AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (22 comments)

  1. A phishing email uses a very effective ploy which I call the Aura of Truth. It provides links to authentic sites and refers to real events, followed by fake claims. The aura of truth from the first items spills over to the fake claims.

    Most people think that they are immune to that ploy. They are sophisticated. But, this is the primary ploy used by politicians to push their plans. They say a few true things followed by their false additions. It works great.

    Keynesian economics is sold in exactly this way. Some absolutely true accounting identities are offered, followed by true observed economic relationships, followed by wishful thinking and reversals of cause and effect.

    The commonly taught and usually believed Keynes Multiplier is probably the most destructive piece of false economics. It provides support for government borrowing and spending regardless of the merits of the project. The act of spending is supposed to create more wealth than the wealth wasted by the spending. So, why not spend big?

    But, the commonly taught derivation is laughably illogical, not merely a bad estimate.

    The Illogic of the Keynes Multiplier

    1. Jeremy Janson

      Obama has never been a Keynesian, or seriously marketed Keynesian economics. His one “stimulus” was an utter joke, and more than counterbalanced by the Keynesian Antimultiplier of blocking huge numbers of oilfield, pipeline and other private sector investments like the Keystone Pipeline, the reduction in lending from Dodd-Frank and the restriction of investment in healthcare by the ACA. In fact, ANY ONE OF THOSE would have been vastly larger than his puny “stimulus” which was little more than a political showpiece. You cannot say that Obama shows Keynesianism does not work because Obama never tried it.

      1. john werneken

        Let us be grateful for small favors;p keynes was ALWAYS dead an I’m glad

      2. To Jeremy Janson,

        The entire idea of a “stimulus package” is Keynesian. You point out the contradictions in Obama’s policies, but Team Obama believes in each policy separately despite the contradictions.

        You think $820 B of government “stimulus” is too small to have an effect, yet you believe in Keynesian stimulus. This is typical of supporters of all failed policies: “They didn’t do enough.”

        The proponents of the stimulus predicted an effect which didn’t happen, namely 3.7 MM new jobs.

        http://bastiat.mises.org/2012/11/fiscal-stimulus-or-fiscal-depressant/
        === ===
        [edited] In sharp contrast, Christina Romer, Chair of President Obama’s Council of Economic Advisers in 2009, argued that a multiplier of 1.6 should be used in estimating the new jobs that would be created by the stimulus program. This sharp difference between Barro’s [ multiplier = 1] and Romer’s multiplier estimates translated into an enormous disparity of 3.7 million new jobs, the number which Romer notoriously claimed would be generated by the stimulus package by the end of 2010.
        === ===

        http://gregmankiw.blogspot.com/2009/01/obamas-multipliers.html
        === ===
        [edited] Team Obama has released its analysis of fiscal stimulus, coauthored by CEA Chair-designate Christina Romer and Vice President-elect adviser Jared Bernstein. If you go to the penultimate page, you can find the fiscal policy mutlipliers they assume. For government purchases, their multiplier is 1.57; for taxes, 0.99.
        === ===

        Obama and our government is Kenesian to the core, even under Republicans. Keynes is the high priest of “tax and spend”, which is why politicians love him so.

    2. Jeremy Janson

      A true Keynesian CANNOT be an environmentalism. In fact, environmentalism, with its core belief in restricting consumption and preventing new productivity, is far more opposite Keynesianism in action than its supposed enemy Supply Side.

      1. john werneken

        Wnvironmentalism is, so far, the ONLY thing ever thart is stoopider or mo9re greedy than Keynes was.

  2. juandos

    Thanks for the link andrew

    1. Andy Fox

      I agree with Andrew, but amusing reply, nonetheless

  3. john werneken

    Remember. Even that jerk Piketty gives these facts prominence. America at one timer was the ONLY developed country not bombed in to ruin. Collusion of big business, big labor, and big (for that time) government made us mostly quite pleased, though elites railed at the4 shallowness of it all. Now the same elites rail, and still at the system which makes them possible in the first place. Graceless numbskulls lol.

    I need not dream each night of a thermonuclear dawn, nor of starving billions. The world has changed, mostly for the better. Seriously, do any of YOU want thee world I grew up in back? I doubt it very much.

    People will ever think what has gone on past memory of anything else to be eternal, and ought not to be blamed for doing so. Nonetheless, dreams are sacred and have been dashed, for rich, middle, and poor.

