Where Keynes Went Wrong

[Romulus]

Just finished the book Where Keynes Went Wrong by Hunter Lewis. I'd like to post four issue I take away from the book which astonish me. Considering there are some very smart people at this forum who know considerably more about economics than I do, I would appreciate the best arguments against these issues as well as arguments which may reinforce them.

Issue One: The Definition of Full Employment/No Math

Keynes' definition of full employment is vague and convoluted. However, having a precise definition for full employment is essential to his model because it is the signal planners use to shift gears and guard against inflation. Keynesians like Tobin (I'm going to use last names here, if detailed citations are needed I can provide them) state full employment is 0%, Dillard puts it at 3% (and like Keynes considers, 'frictional/voluntary unemployment factors), Beveridge documents a range from 2% to 13% from various times in a plethora of countries then claims it is 3% also. Current conventional Keynesian definitions of full employment range from 2%-7%.

This range of definitions of full employment allows Keynesian advisers to policy makers to advocate for inflationary/anti-inflationary policies based on intuition or worse, political bias. It seems to me Friedman's NAIRU model (although, admittedly the math is currently over my head) provides a well defined mathematical model.

Issue Two: Bad Math

N=FD

Where N is employment, F is a function, and D is expected demand. This states that expected demand directly causes employment. In the real world, expectations are not a measurable quantity and have no place in an equation. Demand signals in supply/demand models are not realized until a purchase is made. That purchase could be of anything other than something which increases employment within the country. "Topping off" investment measures by government into companies can and do go overseas, and monetization policies by a central bank (converting bonds to cash) are very often invested in emerging foreign markets. In other words, getting what is actually in demand wrong can increase unemployment.

Issue Three: Further Quantifying the Unquanitifiable/the MPC and the "Multiplier Effect"

Keynes' MPC (marginal propensity to consume) stating the net result of a government or stimulus induced check going to a worker (lets call that result y) will lead to 10y because 90% of that check will be used in consumption. The problem for which from a mathematical perspective is the assumption that the 10% saved (not used for consumption) is stuffed into a mattress. It is not, when savings are invested they convert to spending (by banks, corporate capital expenditures etc.). So, when we realize 100% of stimulus is spent, the "multiplier effect" self destructs and becomes infinite. That may be a bit of a stretch but it is certainly not 10y or 4y or 2y. So what is it? Nobody seems to know.

In her capacity as head of the Council of Economic Advisers, Christina Romer studied tax cuts from 47' to 2005 and found a multiplier effect of 3, so she was fired. :lamo On the stimulus, she projected a ME of 1.57 and it came in at 1 (others disagree and say it was lower). Bevenridge (a Keynesian) predicts a multiplier of 1 or less than 1, and Keynesian economists Paul Samuelson and William Nordhaus (Keynesian authors of bestselling textbooks) state "no proof has yet been presented of an ME greater than 1".

Point being, there is no predictable ME, not even with tax cuts. Which goes back to the N=FD fallacy, there is no way to predict what will be in demand. Give workers money and they will certainly spend and save at some ratio however, they may buy cheap Chinese goods and their investments may go overseas, nullifying any ME.

Issue Four: Keynes is TeH GAy and a Eugenicist! I kid I kid. eace

Although that was discussed in the book. I'm not sure if the topic was silly and extraneous or if Keynes was a diabolical nihilist or self-described "immoralist" who foisted a flawed economic system on the world.

 

[ab9924]

Just finished the book Where Keynes Went Wrong by Hunter Lewis. I'd like to post four issue I take away from the book which astonish me. Considering there are some very smart people at this forum who know considerably more about economics than I do, I would appreciate the best arguments against these issues as well as arguments which may reinforce them.

Issue One: The Definition of Full Employment/No Math

Keynes' definition of full employment is vague and convoluted. However, having a precise definition for full employment is essential to his model because it is the signal planners use to shift gears and guard against inflation. Keynesians like Tobin (I'm going to use last names here, if detailed citations are needed I can provide them) state full employment is 0%, Dillard puts it at 3% (and like Keynes considers, 'frictional/voluntary unemployment factors), Beveridge documents a range from 2% to 13% from various times in a plethora of countries then claims it is 3% also. Current conventional Keynesian definitions of full employment range from 2%-7%.

