The January 30th episode of This American Life features some interesting thoughts on John Maynard Keynes and the inevitability of putting his controversial theories to the test, whether we want to or not. [This American Life]

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  1. ADismalScience says:

    1937 recession.

    It happened!

    Look it up.

    • B says:

      @ADismalScience: I was under the impression that the 1937 recession was preceded by FDR cutting spending in an effort to balance the federal budget.

    • Trai_Dep says:

      @ADismalScience: Because FDR choked back stimulus spending, citing short-term fears of the ballooning deficit. Once he went back to priming the pump, our economy not only recovered, but experienced unprecedented, long-term growth.
      So, Obama better aim big, rather than small, is what your factoid proves.

      • ADismalScience says:

        @Trai_Dep:

        So goes the common refrain. It’s the problem of economics – so little ability to hold true controlled experiments. My argument, and the argument of many scholars, is that the death and relative devastation of competing industrialized societies created a haven for American business postwar that truly ended the recession more effectively than any amount of Government spending.

        The truth is hard to discern.

  2. MeOhMy says:

    Love the part where he talks about two drastically different sides of Keynes’s personailty and the films that would come of them.

    This story was presented by the Planet Money podcast which Consumeristos might also find interesting:
    [www.npr.org]

  3. Ash78 ain't got time to bleed says:

    I’m not much of a TOOL fan anymore

  4. nighttrain2007 says:

    Keynes, that name should be stricken from historical record. His ‘economic policy’ (for lack of the term what it really is) should be tossed on the garbage heap of history. Keynesian economics CAUSES the problems in the first place and government intervention when the markets crash makes it worse not better

    • Angryrider says:

      @nighttrain2007: Damn straight. I mean it wasn’t the private sector that got us into the mess in the first place right?

      • nighttrain2007 says:

        @Angryrider: Matter of fact no it wasn’t. But let’s blame the free market eh? After all they’re responsible for printing money and lowering the interest rate. Oh wait….

        • chuckv says:

          @nighttrain2007: and forcing people to make loans to people who aren’t creditworthy. Don’t forget about that. The private sector also implemented laws which make it difficult for corporate raiders to take over companies and oust incompetent CEOs.

        • t-r0y says:

          @nighttrain2007: Hear, Hear! Sure the free-market has a few bad apples, just like the government has a few good apples, but it’s the irresponsible interventions and regulations by the government is what made this possible. They should have let the corrupt and/or poorly run wall street companies fail!

    • Trai_Dep says:

      @nighttrain2007: Yay, first RedStater to post. You win an anatomically correct doll of Ayn Rand!

    • AtomicPlayboy says:

      @nighttrain2007: Unfortunately, it will require – like other failed leftist ideologies like Communism – institution and abject failure before it can be retired as a bankrupt theory. Remember, the Left always thinks they’ve got some swell new idea that’s going to save the world, somehow ends up scaring everyone into implementing it, wipes out an economy if not a population in this pursuit, and then finally abandons the project in favor some new, even better idea. Rinse, repeat.

      • OggJoshua says:

        @AtomicPlayboy: For example?

        • AtomicPlayboy says:

          @OggJoshua: Well, I gave an example: Communism. For another, I would propose the well-intentioned idiocy of the Great Society. I’d also add Universal Heath Coverage to the pile, a nice-sounding machine which grinds quality and innovation in the health care industry to dust wherever it is implemented.

          For more examples, just find any comprehensive list of social, political, and military policies originated by the left. It’s like a museum of bad, damaging ideas. Our present Keynesian “stimulus” mess is just a honed version of the New Deal, which not only did very little to assist in economic recovery (thank the Nazi and Soviet leftists for forcing that one), but which left a bloated, burdensome bureaucracy which all subsequent efforts have been unable to cull.

          • OggJoshua says:

            @AtomicPlayboy: I don’t know enough history to agree or disagree with you about the Great Society.

