 records.
Vote Placed by 9spaceking 2 years ago
9spaceking
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Reasons for voting decision: ff
Vote Placed by Splenic_Warrior 2 years ago
Splenic_Warrior
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Reasons for voting decision: Forfeit
Vote Placed by Zarroette 2 years ago
Zarroette
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Reasons for voting decision: ff
Vote Placed by Ragnar 2 years ago
Ragnar
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Reasons for voting decision: Conduct: FF. Argument: As I have a rule of discounting new claims made once the opponent cannot respond, we are left with neither side having any arguments (unless con wishes to claim he violated the terms of the debate in that first round by doing more than accepting), therefore the argument can only be a tie.