This range of definitions of full employment allows Keynesian advisers to policy makers to advocate for inflationary/anti-inflationary policies based on intuition or worse, political bias. It seems to me Friedman's NAIRU model (although, admittedly the math is currently over my head) provides a well defined mathematical model.

Issue Two: Bad Math

N=FD

Where N is employment, F is a function, and D is expected demand. This states that expected demand directly causes employment. In the real world, expectations are not a measurable quantity and have no place in an equation. Demand signals in supply/demand models are not realized until a purchase is made. That purchase could be of anything other than something which increases employment within the country. "Topping off" investment measures by government into companies can and do go overseas, and monetization policies by a central bank (converting bonds to cash) are very often invested in emerging foreign markets. In other words, getting what is actually in demand wrong can increase unemployment.

Issue Three: Further Quantifying the Unquanitifiable/the MPC and the "Multiplier Effect"

Keynes' MPC (marginal propensity to consume) stating the net result of a government or stimulus induced check going to a worker (lets call that result y) will lead to 10y because 90% of that check will be used in consumption. The problem for which from a mathematical perspective is the assumption that the 10% saved (not used for consumption) is stuffed into a mattress. It is not, when savings are invested they convert to spending (by banks, corporate capital expenditures etc.). So, when we realize 100% of stimulus is spent, the "multiplier effect" self destructs and becomes infinite. That may be a bit of a stretch but it is certainly not 10y or 4y or 2y. So what is it? Nobody seems to know.

In her capacity as head of the Council of Economic Advisers, Christina Romer studied tax cuts from 47' to 2005 and found a multiplier effect of 3, so she was fired. :lamo On the stimulus, she projected a ME of 1.57 and it came in at 1 (others disagree and say it was lower). Bevenridge (a Keynesian) predicts a multiplier of 1 or less than 1, and Keynesian economists Paul Samuelson and William Nordhaus (Keynesian authors of bestselling textbooks) state "no proof has yet been presented of an ME greater than 1".

Point being, there is no predictable ME, not even with tax cuts. Which goes back to the N=FD fallacy, there is no way to predict what will be in demand. Give workers money and they will certainly spend and save at some ratio however, they may buy cheap Chinese goods and their investments may go overseas, nullifying any ME.

Issue Four: Keynes is TeH GAy and a Eugenicist! I kid I kid. eace

Although that was discussed in the book. I'm not sure if the topic was silly and extraneous or if Keynes was a diabolical nihilist or self-described "immoralist" who foisted a flawed economic system on the world.

I am not an economist, I study maths, but let me chip in for this one. This is a VERY interesting topic. If you take one step back and look at the Keynesian theories from the point of view of control systems, then you find that the economic processes that are modeled there turn out to be positive feedback mechanisms. Then, Keynes is trying to put in human-induced dampers, I guess in the hope that there is something that can be done to turn it into a negative feedback process or at least to reduce the oscillatory swings of the economy.

I would like to agree with the bad math argument. From the theoretical perspective, I think Keynes lived in a world where a measurable "friction" could be attributed to all economic processes, this friction characterizing the time that every process needs for its completion. This forces the linearity of Keynesian arguments, such as the ME.

But I must say, purely from the mathematical point of view, without a good economic education (maybe I should take a class), that today's economy is a non-linear system! Thanks to the internet and the resulting unlimited instant reproduction of industrial goods, plus the elimination of labor costs through currency policies for physical products, we don't have those transitionary working processes that Keynes proposed.

Instead of taking clues from Keyenes, in my humble mathematical view, we should interpret the world economy in the framework of a finite state model. Such an approach would give us the tools of understanding unemployment and inflation without the need for supply-demand balancing, the tools of understanding government without assumptions about taxes/taxpayers, and the tools to understand consumer behaviour without worker productivity.

I think that Keynesian policies to influence countries' economies will remain in the long run though, because this is how today's global financial players developed their control over people, and they will run all governments successfully in this way, until they push the environment (externalities) to the edge of diminishing returns. We will have to wait until the next chaos period before the forced Keynesian characteristics of the world economy will change.