            I’m agnostic about the New Deal for the same reason, but I can say that your opinion of it is unusual. While there are critiques of it from both the left and right (for instance, the *authentic* Left saw the Depression as an opportunity to destroy capitalism and reorganize society), the mainstream view is that it was necessary and it helped a lot. Economist Dean Baker, one of the very few professional economists who predicted the current mess would occur, says that over $1 trillion in New Deal-type deficit spending is needed. So the burden on you to support your opinion is great.

            The only incarnations of “communism” we’ve seen would better be labeled “state capitalism”. I don’t know if real communism would work, but who has tried?

            I can only disagree with you about universal health care. Every other first-world country has it. It has lower costs and better results than the U.S. system — wherein the bloated, burdensome bureaucracy happens to reside inside corporations, to the detriment of the public. 2/3 to 3/4 of the American public consistently supports the idea in polls. It’s not some left-wing fantasy. It works, and it’s popular.

            • AtomicPlayboy says:

              @OggJoshua: Too little space here to go into the detail necessary to refute the popular, but fallacious view that the New Deal was a net positive and had anything near the stimulative effect attributed to it, but I’ll take a quick swing at Universal Health Care.

              My contention against the practice is three-fold: 1) it is completely unnecessary; 2) it provides mediocre care for all vs. the US system of excellent care for less than everyone; 3) it is mutually exclusive of the type of innovation that brought about the health care revolution of the last two decades.

              Briefly: 1) There are very few in this country who can’t afford health insurance, but very many who chose not to. Medicare/aid and other programs provide for the former; the latter can return their iPhones, eat and drink at home a couple more nights a month, and pay their share of the bill. 2) I disagree with your contention that “it works, and it’s popular”, based upon both my anecdotal evidence supplied by friends from the UK, Sweden, Canada, etc. and also facts like the relative mortality rates for diseases in the US vs. countries with UHC. 3) The US pharmaceutical industry, and the US system of medical schools and teaching hospitals, produces not only the finest top-tier medical care in the world, but also has been the greatest engine of medical advancement the world has ever seen. The miracle cures brought on by pharma research and the promise of more miracles through genomics and other biotechnologies are all very expensive, and have been enabled by a capitalist, competitive system with few market controls. A government-run health care system, in which price controls, drug prescription mandates, and other regulations were applied to this industry would do great damage to it.

              There’s plenty more to say against the application of UHC in the US, and I’ll admit there are a few things to say for it. On balance, I neither believe that the very limited successes realized in some other countries are applicable to the US, nor do I believe that there is any reason to try to adopt a UHC system. The health care industry needs to clean its own house by adopting better IT, improving operational practices, etc. but it can do so on its own, to much better effect than a government-imposed, innovation-crushing UHC alternative.

            • god_forbids says:

              @OggJoshua: “2/3 to 3/4 of the American public consistently supports the idea in polls. It’s not some left-wing fantasy.”

              I don’t think you realize that these are equivalent? To wit:

              ” It works, and it’s popular.”

              You got one out of two right. The ‘low costs’ enjoyed by socialist health care systems results from the fact that they pay just licensing costs on the technologies which the evil American corporate R&D system spends billions to generate. Or just reverse engineer it and rely on lax international IP law enforcement.

              As to Dean Baker, lots of people “predicted” that the housing bubble would pop … some as long ago as 1994 (years before it even inflated). This information is as close to useless as my (100% accurate, BTW) prediction that the economy will recover. Timing is everything.

              I wouldn’t call the positive view of the New Deal ‘mainstream’. Certainly the media has propagated the legends of an infallible Keynes and FDR, but then again we know where they come from. It wasn’t until I had graduate level econ courses that it was picked apart entirely. Economists (by survey from my macro text) widely regard it as what not to do to avoid prologing an economic downturn.

              Then again, nothing is more consistent than the general public’s disdain for and distrust of economists. We are aware of the problem (see here and here), but defeating massive ignorance is never easy. While we all wish the idiots would die and get out of the gene pool already, but Trai_Dep and his ilk are apparently too busy voting for BHO and answering surveys about socialist health care systems.

