Is Keynesian Economics the best economic theory?
As Obama ponders who is the right person to tap for the ever-more-important role of Treasury Secretary, he must take a close look at their plans for stimulating the economy. Some have called Obama a Keynesian economist, but many wonder if that's the best theory.
For those non-econ geeks out there, Keynesian economics is essentially a theory that the best way to stimulate the economy is for the government to step in to increase spending, either by increasing the money supply or by actually buying things on the market itself.
Yes
Side Score: 14
|
 |
No
Side Score: 12
|
|
Keynes' General Theory as fleshed out by Hyman Minsky is the best theory IMHO. Under this interpretation, Keynes rejected the concept of equilibirium in unregulated markets that is the cornerstone of Neo-Classical economics. Instead, under this interpretation of Keynes, a capitalist economy has inherent flaws. In this theory, the finance sector serves as the driving force of the economy through its creation of credit. The instability occurs when expectations of never ending increases in asset prices are fueled by a finance sector extending credit that creates a bubble of rising asset prices rising on a mountain of debt(credit). Eventually the income stream needed to keep the debt recycling can not be maintained. The rise was created by leveraging of assets by debt and not by real creation of wealth. Economic actors start selling assets to raise income and start to realize the asset values were based more on debt expansion than real increases in economic productivity. A crash occurs and banks slash credit and try to raise capital resulting in a collapse in private credit creation. NO EQUILIBRIUM will save us. Instead, in these situations, the government is the only economic actor than come in to supply credit and demand.
The Neo-classical theory can not explain why markets can fall without limit. Equilibrium is not the dominant force in the real world. Only Keynes' theory explains this. 267 days ago | Tagged As: yes
Although I tend to agree with Monetarists that markets should be left alone, one has to stop and think about the world we live in. People in power or not will always try to exploit the system (current financial situation) so agree in the Keynesian view of government imposed limits to avoid extreme problematic situations. Games aren't any fun when they don't have rules. 363 days ago | Tagged As: yes
"People in power or not will always try to exploit the system (current financial situation) so agree in the Keynesian view of government imposed limits to avoid extreme problematic situations." Soooo the solution to keeping people in power (like government officials) from abusing their power is too give the government more power? It kinda seems like adding fuel to the fire to me. 351 days ago | Tagged As: No
It's not so much adding power as it is distributing power. Humans learned real quick that countries governed by a single entity are most susceptible to abuse. That's why our nation was developed with a system of checks and balances. Giving the government / fed more power over the economy helps to balance the already great power wielded by the large corporations. Eliminate either of the two, and you facilitate abuse. And, it will be in their nature to want to eliminate each other, so we the people need to be watchful. 100 days ago | Tagged As: yes
I believe that Keynesian economics is the best economic theory that I have seen to date. The current situation that we're in is being exacerbated by consumers closing their wallets, which in turn causes businesses to sell less, which causes them to lay off people, which causes further declines in the economy, and the cycle repeats. Stimulus by the government in terms of direct investment in the economy (i.e through infrastructure projects, alternative energy, etc) and through reduction of interest rates will encourage people to spend more, which drives the economy. 367 days ago | Tagged As: yes
It is not the governments job to "drive the economy", otherwise the economy will become dependent on the government, like it has now. With an economy not directly and fed by the government, yeah the bottom line would be smaller, but it would be more stable. Keynesian economics is like putting the economy on methamphetamine, seeing the high it gets and concluding that it is good for the economy, then proceeding to continually pump the drug into the system to avoid an inevitable crash. Part of economics is looking BEYOND the short term benefits. Yeah giving subsides now might boost and industry... for a time, before it harms all of the economy. Keynesian economics is not sustainable, it is Utopian. 351 days ago | Tagged As: No