 

[JP Hochbaum]

Keynes wasn't that vague when it came to full employment, he just chose not to use unemployment numbers as it's measurement, he instead used effective demand as a measurement:

"This paper
argues against this view and suggests that while aggregate demand has an important place
in Keynes’s analysis of the business cycle, “filling the gap” is not his method for fiscal
policy. Rather, he had a targeted demand approach to full employment of a specific kind.
He favored public employment schemes, generally in the form of public works, which
were to be implemented both in recessions and in economies near full employment. To
subscribe to such a plan, however, requires conviction of its advantages and cleverness in
its execution. Keynes had both.

http://www.levyinstitute.org/pubs/wp_542.pdf

"What was truly innovative in Keynes’s work was the principle of effective
demand, which is quite distinct from what has become known as the theory of aggregate
demand (Kregel 2008)."

This being said, many of my econ teachers don't agree with Keynes analysis:

"While rejecting the Keynesian analysis, the New Economic
Consensus model and much of mainstream theory still use the gap method to argue in
support of monetary or fiscal policy by stipulating various demand- or supply-side effects
of each.2 While the policy recommendations across the theoretical spectrum diverge
significantly, plugging the gap is a core economic concept that underpins them. This
methodology is also embraced by many Post Keynesians."

 

[Missed AB]

Just finished the book Where Keynes Went Wrong by Hunter Lewis. I'd like to post four issue I take away from the book which astonish me. Considering there are some very smart people at this forum who know considerably more about economics than I do, I would appreciate the best arguments against these issues as well as arguments which may reinforce them.

Issue One: The Definition of Full Employment/No Math

Keynes' definition of full employment is vague and convoluted. However, having a precise definition for full employment is essential to his model because it is the signal planners use to shift gears and guard against inflation. Keynesians like Tobin (I'm going to use last names here, if detailed citations are needed I can provide them) state full employment is 0%, Dillard puts it at 3% (and like Keynes considers, 'frictional/voluntary unemployment factors), Beveridge documents a range from 2% to 13% from various times in a plethora of countries then claims it is 3% also. Current conventional Keynesian definitions of full employment range from 2%-7%.

This range of definitions of full employment allows Keynesian advisers to policy makers to advocate for inflationary/anti-inflationary policies based on intuition or worse, political bias. It seems to me Friedman's NAIRU model (although, admittedly the math is currently over my head) provides a well defined mathematical model.

Issue Two: Bad Math

N=FD

Where N is employment, F is a function, and D is expected demand. This states that expected demand directly causes employment. In the real world, expectations are not a measurable quantity and have no place in an equation. Demand signals in supply/demand models are not realized until a purchase is made. That purchase could be of anything other than something which increases employment within the country. "Topping off" investment measures by government into companies can and do go overseas, and monetization policies by a central bank (converting bonds to cash) are very often invested in emerging foreign markets. In other words, getting what is actually in demand wrong can increase unemployment.

Issue Three: Further Quantifying the Unquanitifiable/the MPC and the "Multiplier Effect"

Keynes' MPC (marginal propensity to consume) stating the net result of a government or stimulus induced check going to a worker (lets call that result y) will lead to 10y because 90% of that check will be used in consumption. The problem for which from a mathematical perspective is the assumption that the 10% saved (not used for consumption) is stuffed into a mattress. It is not, when savings are invested they convert to spending (by banks, corporate capital expenditures etc.). So, when we realize 100% of stimulus is spent, the "multiplier effect" self destructs and becomes infinite. That may be a bit of a stretch but it is certainly not 10y or 4y or 2y. So what is it? Nobody seems to know.

In her capacity as head of the Council of Economic Advisers, Christina Romer studied tax cuts from 47' to 2005 and found a multiplier effect of 3, so she was fired. :lamo On the stimulus, she projected a ME of 1.57 and it came in at 1 (others disagree and say it was lower). Bevenridge (a Keynesian) predicts a multiplier of 1 or less than 1, and Keynesian economists Paul Samuelson and William Nordhaus (Keynesian authors of bestselling textbooks) state "no proof has yet been presented of an ME greater than 1".

