The takeaway from six years of economic troubles? Keynes was right. Countries that took emergency measures to reduce public borrowing have mostly suffered weaker growth, as in the case of Britain from 2010 to 2012, Japan this year and the United States after the 2013 “sequester” and fiscal cliff deal. In more extreme cases, such […]
Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast. There seems to be some kind of lesson here about macroeconomics, but I can’t quite put my finger on it If austerity worked, the bars for the UK and Italy would […]
I didn’t believe in the liquidity trap and was pretty down on old-fashioned Keynesianism until 1998, when a hard look at Japan and an attempt to understand what was happening there led me to change my mind. Krugman on Japan and Keynes. Macroeconomic Morality – NYTimes.com
a study from Robert Pollin and Heidi Garrett-Peltier finds that defense spending does indeed create jobs under recession conditions but that “$1 billion spent on each of the domestic spending priorities will create substantially more jobs within the U.S. economy than would the same $1 billion spent on the military” with “investments in clean energy, […]
the way the dialogue works is that first a Keynesian observes that fiscal stimulus can increase growth in a depressed economy. Second, as an attempted reductio, a conservative says “if that was true, then you could increase growth by breaking a bunch of windows.” Third, the Keynesian accurately points out that you could, in fact, […]
Whenever you read conservatives trying to critique what they think the other side believes, you find them assuming that their opponents must be mirror images of themselves. The right believes that less government spending is always good, regardless of circumstances, so it assumes that the other side must always favor more government spending. The right […]
The Keynes v. Hayek BBC debate at the LSE which pits Lord Robert Skidelsky and Duncan Weldon arguing for Keynes against George Selgin and Jamie Whyte arguing for Hayek is now available in an online podcast. From Keynes v. Hayek Debate — Marginal Revolution Going to listen to this on way in to work.
If we decided to build a couple of new carriers, thousands of workers would be hired for the shipyards. Thousands of employees would be hired for the steel mills that would provide the steel for the hull and various sub contractors would hire thousands. Do you know what that means? It means they would receive paychecks and […]
Life in the Liquidity Trap The Wall Street Journal is now admitting that we are in a liquidity trap. This is something the Keynesian have been saying for the past two and a half years. At that same time; the Journal Op-Ed pages have been warning about inflation and interest rates while hyping gold.
Keynes — and others who later elaborated on his work, like Hyman Minsky — taught us that although markets are usually self-correcting, they occasionally enter destructive feedback loops in which a shock to, say, the financial system scares business and consumers so badly that they hoard money, which worsens the damage to the system, which […]