    What we could do with impunity once upon a time, we can no longer do at all. Births, immigration, expanding labor force, dramatically rising skills, rising wages, and the profits of a nearly glo9bal oligopoly centered on the USA, are no more. The entire population cannot at the same time be somewhat equal and privileged, not any more

    Perhaps we might make choices, before the system itself falls apart.

    1. Gordon Richens

      Sooner or later, Americans must wake up to the fact that resources are *not* unlimited and that they must compete for scarce goods with people in other countries. Full stop.

      1. When did Hopenchange morph into Obamalaise?
        Bwahahahahahahahahahah!
        You can accept that with Obama’s disastrous policies we can now operate on a level playing field with Zimbabwe, but I don’t. Eventually enough Americans will see that when you start with socialism, the end is always failure.

      2. JohnnyL

        Paul Erhlich was doing his scarce resource schtick back in the 70’s. What Americans need to realize is that they can’t sit back and be complacent. It’s not the competition for resources but the competition for well paying jobs and maintaining the necessary and needed skill levels. There is a growing segment of the population that are being fed fantasies about how they can be fry cooks for the rest of their lives and be entitled to be paid enough to raise a family of 4 in NYC.

      3. M. Report

        Wrong.
        A counsel of defeat from a technophobe who would
        rather return to the zero-sum economy of the past
        than move forward to the abundant future.

      4. Brendan

        Resources are controlled by economics. When they become scarce, replacements are found. But cripple the economy with regulations, and you make innovation impossible.

        As with famine, resource scarcity and job scarcity are caused by government malfeasance.

    2. AmericanBelle

      “The world has changed, mostly for the better.”
      No it hasn’t.

      “Seriously, do any of YOU want thee world I grew up in back? I doubt it very much.”

      Yes! I grew up in it and would take it back in a NY minute. Dreams haven’t been dashed, only our moral well-being and devotion to family and God. All of that has been destroyed which is why the new progressive trends have run out of control and taken over our lives and livelihoods. Without controls and discipline, the American Dream has been destroyed, taking with it our culture, traditions, and values.

      The population was never meant to be equal or privileged. The population was given the opportunities to reach for the stars. Whether they did or not was up to them. Entitlement was never part of the equation.

      1. john werneken

        @Matt u an ID 10 T m8

  4. Couldn’t possibly be because business is being constantly and progressively throttled to death by federal, state, county, municipal laws, regulations, and taxes could it? That just can’t be it…it must be long term trends and changes in the makeup of the country. As Jimmy Carter told us all, the sunset of America is upon us, turn down those thermostats and put on a sweater and wait out the end in your old rocking chair.

  5. rocinante3d

    The argumentation is that free markets work. And that’s all to the good but it doesn’t solve the problem of people. Big government, big programs, big spending has plenty of opportunities for graft, bribery and corruption. Its in our nature to find ways to make our lives easier.

    All that is being said is the good times are over. We need to find another problem/issue to resolve (global warming/cooling, comets hurtling at us, ISIS taking over the entire Middle East). We are rapidly running out major earth shattering problems. We better find one soon or we will not be on the gravy train.

    I am just looking for a small off shore country to hide in till 2015.

  6. bob sykes

    There is also the huge influx of uneducated, unskilled immigrants who are unproductive drags on the economy.

    1. Wrong. Immigrant labor is propping us up while Europe and Japan sag further due to aging populations and less ability to replace them with new workers. The way you make up for demographics is to bring in more workers who, rather than live on the dole, contribute to the economy. Immigrants who work and earn a paycheck — no matter which end of the skills/education spectrum they are at — are a net positive.

      1. Mkelley

        I can agree that legal immigration helps us, but just look at the insanity down on the border right now to see what out-of-control illegal immigration brings us:

        http://www.washingtontimes.com/news/2014/jun/13/border-patrol-change-diapers-heat-baby-formula/

        Or this, where our “border control” agents are knowingly letting MS-13 gang members enter this country:

        http://www.nationalreview.com/article/380337/teenage-latin-border-horde-ryan-lovelace

  7. Mkelley

    I blame the constant expansion of government control and regulation for most of our slow growth. The America that had a 3.4% growth rate was also a country in which you could build a factory, a mine, or an interstate highway without fighting a mountain of regulations, lawsuits, and protests. The Pentagon was built in 18 months, but the silly new “World Trade Center” took over 10 years. You see it everywhere you look. Obama is currently doing his best to destroy one of our good old reliable heavy industries, coal, and with that he will greatly raise our cost of electricity. The price of gasoline is double what it was when Obama took office. Talk to anyone in business and you will hear a tale of too much red tape and government intrusion into business operation. I wouldn’t start a business right now if you held a gun to my head.

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