Point being, there is no predictable ME, not even with tax cuts. Which goes back to the N=FD fallacy, there is no way to predict what will be in demand. Give workers money and they will certainly spend and save at some ratio however, they may buy cheap Chinese goods and their investments may go overseas, nullifying any ME.

Issue Four: Keynes is TeH GAy and a Eugenicist! I kid I kid. eace

Although that was discussed in the book. I'm not sure if the topic was silly and extraneous or if Keynes was a diabolical nihilist or self-described "immoralist" who foisted a flawed economic system on the world.

The flaw people do not understand is Keynes did not use evidence based research. Also Keynes theories never address the consumer's ability to think past the moment.

 

[Romulus]

Keynes wasn't that vague when it came to full employment, he just chose not to use unemployment numbers as it's measurement, he instead used effective demand as a measurement:

Not in the General Theory, he did not define full employment with "effective demand as a measurement". The author of the paper you cited makes the case (and a compelling one consistent with Keynes' tendency to change his mind) that Keynes' overall body of work argues for "targeted public works" to increase "effective demand" to generate "full employment". That is, an actual 0% unemployment rate regardless of frictional, voluntary or structural unemployment (like Tobin who I cited above). This is counter to Keynes in the General Theory, where Keynes' vague and convoluted definition of full employment considers those other factors. This is what I mean by vague and convoluted:

We have full employment when output has risen to a level at which the marginal return from a representative unit of the factors of production has fallen to the minimum figure at which a quantity of the factors sufficient to produce this output is available.--Keynes, General Theory

That is maximally convoluted and vague. I get what he means--full employment is when all factors of production are fully employed--but it begs the question, when is that? It is an important question too because that is when we should worry about inflation, according to Keynes. But I understand, the author of the paper you cited says Keynes changed his mind later and that that is 0%.

"This paper
argues against this view and suggests that while aggregate demand has an important place
in Keynes’s analysis of the business cycle, “filling the gap” is not his method for fiscal
policy. Rather, he had a targeted demand approach to full employment of a specific kind.
He favored public employment schemes, generally in the form of public works, which
were to be implemented both in recessions and in economies near full employment. To
subscribe to such a plan, however, requires conviction of its advantages and cleverness in
its execution. Keynes had both.

http://www.levyinstitute.org/pubs/wp_542.pdf

"What was truly innovative in Keynes’s work was the principle of effective
demand, which is quite distinct from what has become known as the theory of aggregate
demand (Kregel 2008)."

I read the above paper and understood where he was going with it, which is full employment is 0% unemployment. "Effective demand" being no more mathematical than "expected demand" (mentioned in my 1st post), even if we have the "convictions of our intellect" or are "clever" in our approach to public works. This is simply a shot in the dark. No, it's worse than a shot in the dark, because I have Trijicon nights sights and a 120 lumen Sure Fire flashlight fastened to the Picatinny rail of my customized 70s series Colt Combat Commander. The tool we need to justify this Keynesian silliness is math, and we have none.

The question I had--once I realized this was moving to the 0% unemployment mantra--was how are we gonna get past the frictional and voluntary unemployment issues? This is what your author had to say:

For Keynes, even in expansions, the goal of full employment is still
important. The problem to wrestle with is structural unemployment, which should “be
treated as something to be handled forcibly and not something to be defeatist about”
(Keynes 1980: 357). To deal with structural unemployment, government can redirect its
public works to those “special areas” with the highest remaining unemployment. Keynes 11
and the government had agreed that they could take “the contract to the men, rather than
the men to the contract” (Brown 1936).

He doesn't mean we should force people to work, does he? I mean, that's how socialist nations attempted to get to full productivity. Wait!!!:

As it will be noted later, large-scale public works are needed not only for the swift reduction in
unemployment, but also for a generalized socialization of investment, which Keynes considered to be a
prerequisite for economic stability.

When comparing these strategies to the
one via public investment, he finds that cumulative stimuli are not required for the latter
and that the only logical solution to the problem of unemployment is for government to
socialize private investment and control its growth rate lockstep with population growth
and the increase in productivity of the labor force.

