Keynesian Economics Is Right

[Turtle]

... You can't make the poor wealthy by making the wealthy poor.

 

you can however make the middle class poor by making the rich richer, which is what is happening now.

 

Soaring Poverty Casts Spotlight on ‘Lost Decade’ @ NYT

 

WASHINGTON — Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

...

[Turtle]

reviewing the thread i see no one has mentioned john nash's Nash Equilibrium. i did bring it up in one of the other economics threads, but i can't find it just now. anyway, whether or not you knew of it, you might now want to consider it in light of the arguments being put forward here.

nash equilibrium @wikipedia

(boldenation mine.)

In game theory, Nash equilibrium (named after John Forbes Nash, who proposed it) is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his own strategy unilaterally. If each player has chosen a strategy and no player can benefit by changing his or her strategy while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium.

...

Applications

Game theorists use the Nash equilibrium concept to analyze the outcome of the strategic interaction of several decision makers. In other words, it provides a way of predicting what will happen if several people or several institutions are making decisions at the same time, and if the outcome depends on the decisions of the others. The simple insight underlying John Nash's idea is that we cannot predict the result of the choices of multiple decision makers if we analyze those decisions in isolation. Instead, we must ask what each player would do, taking into account the decision-making of the others.

 

Nash equilibrium has been used to analyze hostile situations like war and arms races[1] (see Prisoner's dilemma), and also how conflict may be mitigated by repeated interaction (see Tit-for-tat). It has also been used to study to what extent people with different preferences can cooperate (see Battle of the sexes), and whether they will take risks to achieve a cooperative outcome (see Stag hunt). It has been used to study the adoption of technical standards, and also the occurrence of bank runs and currency crises (see Coordination game). Other applications include traffic flow (see Wardrop's principle), how to organize auctions (see auction theory), the outcome of efforts exerted by multiple parties in the education process,[2] and even penalty kicks in soccer (see Matching pennies).[3]...

 

...

[Michaelangelica]

It seems sad that most world Governments are not following Keynesian principles (except for Australia and China).

Reducing government expenditure is not going to help Europe and the UK and USA.

 

I still can't get my head around "qualitative easing" except the markets seem to like it. I guess devaluing the US $ gives some comfort and makes US products more competitive.(especially while China controls the value of the Yuan) Still the world seems to have a love affair with the Yankee dollar which is not helping Obama or the economy The US is still the world's biggest economy even if you added up all the rest together; despite the hysteria/hyperbole about China the economy is only about 2 trillion$

 

However this current situation is a little historically different to past recessions given the addiction of most governments to debt. Also the increasing disparity between the richest and poorest people in the West, now almost the same as Dickensian UK/London. The disparity between richest and poorest people is well over a factor of 300 these days! Totally unsustainable in my view; unless the UK and US is prepared to spend even more money putting even more of their citizens in jail (California is now spending more on jails than education, and the US is beating many repressive regimes like China per capita)

 

BTW have the Yanks managed to actually implement some laws that control the Corporate Cowboys in banks and Wall street yet?

 

The other strange thing is that Multinational corporations are now making the biggest profits in the US since WW2. Many (like GE don't pay tax possibly because they employ more tax accountants than the Government!).. The US tax system seems only effective on the middle class not the super rich or corporations.

 

I would like to see taxation (0.05%?)on all money flowing/transferring off shore.

At the moment estimates for hidden money in off shore accounts vary from 6-10 trillion $ but few know for sure.

[Michaelangelica]

PS

http://www.marketwatch.com/story/news-corp-profit-more-than-doubles-2011-02-02

 

http://www.smh.com.au/entertainment/tv-and-radio/the-simpsons-under-threat-as-fox-demands-45-pay-cut-for-cast-20111005-1l7sx.html

[geko]

This thread is getting a bit silly.

 

http://www.nytimes.com/2011/09/14/us/14census.html?pagewanted=all

 

There's nothing in this article that would suggest or imply causation or correlation between making the rich richer by making the middle class poorer.

 

Nash equilibrium is just a name for perfect knowledge in competition.

 

Of course the market likes quantitative easing, i.e. printing money, aka. inflation. It's free money, and free interest for the creditors on money that never existed previously.

 

Why do some of you think you can make poor people wealthier by depreciating their currency?

[Turtle]

This thread is getting a bit silly.

 

http://www.nytimes.com/2011/09/14/us/14census.html?pagewanted=all

 

There's nothing in this article that would suggest or imply causation or correlation between making the rich richer by making the middle class poorer.

