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Question for Keynesians on Fiscal Stimulus

JamesMadison
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7/16/2012 2:36:11 AM
Posted: 4 years ago
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
JaxsonRaine
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7/16/2012 3:27:49 AM
Posted: 4 years ago
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

I don't claim to know, and I'm really tired.

But, I guess the claim would be, if the money is borrowed, then it increases net spending in the short term. In the long term, it would decrease net spending(because of interest), or cause harm to everyone(if not paid back).

IF the government taxed an extra $50/person, and then reinvested that money directly into the economy by paying for projects, I guess that would be the broken window fallacy.
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NixonianVolkswagen
Posts: 481
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7/16/2012 4:27:35 AM
Posted: 4 years ago
My understanding, which could well be in error, is that opportunity cost, which is central to the Broken Window Fallacy, provides succor to their Keynesian programs. That is to say, just as the $ which are spent on a new pane of glass could have been expended on something else, so the $ which are languishing in the private sector (in the sense that they're not encouraging growth, or aren't sufficiently encouraging growth), could be put to better use (eg: specific investments) by the government.

Unless I've misunderstood?
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Lordknukle
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7/16/2012 10:01:44 AM
Posted: 4 years ago
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
JamesMadison
Posts: 381
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7/16/2012 10:59:11 AM
Posted: 4 years ago
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.

But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
Stephen_Hawkins
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7/16/2012 11:01:02 AM
Posted: 4 years ago
At 7/16/2012 10:59:11 AM, JamesMadison wrote:
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.


But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.

Money saved is money wasted, is the point. You need the money to be going through the system for it to be worth anything. A ten pound note isn't worth anything, it's only worth something because the government says so. But when the government has the note, it's not really worth anything.
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Lordknukle
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7/16/2012 11:02:17 AM
Posted: 4 years ago
At 7/16/2012 10:59:11 AM, JamesMadison wrote:
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.


But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.

Actually, with the National Savings Identity, as government borrowing increases, savings should also increase. However, there is little empirical evidence to show this and what actually happens is private investment goes down due to "Crowding Out."

Keynesian policies are focused on short term economic growth. The net benefit is supposedly that it increases aggregate demand in the short term, although in my opinion, the demand is purely fictional and not representative of the desires of the consumer.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
JamesMadison
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7/16/2012 11:56:48 AM
Posted: 4 years ago
At 7/16/2012 11:01:02 AM, Stephen_Hawkins wrote:
At 7/16/2012 10:59:11 AM, JamesMadison wrote:
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.


But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.

Money saved is money wasted, is the point. You need the money to be going through the system for it to be worth anything. A ten pound note isn't worth anything, it's only worth something because the government says so. But when the government has the note, it's not really worth anything.

But savings are crucial to any long term lasting gains in productivity. Money saved, or resources saved, may not be driving short term bursts in growth, but it is essential to any kind of long term lasting growth.
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
Lordknukle
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7/16/2012 1:16:20 PM
Posted: 4 years ago
At 7/16/2012 11:56:48 AM, JamesMadison wrote:
At 7/16/2012 11:01:02 AM, Stephen_Hawkins wrote:
At 7/16/2012 10:59:11 AM, JamesMadison wrote:
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.


But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.

Money saved is money wasted, is the point. You need the money to be going through the system for it to be worth anything. A ten pound note isn't worth anything, it's only worth something because the government says so. But when the government has the note, it's not really worth anything.



But savings are crucial to any long term lasting gains in productivity. Money saved, or resources saved, may not be driving short term bursts in growth, but it is essential to any kind of long term lasting growth.

Right. This is the major difference between Keynesian and Neo-Classical economics. Keynesian= Anti-saving. Neo-classical= Pro-saving. Of course, that's not true all the time but it's kind of the general premise.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
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7/16/2012 2:55:19 PM
Posted: 4 years ago
At 7/16/2012 11:56:48 AM, JamesMadison wrote:
At 7/16/2012 11:01:02 AM, Stephen_Hawkins wrote:
At 7/16/2012 10:59:11 AM, JamesMadison wrote:
At 7/16/2012 10:01:44 AM, Lordknukle wrote:
I created a thread for this before and the Keynesian answer to this is actually quite simple. They state that it's not a matter of where you get the money from- but whether the money is actually being spent. Despite the money being taken from the private sector, they argue that during a recession the private sector isn't spending this money anyways- therefore causing an increase in aggregate demand if the government, not the private sector, spends it into the economy. I agree that it's inefficient, but they definitely do have a point with the whole liquidity trap.


But, this seems like this would just have the effect of destroying a nation's savings. I mean, a government can certainly spend a lot of money and create short term growth, but only by destroying what a nation has saved through taxing, borrowing, or inflation. I don't see any net benefit.