Awww...man! :shock: Not socialsm, we tried that and it sucked. :neutral:

This being said, many of my econ teachers don't agree with Keynes analysis:

"While rejecting the Keynesian analysis, the New Economic
Consensus model and much of mainstream theory still use the gap method to argue in
support of monetary or fiscal policy by stipulating various demand- or supply-side effects
of each.2 While the policy recommendations across the theoretical spectrum diverge
significantly, plugging the gap is a core economic concept that underpins them. This
methodology is also embraced by many Post Keynesians."

Cool I get it, use Friedman's NAIRU to find full employment. Which begs the question, if we can find "natural unemployment" and should not work to alter it for fear of inflation, why do we intervene in other "natural" economic rates to cause inflation? Plus, we are still stuck with the other two issues in my first post. :2wave:

 

[JP Hochbaum]

Not in the General Theory, he did not define full employment with "effective demand as a measurement". The author of the paper you cited makes the case (and a compelling one consistent with Keynes' tendency to change his mind) that Keynes' overall body of work argues for "targeted public works" to increase "effective demand" to generate "full employment". That is, an actual 0% unemployment rate regardless of frictional, voluntary or structural unemployment (like Tobin who I cited above). This is counter to Keynes in the General Theory, where Keynes' vague and convoluted definition of full employment considers those other factors. This is what I mean by vague and convoluted:

We have full employment when output has risen to a level at which the marginal return from a representative unit of the factors of production has fallen to the minimum figure at which a quantity of the factors sufficient to produce this output is available.--Keynes, General Theory

That is maximally convoluted and vague. I get what he means--full employment is when all factors of production are fully employed--but it begs the question, when is that? It is an important question too because that is when we should worry about inflation, according to Keynes. But I understand, the author of the paper you cited says Keynes changed his mind later and that that is 0%.

Taking one of his writing and claiming he was convoluted is a little dishonest IMO. Keynes wrote many books, so pulling one sentence out of about 10,000 pages in his career is a bit ridiculous.

In General Theory of Employment he says this:

"Thus the volume of employment is given by the point of intersection between the aggregate demand function and the aggregate supply function; for it is at this point that the entrepreneurs’ expectation of profits will be maximised. The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand. Since this is the substance of the General Theory of Employment, which it will be our object to expound, the succeeding chapters will be largely occupied with examining the various factors upon which these two functions depend."

So he specifically says that Effective Demand is the substance to his General Theory of Employment.

The General Theory of Employment, Interest and Money by John Maynard Keynes

 

[JP Hochbaum]

Your quips about socialism:

Please refrain from calling a government program socialism, that too is dishonest. Unless of course you agree to call our military socialism as well.

 

[Romulus]

Your quips about socialism:

Please refrain from calling a government program socialism, that too is dishonest. Unless of course you agree to call our military socialism as well.

The military is a means to destruction, not a means of production. Therefore no, the military is not "socialism as well". I'll refrain from calling you dishonest even though it was you and the author you cited who brought socialism into this discussion. I agree with the author however, and believe Keynes advocated to "forcibly" mandate those frictionally, structurally, and voluntarily unemployed to work at the sharp end of a bayonet. I guess when the military is used in that sense, it is a means to force production. Still, like with everything else Keynes advocated, he's being duplicitous. At other times he called socialists "deranged Methodists", and insisted his policy recommendations could be enacted without embracing "Communism, Socialism or Fascism". Now we discover from the author you cited that Keynes advocated the same policy to reach full production as enacted by Mao in China, Uncle Joe in the USSR, Uncle Ho in Vietnam, Castro in Cuba, Mussolini in Italy, Pol Pot in Cambodia, Ceauşescu in Romania, Baathists in Iraq and Syria, Neto in Angola, Hitler in Germany (sorry Godwin), Mengistu in Ethiopia, Tito in Yugoslavia and Sung in Korea.

Taking one of his writing and claiming he was convoluted is a little dishonest IMO. Keynes wrote many books, so pulling one sentence out of about 10,000 pages in his career is a bit ridiculous.