 

i think it was my suggestion/implication; not the article's. :shrug: you gave as much evidence against as i gave for; guess it's a push.

 

Nash equilibrium is just a name for perfect knowledge in competition.

 

Of course the market likes quantitative easing, i.e. printing money, aka. inflation. It's free money, and free interest for the creditors on money that never existed previously.

...

 

:lol: so your simply saying that nash has no bearing makes it so? :doh: gonna have to do better than that.

 

in order that nash is not also a push, i've been out doing some reading and found a scholarly piece indicating a correlation between, and/or application to, nash equilibrium and keynesian economics (the subject of this thread afterall.) perhaps it isn't just my suggestion as was suggested.

 

Asset Pricing under Asymmetric Information

- Bubbles, Crashes, Technical Analysis and Herding - @ princeton.edu

 

Asset Pricing under Asymmetric Information

- Bubbles, Crashes, Technical Analysis and Herding -

Markus K. Brunnermeier

September 3, 2000

 

...The book contrasts different market microstructure models that demonstrate how

asymmetric information affects asset prices and traders’ information inference. Optimal

trading strategies are illustrated using dynamic models. These models provide a theoretical

explanation for technical analysis and illustrate why some investors “chase the trend”.

The reader is then introduced to herding models and informational cascades which might

arise in a setting where agents’ decision making is sequential. The insights derived from

herding models are used to provide rational explanations for stock market crashes. Models

in which all traders are induced to search for the same piece of information are then

presented to provide a deeper insight into Keynes’ comparison of the stock market with a

beauty contest. The book concludes with a brief summary of bank runs and its connection

to financial crises.

...

Structure of the Survey

The main aim of this survey is to provide a structural overview of the current literature

and to stimulate future research in this area.

 

Chapter 1 illustrates how asymmetric information and knowledge in general is modeled

in theoretical economics. Section 1.1 also introduces the concept of higher-order knowledge

which is important for the analysis of bubbles. Prices are determined in equilibrium.

There are two different equilibrium concepts which are common in market settings with

asymmetric information. The competitive Rational Expectations Equilibrium (REE) concept

has its roots in the general equilibrium theory, whereas the strategic Bayesian Nash

Equilibrium concept stems from game theory. The book compares and contrasts both

equilibrium concepts and also highlights their conceptual problems. This chapter also

introduces the informational efficiency and allocative efficiency concepts to the reader.

...

[geko]

it wasn't a direct attack on you mate it was just a comment on the article.

[Turtle]

it wasn't a direct attack on you mate it was just a comment on the article.

 

:omg: why i oughta.... smile & go back to the article. :lol: actually i did last night and there is a comment that might be construed as a correlation and/or connection between the rich getting richer and the middle class getting poor. more accurately perhaps is that the rich are getting poorer much slower than the middle class. to whit...

 

Soaring Poverty Casts Spotlight on ‘Lost Decade’

...The past decade was also marked by a growing gap between the very top and very bottom of the income ladder. Median household income for the bottom tenth of the income spectrum fell by 12 percent from a peak in 1999, while the top 90th percentile dropped by just 1.5 percent. Overall, median household income adjusted for inflation declined by 2.3 percent in 2010 from the previous year, to $49,445. That was 7 percent less than the peak of $53,252 in 1999. Part of the income decline over time is because of the smaller size of the American family. ...

 

my twocents : while arguing the points of contrasting economic models is all well and good, the crux of the problem is the widening gap twixt bottom & top, or more to the point, peoples' perception of that gulf. no "rich" people -whether their wealth has declined or risen- are going hungry, losing their health care, losing their homes, losing their cars, losing their vacations, losing their kids college tuition, going without new clothing, or pretty much having any such difficulties as are those near or below the poverty threshhold.

 

now, just in the last few days, we have the new "occupy wall street' protests and these folks are calling themselves the 99%, referring to not being in the top 1% of wealth holders. so again, models right or wrong, people are getting mighty pissed at that 1% and it's hard to see that working in the favor of the wealthy. since nash et al are taking into account the behavior of people, such game-theoretical approaches may well shed more light on possible solutions rather than throwing more mud on the problem.