Money saved is money wasted, is the point. You need the money to be going through the system for it to be worth anything. A ten pound note isn't worth anything, it's only worth something because the government says so. But when the government has the note, it's not really worth anything.



But savings are crucial to any long term lasting gains in productivity. Money saved, or resources saved, may not be driving short term bursts in growth, but it is essential to any kind of long term lasting growth.

Money =/= resource. Money is just a medium of exchange. Keynesians are not against investing. However investing =/= savings in the Keynesian sense. Investing involves purchasing bonds, stocks, and other forms of equity. This is not the same thing as savings in which money is hoard, like putting it under a mattress. Hoarding money does not contribute to economic prosperity.
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Contra
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7/16/2012 6:22:58 PM
Posted: 4 years ago
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.
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JamesMadison
Posts: 381
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7/16/2012 10:26:08 PM
Posted: 4 years ago
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
darkkermit
Posts: 11,204
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7/16/2012 10:31:06 PM
Posted: 4 years ago
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).
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JamesMadison
Posts: 381
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7/16/2012 11:09:24 PM
Posted: 4 years ago
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).

But, does anyone really "hoard" money in that sense anymore?

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
darkkermit
Posts: 11,204
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7/16/2012 11:11:46 PM
Posted: 4 years ago
At 7/16/2012 11:09:24 PM, JamesMadison wrote:
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).


But, does anyone really "hoard" money in that sense anymore?

Well one can say it goes to the banks but the banks aren't loaning the money either so its going to waste.

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?

You build capital by investing in capital. Buying stock, bonds, and equity. It isn't about just "saving" it.
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JamesMadison
Posts: 381
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7/16/2012 11:17:00 PM
Posted: 4 years ago
At 7/16/2012 11:11:46 PM, darkkermit wrote:
At 7/16/2012 11:09:24 PM, JamesMadison wrote:
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).


But, does anyone really "hoard" money in that sense anymore?

Well one can say it goes to the banks but the banks aren't loaning the money either so its going to waste.

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?

You build capital by investing in capital. Buying stock, bonds, and equity. It isn't about just "saving" it.

But, even if banks don't loan, it is my understanding that the money is still "moving around" in a sense.

And, it just seems like you have to have a lot of people saving to have any kind of long term growth. Even if they aren't investing, they are still building up resources that can be invested in the future.

What is savings but future consumption?
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
darkkermit
Posts: 11,204
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7/16/2012 11:27:20 PM
Posted: 4 years ago
At 7/16/2012 11:17:00 PM, JamesMadison wrote:
At 7/16/2012 11:11:46 PM, darkkermit wrote:
At 7/16/2012 11:09:24 PM, JamesMadison wrote:
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).


But, does anyone really "hoard" money in that sense anymore?

Well one can say it goes to the banks but the banks aren't loaning the money either so its going to waste.

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?

You build capital by investing in capital. Buying stock, bonds, and equity. It isn't about just "saving" it.


But, even if banks don't loan, it is my understanding that the money is still "moving around" in a sense.

The process of banks making loans actually creates money if you defining money using M2. However, if your just using monetary base as the definition of money, then money is moving slower if the banks aren't loaning money. It's spending that matters.

And, it just seems like you have to have a lot of people saving to have any kind of long term growth. Even if they aren't investing, they are still building up resources that can be invested in the future.

Money =/= resources. It's just a medium of exchange. How does hoarding money amount to "building up resources". What things "seem" like doesn't mean what is reality. The world seems flat. It's round.

What is savings but future consumption?

sure one can have strong economic booms and boosts with a bumpy economy, but a stable economy is much more preferable.
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JamesMadison
Posts: 381
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7/16/2012 11:48:29 PM
Posted: 4 years ago
At 7/16/2012 11:27:20 PM, darkkermit wrote:
At 7/16/2012 11:17:00 PM, JamesMadison wrote:
At 7/16/2012 11:11:46 PM, darkkermit wrote:
At 7/16/2012 11:09:24 PM, JamesMadison wrote:
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).


But, does anyone really "hoard" money in that sense anymore?

Well one can say it goes to the banks but the banks aren't loaning the money either so its going to waste.

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?

You build capital by investing in capital. Buying stock, bonds, and equity. It isn't about just "saving" it.


But, even if banks don't loan, it is my understanding that the money is still "moving around" in a sense.

The process of banks making loans actually creates money if you defining money using M2. However, if your just using monetary base as the definition of money, then money is moving slower if the banks aren't loaning money. It's spending that matters.

And, it just seems like you have to have a lot of people saving to have any kind of long term growth. Even if they aren't investing, they are still building up resources that can be invested in the future.

Money =/= resources. It's just a medium of exchange. How does hoarding money amount to "building up resources". What things "seem" like doesn't mean what is reality. The world seems flat. It's round.

What is savings but future consumption?

sure one can have strong economic booms and boosts with a bumpy economy, but a stable economy is much more preferable.