In General Theory of Employment he says this:

"Thus the volume of employment is given by the point of intersection between the aggregate demand function and the aggregate supply function; for it is at this point that the entrepreneurs’ expectation of profits will be maximised. The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand. Since this is the substance of the General Theory of Employment, which it will be our object to expound, the succeeding chapters will be largely occupied with examining the various factors upon which these two functions depend."

So he specifically says that Effective Demand is the substance to his General Theory of Employment.

The General Theory of Employment, Interest and Money by John Maynard Keynes

Effective demand minus voluntary and frictional unemployment to achieve full employment is the case Keynes made in the General Theory. He further convoluted this definition by advocating for 0% unemployment in private correspondence. This pattern he has set has been copied by his advocates since that time. Keynesian economists give policy advice based on intuition or political bias. When the party they prefer is in power, we'll find out the Keynesians flout their superior scientific understanding to the unwashed simpletons if they happen to complain about 4% unemployment, citing frictional unemployment. When cognitive dissonance gets the better of them or their guy is out of power, 3% is not good enough.

 

[JP Hochbaum]

There was not one mention of socialism in anything that I posted or the author posted, YOU mentioned it. Until you stop being dishonest I won't engage you.

 

[Romulus]

There was not one mention of socialism in anything that I posted or the author posted, YOU mentioned it. Until you stop being dishonest I won't engage you.

Please, don't engage me, at least until you review your signature line. Then, explain to me the difference between Keynes' "generalized socialization of investment" and Marx's "socialization of production"?

 

[JP Hochbaum]

Please, don't engage me, at least until you review your signature line. Then, explain to me the difference between Keynes' "generalized socialization of investment" and Marx's "socialization of production"?

1) I am not attacking you in any way, form or fashion
2) We aren't discussing general socialization of investment

Congrats on not understanding what an attack is, and for also not staying on subject. We are discussing Keyne's theory of employment, to which I used his general theory of employment. You are relying on personal correspondences and not his actual body of work.

"Topic dilution is not only effective in forum sliding it is also very useful in keeping the forum readers on unrelated and non-productive issues. This is a critical and useful technique to cause a 'RESOURCE BURN.' By implementing continual and non-related postings that distract and disrupt (trolling ) the forum readers they are more effectively stopped from anything of any real productivity. If the intensity of gradual dilution is intense enough, the readers will effectively stop researching and simply slip into a 'gossip mode.' In this state they can be more easily misdirected away from facts towards uninformed conjecture and opinion. The less informed they are the more effective and easy it becomes to control the entire group in the direction that you would desire the group to go in. It must be stressed that a proper assessment of the psychological capabilities and levels of education is first determined of the group to determine at what level to 'drive in the wedge.' By being too far off topic too quickly it may trigger censorship by a forum moderator."

The Gentleperson's Guide To Forum Spies

 

[Romulus]

1) I am not attacking you in any way, form or fashion

In that case, you are being dishonest. There, I feel better.

2) We aren't discussing general socialization of investment

Congrats on not understanding what an attack is, and for also not staying on subject. We are discussing Keyne's theory of employment, to which I used his general theory of employment. You are relying on personal correspondences and not his actual body of work.

You brought it up, and it remains on topic. Defending Keynes' vagueness on the definition of full employment, you cited a scholarly source which shows Keynes' evolution from the General Theory (when he considers frictional unemployment) to where he recommends actual full employment (0%) some time later. This is certainly less vague, but how does he get past frictional/voluntary/structural unemployment? The answer--which you gave through your source--"generalized socialization of investment" and "forcibly" inducing full employment. Now, saying the "generalized socialization of investment" is not socialism is a stretch linguistically and logically. Marx himself would call it "Bourgeois Socialism". Admittedly, it may be more accurate to call it mercantilism..if only because I don't like to agree with Marx.

 

[JP Hochbaum]

I haven't seen you provide anything or from my paper that addresses frictional/structural or voluntary unemployment.

 

[Romulus]

I haven't seen you provide anything or from my paper that addresses frictional/structural or voluntary unemployment.