 

seems wiki already has a piece on the occupiers. they are at it right now just across the mighty columbia from me in portland oregon. >>

 

Occupy Wall Street

Occupy Wall Street is an ongoing series of demonstrations in New York City[5] based in Zuccotti Park, formerly "Liberty Plaza Park". The protest was originally called for by the Canadian activist[6] group Adbusters; it took inspiration from the Arab Spring movement (particularly the Tahrir Square protests in Cairo, which initiated the 2011 Egyptian Revolution) and from the Spanish Indignants.[7][8]

 

The participants of the event are mainly protesting against social and economic inequality, corporate greed, and the influence of corporate money and lobbyists on government, among other concerns.[9][10] Adbusters states that, "Beginning from one simple demand – a presidential commission to separate money from politics – we start setting the agenda for a new America."[11] The protest's organizers hope that the protesters themselves will formulate their own specific demands, expecting them to be focused on "taking to task the people who perpetrated the economic meltdown."[12][13][14]

 

By October 6, similar demonstrations had been held in Washington, Los Angeles, Boston, Chicago, Philadelphia, Miami,[15] Portland, Maine,[16] Jersey City,[17][18] Trenton,[17] Portland, Oregon,[19] Seattle,[20] Denver,[20][21][22][23] and Austin, Texas.[24]...

[phillip1882]

while arguing the points of contrasting economic models is all well and good, the crux of the problem is the widening gap twixt bottom & top, or more to the point, peoples' perception of that gulf. no "rich" people -whether their wealth has declined or risen- are going hungry, losing their health care, losing their homes, losing their cars, losing their vacations, losing their kids college tuition, going without new clothing, or pretty much having any such difficulties as are those near or below the poverty threshhold.

 

while i agree completely with this statement, I'm not convinced the solution is to tax the rich more.

protest the corruption, sure, though that's not gonna change any time soon.

[Turtle]

...my twocents : while arguing the points of contrasting economic models is all well and good, the crux of the problem is the widening gap twixt bottom & top, or more to the point, peoples' perception of that gulf. no "rich" people -whether their wealth has declined or risen- are going hungry, losing their health care, losing their homes, losing their cars, losing their vacations, losing their kids college tuition, going without new clothing, or pretty much having any such difficulties as are those near or below the poverty threshhold. ...

 

while i agree completely with this statement, I'm not convinced the solution is to tax the rich more.

protest the corruption, sure, though that's not gonna change any time soon.

 

well, just who do you suppose benefits the most from your doubt? who is provoking your doubt? who is bankrolling those who are provoking your doubt? who wants to discredit keynesian economics? "now, who could it be? Could it be ... Satan?" :evil: "well, isn't that special?" :lol:

 

breaking new today: The Billionaires Bankrolling the Tea Party @ New York Times

 

i'm just quoting a smidgeon here; you'll want to read the entire piece.

 

 

...Last week the Kochs were shoved unwillingly into the spotlight by the most comprehensive journalistic portrait of them yet, written by Jane Mayer of The New Yorker. Her article caused a stir among those in Manhattan’s liberal elite who didn’t know that David Koch, widely celebrated for his cultural philanthropy, is not merely another rich conservative Republican but the founder of the Americans for Prosperity Foundation, which, as Mayer writes with some understatement, “has worked closely with the Tea Party since the movement’s inception.” To New Yorkers who associate the David H. Koch Theater at Lincoln Center with the New York City Ballet, it’s startling to learn that the Texas branch of that foundation’s political arm, known simply as Americans for Prosperity, gave its Blogger of the Year Award to an activist who had called President Obama “cokehead in chief.”

 

The other major sponsor of the Tea Party movement is Dick Armey’s FreedomWorks, which, like Americans for Prosperity, is promoting events in Washington this weekend. Under its original name, Citizens for a Sound Economy, FreedomWorks received $12 million of its own from Koch family foundations. Using tax records, Mayer found that Koch-controlled foundations gave out $196 million from 1998 to 2008, much of it to conservative causes and institutions. That figure doesn’t include $50 million in Koch Industries lobbying and $4.8 million in campaign contributions by its political action committee, putting it first among energy company peers like Exxon Mobil and Chevron. Since tax law permits anonymous personal donations to nonprofit political groups, these figures may understate the case. The Kochs surely match the in-kind donations the Tea Party receives in free promotion 24/7 from Murdoch’s Fox News, where both Beck and Palin are on the payroll. ...