      • Trai_Dep says:

        @AtomicPlayboy: How’s that Ayn Randian Free Market Fundamentalism working for you? Lost much in the Wall Street sell-off? Shame your Social Security wasn’t converted before the crash? Happy to see investment banking evaporate as an entire category within the United States?
        Don’t worry, more tax cuts will fix everything!

        • acklenheights says:

          @Trai_Dep: Haven’t had much of a free market lately at all, buddy. Although in the Reagan years it was mighty fine. Wouldn’t mind having that back at all, no sir.

          You clearly have a lot to learn about economics.

          • AtomicPlayboy says:

            @acklenheights: Ignore him, as I quickly learned to do. He’s a crank with little understanding of the many subjects on which he chooses to pontificate, and paying him any attention only stokes his trolling flame.

        • t-r0y says:

          @Trai_Dep: You haven’t a clue. There is no Social Security — it’s all a giant Ponzi scheme. I puts Madoff to shame! It’ll come crumbling down someday.

  5. concordia says:

    I propose we replace the teachings of John Maynard Keynes with those of Maynard James Keenan.

  6. Trai_Dep says:

    So with the Fed Rate at essentially zero, what will the monetarists suggest the US do? Pay money to take loans, I suppose?

    • t-r0y says:

      @Trai_Dep: We shouldn’t be following the monetarists either. We, as a nation, need to stop borrowing and printing, period!

      • CheritaChen says:

        @t-r0y: Agreed. It’s become a fantasy of mine that President Obama, still high on his reputation as messiah, will have an epiphany:

        Federal Reserve…wait a minute. Are you part of the government or aren’t you? You know what? Why is this country in debt to you for printing more worthless paper? This is idiotic. You’re fired. We don’t owe you shit. “Debt” abolished. Now fuck off.

        (Hey, a girl can dream.)

    • god_forbids says:

      @Trai_Dep: In a manner of speaking, yes.

      [www.businessweek.com]

      • Trai_Dep says:

        @god_forbids: An interesting approach, although it’d be tricky to force the “right” amount of inflation in. With our careening deficits, I’d be concerned with the inflation horse quickly stampeding out of our control if we took a lax attitude towards it.
        And, besides, what’s the main tool a central bank uses to increase inflation? Fiscal measures. So we’re back to neo-Kenseyian economics to prime the pump until our economy is at the point where monetary tools are again available to policymakers.
        Interesting article, tho. Provocative. Thanks!

  7. B says:

    Speaking of Keynsian economics, the Planet Money podcast from Friday has a fascinating look at Japan’s late 80s/early 90s real estate bubble/burst/collapse and their decidedly non-Kensyian reaction to the problem (cut spending, Raise taxes!). To summarize, it didn’t work. Of course, nobody’s suggesting we raise taxes, but still, a fascinating look at what can go wrong when government policy makes the wrong decision.
    [www.npr.org]

    • acklenheights says:

      @B: they almost had it right. cut spending AND cut taxes. You cut taxes, there’s more money in people’s pockets that’s not going to efficient private, profit-oriented businesses and not bureaucratic waste.

      • B says:

        @acklenheights: Right, because when people have more money they spend it efficiently on plasma TVs and blu-ray DVD players, not inefficiently on roads and bridges.

        Full disclosure, I have both a blu-ray player and an HD TV, but no roads or bridges.

    • Trai_Dep says:

      @B: Well, to be fair, the Japanese gov’t also finally forced their banks to write off the bad loans on their books – the latter refused to bite the bullet for nearly a decade, which paralyzed their financial sector. And, Japanese/American comparisons must be made gingerly, since their savings rates dwarf ours.
      I’d like to see our banks forced to do a similar thing: let blood flow from their books, then if we need to, pump $$$ to recapitalize them w/ the appropriate strings attached. Can’t really fix them until they reset, IMO.

  8. Andrew Burns says:

    Spend, Spend, Spend! Hey it’s worked really well in Asia…. I guess that’s better than WW3 to solve the current deperession, and don’t kid, that is exactly where we’re headed and the last deperession required a spending and thrift event that reset american perspective and taught us to be responsible for our own lives.