It's in the General Theory. First couple of pages of the book in the "definitions", Keynes describes frictional and voluntary unemployment as part of his definition of full employment. Simply, full employment is full employment minus frictional and voluntary unemployment. According to your paper, Keynes' changes his mind. From your paper:

We cannot conclude from this that the goal of full employment is abandoned once
we approach it, as it is done by mainstream economists who define full employment as
the noninflationary level of unemployment (or the remaining frictional and structural
unemployment). For Keynes, even in expansions, the goal of full employment is still
important.

So...yup. He changed his mind. Which is fine, like you have proven...his definition is less vague. The problem comes from how we get to actual full employment, which is no different than socialism--or, I should say--the way totalitarian socialists enforced full-productivity out of the (voluntarily) unemployed.

 

[JP Hochbaum]

It's in the General Theory. First couple of pages of the book in the "definitions", Keynes describes frictional and voluntary unemployment as part of his definition of full employment. Simply, full employment is full employment minus frictional and voluntary unemployment. According to your paper, Keynes' changes his mind. From your paper:



So...yup. He changed his mind. Which is fine, like you have proven...his definition is less vague. The problem comes from how we get to actual full employment, which is no different than socialism--or, I should say--the way totalitarian socialists enforced full-productivity out of the (voluntarily) unemployed.

LOL, he said noninflationary, not "he recommends actual full employment (0%) some time later", as you are saying he said, which he didn't.

You are changing your own argument now.

 

[Romulus]

LOL, he said noninflationary, not "he recommends actual full employment (0%) some time later", as you are saying he said, which he didn't.

You are changing your own argument now.

LOL, full employment minus structural and frictional unemployment equals 0% unemployment. Are you sure you have a good enough handle on the jargon to take part in this debate?

 

[Matt Foley]

 

[JP Hochbaum]

LOL, full employment minus structural and frictional unemployment equals 0% unemployment. Are you sure you have a good enough handle on the jargon to take part in this debate?

Okay I thought you were arguing that Keynes was saying we could reach 0% unemployment, without including frictional and structural unemployment. Now I get what you are arguing, completely misunderstood you.

Now that we have that understood, I actually agree with Keynes that we can use public works to reach 0% unemployment (full employment minus structural and frictional unemployment).

 

[Romulus]

Okay I thought you were arguing that Keynes was saying we could reach 0% unemployment, without including frictional and structural unemployment. Now I get what you are arguing, completely misunderstood you.

This is what the paper you cited argued. Did you read this paragraph?

We cannot conclude from this that the goal of full employment is abandoned once
we approach it, as it is done by mainstream economists who define full employment as
the noninflationary level of unemployment (or the remaining frictional and structural
unemployment). For Keynes, even in expansions, the goal of full employment is still
important.

Did you read the article you cited at all?

Now that we have that understood, I actually agree with Keynes that we can use public works to reach 0% unemployment (full employment minus structural and frictional unemployment).

Do you mean Friedman's NAIRU, or Keynes' vague definition of full employment that was the first issue I posted in this thread?

 

[RGacky3]

Dillard puts it at 3% (and like Keynes considers, 'frictional/voluntary unemployment factors)

Voluntary unemployment isn't counted since unemployment is measured based on searching for employment.

In the real world, expectations are not a measurable quantity and have no place in an equation.

They have whole industries for that . But thats not true at all, unrealized demand absolutely increases employment, just by the fact that you have disposable income laying around and ready for euntreprenours to profit by providing a product that might work. Thats the whole idea of euntreprenoirship (taking advantage of unrealized demand), but it first requires excesse expendible income.

It is not, when savings are invested they convert to spending (by banks, corporate capital expenditures etc.).

Not at all, I meant, technically yeah, but investing in the stock market is a lot lot different than buying milk at the super market, the former doesn't really do anything for jobs or the overall economy.

Spending on goods and services and "ficticious capital" are 2 very different things. Also money going into the banks actually lessens the spending later since rent is being collected.

Give workers money and they will certainly spend and save at some ratio however, they may buy cheap Chinese goods and their investments may go overseas, nullifying any ME.

That may be the case, but we are assuming a closed system, that issue has to be dealt with seperately.