How does money=/= resources?

What is money but resources?

Of course, the fed can inflate the currency, but that has the effect of moving resources. The way I see it money is representative of stuff or resources.

Even if it isn't technically resources, the fact that we treat it as such makes it such for all practical purposes.
As a general rule, you'll find that, when a conservative is talking about policy, history, economics, or something serious, liberals are nowhere to be found. But, as soon as a conservative mentions Obama's birthplace or personal life, liberals are everywhere, only to dissappear again when evidence enters the discussion.
darkkermit
Posts: 11,204
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7/17/2012 12:01:23 AM
Posted: 4 years ago
At 7/16/2012 11:48:29 PM, JamesMadison wrote:
At 7/16/2012 11:27:20 PM, darkkermit wrote:
At 7/16/2012 11:17:00 PM, JamesMadison wrote:
At 7/16/2012 11:11:46 PM, darkkermit wrote:
At 7/16/2012 11:09:24 PM, JamesMadison wrote:
At 7/16/2012 10:31:06 PM, darkkermit wrote:
At 7/16/2012 10:26:08 PM, JamesMadison wrote:
At 7/16/2012 6:22:58 PM, Contra wrote:
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.

The money would be primarily gathered by using deficit spending, which increases aggregate demand, and causes economic growth. To cut inflation, spending is cut or taxes or increased, or a mix of the sort.

If you have a pure free market, it relies thus for the vast part private investment and spending to run the economy. In a recession then, recessions are more severe, but periods of economic growth are stronger, but not as long.

In a Capitalist mixed market economy, the market provides most of the private investment and spending, but the gov't is involved, and thus levels the bumps of the market. This causes recessions to be less severe, but economic growth in the future less robust.

According to the theory, once the economy is growing again, deficits are paid for by increasing taxes or cutting spending.

It just seems like that would deplete savings and hurt long term invetment.

Did you read my last post. Savings =/= investments. Investments are stuff like bonds and stock. Savings is when money is just hoarded without doing anything (like just being stored under one's mattress).


But, does anyone really "hoard" money in that sense anymore?

Well one can say it goes to the banks but the banks aren't loaning the money either so its going to waste.

I mean, I'm sure a few people do. But, I just don't know of many people who stuff their money in their mattress.

Anyways, isn't it crucial to have some people save or "hoard" money so capital can be built up to invest in new technologies and new jobs?

You build capital by investing in capital. Buying stock, bonds, and equity. It isn't about just "saving" it.


But, even if banks don't loan, it is my understanding that the money is still "moving around" in a sense.

The process of banks making loans actually creates money if you defining money using M2. However, if your just using monetary base as the definition of money, then money is moving slower if the banks aren't loaning money. It's spending that matters.

And, it just seems like you have to have a lot of people saving to have any kind of long term growth. Even if they aren't investing, they are still building up resources that can be invested in the future.

Money =/= resources. It's just a medium of exchange. How does hoarding money amount to "building up resources". What things "seem" like doesn't mean what is reality. The world seems flat. It's round.

What is savings but future consumption?

sure one can have strong economic booms and boosts with a bumpy economy, but a stable economy is much more preferable.

How does money=/= resources?

What is money but resources?

Money is a medium to exchange resources. It is not resources itself. I don't see how you can confuse stuff like books, food, machines, and clothing with money.

If you double the money supply you don't double the resources. This is just obvious.

Of course, the fed can inflate the currency, but that has the effect of moving resources.

[sarcasm] but if money represents resources, why doesn't doubling the money supply double the amount of resoruces [/sarcasm]

The way I see it money is representative of stuff or resources.

It doesn't "represent" it. It's just a medium of exchange. The value of money changes. There are price changes.

Even if it isn't technically resources, the fact that we treat it as such makes it such for all practical purposes.

We don't treat money as resources in so many different ways. And If you treat a human like a pig, does it become a pig?
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Jake-migkillertwo
Posts: 67
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7/17/2012 5:06:06 PM
Posted: 4 years ago
At 7/16/2012 2:36:11 AM, JamesMadison wrote:
So, I had a quick question for adherents to the keynesian school of economics.

I understand that keynesians do not find the so called "broken window fallacy" criticism of keynesian style policies very convincing. I have heard keynesians laugh at this criticism, but I have never seen an actual refutation.

Basically, the idea is that keynesian stimulus can't work because anything government spends must be first taken from somewhere else, taxes or borrowing. So, government stimulus does not lead to any net increase in spending or any sort of "stimulus".

Could someone explain to me exactly what is wrong with this line of thinking, as it seems somewhat convincing to me?

Empirical evidence is welcome, but I am really looking for a logical refutation.
Sure. The criticism is assuming that resources used by the government are taken away from another use. But when there's high unemployment, that simply isn't the case. You're putting idle workers and idle capital to work.