That's only one side of Keynesian economics. The other is, when the economy is highly prosperous, taxes and interest rates should be increased, and the excess government funds put into savings to pay off debts and prepare for the next economic downturn. This is essentially a control system, something we deal with in engineering applications all the time. Both systems work, namely Keynesian and Classical, however the recent policies of the United States have been neither. When times are good, a Keynesian economist would increase taxes and tone down the level of prosperity to a more sustainable level. A Classical economist would let the economy take its natural course, thereby meaning the economy is temporarily more prosperous. When times are bad, a Keynesian economist would decrease taxes and interest rates to try to increase the cash flow, helping to dampen the economic crisis. A Classical economist would again let the economy take its natural course, thereby meaning the economy is temporarily in an even greater crisis. The real problem is, voters are shortsighted. We vote for Classical economic policies when times are good (because it makes the times even better) and Keynesian economic policies when times are bad (because it makes the times less bad). And, you're absolutely right, this is not sustainable. We need to adopt either one system or the other, otherwise our debt will continue to increase. My opinion on the matter is that Keynesian economics is the better of the two systems, and the best system I've seen. 100 days ago | Tagged As: yes
Keynesian theory while interesting forgets that markets are made and driven by humans and humans by the nature are greedy. We now need new thinking and forget the past flawed theories. The world cannot keep shipping jobs to China etc and think that we in the western world can keep getting fat off providing services. I believe that it is only time before there will be trade restrictions again to protect jobs. 190 days ago | Tagged As: No
"humans by the nature are greedy" ...in your own Right-wing mind that is. While it is very true that "conservatives" by nature are fearful of how they perceive human nature, it is unnecessary to feel this way. Living your life through fear is not very productive. "The world cannot keep shipping jobs to China etc and think that we in the western world can keep getting fat off providing services. I believe that it is only time before there will be trade restrictions again to protect jobs." This has absolutely nothing to do with Keynesian Economics. The days of the USA basing its economy on either agriculture or manufacturing in a truly global economy are looooong gone. Only increased education and high paying green & high technology jobs will save this country. 20 days ago | Tagged As: yes
|
It depends on if you're asking about the long-run and what factors you are including in your question. In the 60s or so, Keynes' theories (plus unions) pretty much screwed our economy (hyper-inflation). Demand was increased (because of gov. spending), supply increased (because of higher prices brought by higher demand). GDP was no longer growing and CPI was growing really quickly. (Source: my economics class) 367 days ago | Tagged As: No
Keynesian economics in the context of this debate promises to enrich you by first stealing from you and/or future generations. This is a contradiction in reason. History and reason teach that while taxes are being taken of people those tax dollars benefit the people who own the means of production while the wage earners struggle to feed themselves and their families. The wars of this country has made billionaires of bomb producers. Do you think they love the Keynesian theory? Without question! 253 days ago | Tagged As: No
"Keynesian economics in the context of this debate promises to enrich you by first stealing from you and/or future generations." Nonsense, all this theory is about is that when the economy is in serious trouble that the govt. needs to be the "spender of last resort". The success of the New Deal proved once & for all that Keynesian Economics works! "The wars of this country has made billionaires of bomb producers." You are warping the real meaning of Keynesian Economics here. It's not about starting senseless wars for profit...that's a neo-con/free market attitude. 20 days ago | Tagged As: yes
It “works” if you are a beneficiary of Government intervention in the economy. Shall I enumerate a couple dozen recipients of the latest flurry of Keynesian economics in practice? Who do you think shall ultimately pay for the government’s intervention in the economy? --We, the taxpayers in the forms of higher taxation, and price inflation, with a devalued currency! You believe Keynesian economics “works”, but what I asserted is the simplicity of how and for whom it “works” and for whom it does not “work”. Lastly, if you are going to argue that the taxpayers will prosper by the government taking a larger share of their incomes throughout their lifetime by taxation then argue on. 20 days ago | Tagged As: No
Keynesian economics is based upon this idea: If you take a room full of people and half the people give their money to the other half, then everyone is richer. This makes no sense! Keynesian economics has been proven to be false over and over in US economic history. The idea that take money from some people and giving it to others so that they will spend more is a fallacy. You can't take money out of your left pocket and put it in your right pocket, and claim to be richer. Check out the debate on Keynesian economics here: http://deb8.us/l0Rmr6 |