The criticism lays on the assumption that ALL money circulation is made equal, which is clearly not the case.

Where Keynes really went wrong was in thinking that you could simply offset the internal contradictions of Capitalism with government policy and all would be fine.

Now, saying the "generalized socialization of investment" is not socialism is a stretch linguistically and logically. Marx himself would call it "Bourgeois Socialism". Admittedly, it may be more accurate to call it mercantilism..if only because I don't like to agree with Marx.

Its not socialism because you don't change the Capitalist mode of production (Capitalist/worker), the profit motive and the majority private control of capital.

You don't democratize the economy. Its silly to start throwing around the word "socialism" as just a boogieman, stick to the economics.

 

[Romulus]

Voluntary unemployment isn't counted since unemployment is measured based on searching for employment.

Voluntary unemployment is considered in Keynes' definition of full employment in his General Theory.

They have whole industries for that . But thats not true at all, unrealized demand absolutely increases employment, just by the fact that you have disposable income laying around and ready for euntreprenours to profit by providing a product that might work. Thats the whole idea of euntreprenoirship (taking advantage of unrealized demand), but it first requires excesse expendible income.

A little evidence please? Whole industries for quantifying an emotion? And then this...

Not at all, I meant, technically yeah, but investing in the stock market is a lot lot different than buying milk at the super market, the former doesn't really do anything for jobs or the overall economy.

Spending on goods and services and "ficticious capital" are 2 very different things. Also money going into the banks actually lessens the spending later since rent is being collected.

You just stated "ficticious capital" is spent on "unrealized demand" in the previous quote.

That may be the case, but we are assuming a closed system, that issue has to be dealt with seperately.

The criticism lays on the assumption that ALL money circulation is made equal, which is clearly not the case.

Where Keynes really went wrong was in thinking that you could simply offset the internal contradictions of Capitalism with government policy and all would be fine.

OK then, we agree. Keynes was wrong.

Its not socialism because you don't change the Capitalist mode of production (Capitalist/worker), the profit motive and the majority private control of capital.

You don't democratize the economy. Its silly to start throwing around the word "socialism" as just a boogieman, stick to the economics.

You can call it whatever you want. Keynes and Marx called it socialism. The "generalized socialization of investment" seems like socialism to me. Plus, if the word socialism is such a "boogieman", shouldn't you change your Lean status?

 

[RGacky3]

A little evidence please? Whole industries for quantifying an emotion? And then this...

Marketing, consumer research and so on.

You just stated "ficticious capital" is spent on "unrealized demand" in the previous quote.

No I didn't ...

OK then, we agree. Keynes was wrong.

Yeah, but not for the reason you think.

You can call it whatever you want. Keynes and Marx called it socialism. The "generalized socialization of investment" seems like socialism to me. Plus, if the word socialism is such a "boogieman", shouldn't you change your Lean status?

Because I'm a socialist, in the classical sense of economic democracy.

Generalized socialization of investment is not socialism because its not democratising the economy, its just the government boosting capitalism ... And that is NOT what Marx called socialism.

 

[Romulus]

Marketing, consumer research and so on.

Guess work based on hunches and intuition. There is no mechanical formula which predicts future human desires.

No I didn't ...

Yes you did. The "unrealized demand" you wrote about and that "disposable income laying around" funding "euntreprenours" and "euntreprenoirship". When capital is used to fund a start up, that capital is spent on equipment, supplies, marketing, hiring, etc. You are correct, even if your spelling is atrocious. But then you become duplicitous and state this is "fictitious" capital. Apparently if we aren't buying "milk" we aren't really spending. Entrepreneurs buy milk too.

Because I'm a socialist, in the classical sense of economic democracy.

I'm sorry. They have many self-help books for your affliction. Hayek's Road to Serfdom or Constitution of Liberty, Friedman's Free to Choose or Capitalism and Freedom are good places to start your climb out of the 'dustbin of history'.

Generalized socialization of investment is not socialism because its not democratising the economy, its just the government boosting capitalism ... And that is NOT what Marx called socialism.

You're right, Marx called it Bourgeois Socialism.