[phillip1882]

to me, it's not really a question of kaynes or free market, though i side with the free market.

the question is logic. do you own yourself? do you own the product of your labor? do you have the right to sell your labor for something you consider of equal or greater value? do you have the right to employ people? etc. etc.

if your answer is yes to all these questions, then what's your argument for taxing the rich more?

if you believe they are earning thier money from illigimate means, then boycott their goods and services. refuse to work for them. make a good or service better than they do. etc.

people seem to forget that the manner in which the rich got that way in the first place was mostly through voluntary transactions.

[charles brough]

. .. say i make bicycles for a living. after 10 years of making them, my business grows to a point i need additional employees. i become the manager and teach them how to make bikes, while i look for new clients to sell them to. they voluntarily agree to the wage per hour, and I pay myself anything left over from the profit. after another 2 years, i even hire employees to acquire clients, while i simply manage the materials needed. then i even hire employees to do that part a year after that, and just manage the wages, make sure the company is in the green, or at least black. i begin an advertizing campaign to bolster sales further. "buy mike's bikes" becomes our slogan. soon we are one of the top 10 sellers of bikes. one of our rivals is interested in our business and offers me 10 million dollars to buy the company. I figured I've had enough bike managing so agree and retire.

 

now what exactly about this scenario do you object to?

everything was voluntary. my wages, my employees, what i spend my time doing, etc. etc. i see no public or democratic harm from any of these actions.

 

 

hmm, i hope not but yes we seem to have very different views of acceptable behavior.

No, there is of course nothing wrong with the example you give. It could be a restaurant, a hair salon, a boating tour service, an accounting office or a show shop, for examples..

 

What I am referring to is the big corporate world of finance, legal profession, insurance industry, mineral extraction, drug and chemical making industries We have to have government, but big business has become so powerful, so amply financed and so legally shaped to the extracting of profit that it use government to its ends at the cost of honest government able to protect the interests of the common people. A huge waste of funds exists in the medicare system because the legal profession, the drug companies and the health insurace corporations all fight to keep the wasteful and inefficient system going. Thus, doctors are forced to pay high liability insurance rates because of litigation threat and to have more tests than is needed. That leads to more health care costs as well as does the expensive advertising that insurance companies, attorney firms and the government expense for students that mostly quit before graduation and whose credentials are not honored for those who do graduate. For profit prisons forgoe rehbilitation courses to save money and hence profit. Private police patrol services will let a the the theif go rather than take the added time (hence expense) of turning them into the police. The list includes virtually all major industries and corporate services.

[Turtle]

to me, it's not really a question of kaynes or free market, though i side with the free market.

the question is logic. do you own yourself? do you own the product of your labor? do you have the right to sell your labor for something you consider of equal or greater value? do you have the right to employ people? etc. etc.

if your answer is yes to all these questions, then what's your argument for taxing the rich more?

if you believe they are earning thier money from illigimate means, then boycott their goods and services. refuse to work for them. make a good or service better than they do. etc.

people seem to forget that the manner in which the rich got that way in the first place was mostly through voluntary transactions.

 

your argument is a strawman inasmuch as the rich folk who are skating on a fair share of taxes are not in the same league as those who worked their way up in business as you earlier alluded to. the (super) rich aren't doing "real" work for the money they are hiding off-shore and in tax loop holes. moreover, no i don't own myself in the senses you imply. if i want to have a car & drive, i have to pay insurance & buy gas and it is the insurance companies and oil companies and their executives who set the conditions & pull my/our strings. sure i have the right to walk or bike and sure i have a right to apply for a loan to start a business, but again if the banks don't want to lend to me i'm screwed. again, they set the standards and as we well know this has little to do with whether or not i am deserving. while it may sound logical to just boycott big industry, it really isn't practical. you can see for yourself how it's going for folks trying to make changes in the laws to close the loopholes and make the big wheels accountable.

 

when you say "free market", do you mean anything goes? the payday loan outfits shooting up are within the law, for a while, & they are just being free to employ people, yada, yada, yada. do you really think what they are doing is right? do you really think they are helping anyone but themselves @ 800% interest?

 

finally, keynes et al are not advocating the elimination of a free market, rather an equitable operation of it. you set up a false dichotomy.

 

PS i see no one has bothered even to define keynesian economics, so allow me. might do well to know what we arguing about. (boldenation mine)

keynsesian economics @ wikipedia

Keynesian economics ( /ˈkeɪnziən/ kayn-zee-ən; also called Keynesianism and Keynesian theory) is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.

 

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1] The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. The interpretations of Keynes are contentious and several schools of thought claim his legacy.

 

Keynesian economics advocates a mixed economy — predominantly private sector, but with a significant role of government and public sector — and served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought.[2]...

 

Edited October 7, 2011 by Turtle

[phillip1882]

your argument is a strawman inasmuch as the rich folk who are skating on a fair share of taxes are not in the same league as those who worked their way up in business as you earlier alluded to. the (super) rich aren't doing "real" work for the money they are hiding off-shore and in tax loop holes.

well, that's part of my point. how exactly do you intend to tax these people?

 

if i want to have a car & drive, i have to pay insurance & buy gas and it is the insurance companies and oil companies and their executives who set the conditions & pull my/our strings.

well I'd like to point out that both car insurance companies and oil companies are very competitive.

yes they set the rates and yes if you want to drive you have to buy both. but do you really believe the government can offer better rates, or better quality of service?

 

moreover, no i don't own myself in the senses you imply.

sure i have the right to walk or bike and sure i have a right to apply for a loan to start a business...

then in what sense do you not own yourself?

but again if the banks don't want to lend to me I'm screwed.

how? you can still work for money to start a business, you can still make and sell goods from your home.

again, they set the standards and as we well know this has little to do with whether or not i am deserving. while it may sound logical to just boycott big industry, it really isn't practical. you can see for yourself how it's going for folks trying to make changes in the laws to close the loopholes and make the big wheels accountable.

right, but i see this as a government defect, not as a business defect.

when you say "free market", do you mean anything goes?

anything within reason. you shouldn't commit or threaten violent acts, and you shouldn't commit fraud. beyond that sure.

finally, keynes et al are not advocating the elimination of a free market, rather an equitable operation of it. you set up a false dichotomy.

no i don't think i have. for example the Kayne theory has no idea what to do with stagflation. read up on why.

[phillip1882]

What I am referring to is the big corporate world of finance, legal profession, insurance industry, mineral extraction, drug

and chemical making industries We have to have government, but big business has become so powerful, so amply financed and so legally shaped to the extracting of profit that it use government to its ends at the cost of honest government able to protect the interests of the common people. A huge waste of funds exists in the medicare system because the legal profession, the drug companies and the health insurace corporations all fight to keep the wasteful and inefficient system going.

i agree completely, but again, i would argue this is a reason we should shrink government, not grow it further.

[Turtle]

well, that's part of my point. how exactly do you intend to tax these people?

by government restructuring the tax code and spending enough to enforce it.

 

 

well I'd like to point out that both car insurance companies and oil companies are very competitive.

yes they set the rates and yes if you want to drive you have to buy both. but do you really believe the government can offer better rates, or better quality of service?

 

again, i believe that enforced government regulations are the way to keep these free market companies honest. publically traded companies work for the shareholders, not the dupes customers. few middle class folks even own stocks, even fewer low-classers. nevermind for now that those who perpetrated the real estate mess have yet to be held accountable. yes, that's a poor job by government, but it does not logically follow that it is not government's job. i'll just post this reference & leave off replying to the rest of your post 'til later. my tummy is growling & i gotta get some dinner.

 

In terms of types of financial wealth, the top one percent of households have 38.3% of all privately held stock, 60.6% of financial securities, and 62.4% of business equity. The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

 

edit: i'm having problems with the following chart displaying; it is Figure 1: Net worth and financial wealth distribution in the U.S. in 2007

source: Wealth, Income, and Power @ ucsc

 

ps (ok; one more reference. dinner's not hot yet. ) this is not the 70's and we are not in a high inflation period so i'd say that it doesn't matter that keynesian ecconomics has a hard time with stagflation.

inflation @wiki

Edited October 8, 2011 by Turtle

[Turtle]

...then in what sense do you not own yourself?

 

how? you can still work for money to start a business, you can still make and sell goods from your home.

...

anything within reason. you shouldn't commit or threaten violent acts, and you shouldn't commit fraud. beyond that sure.

 

 

so i don't own myself in exactly the ways i said. if getting a job or starting a busines is as easy as you want us to believe, why do we have such high unemployment? it may be the american dream, but it not always the american reality. do you think all those out of work people are just lazy good for nothing losers who don't want a job or some dignity? i don't quite get why you are so enamored with the rich and their money and so dismissive of the current plight of the middle class, the poor, the old, and the sick. :shrug:

 

i get a taste of anarchism or something there in the "anything goes". again i'm confused about your motivation. governments governing for the benefit of the people is well within reason. our constitution is well within reason. throwing out the baby with the bathwater is not within reason.