I wrote: "This stimulates private fixed investment, adding onto any multiplier effects. To the extent that private fixed investment rises, fiscal stimulus becomes unneeded."
Lakshmi Rhone wrote: > But Jim you write this [the above] as if it follows mechanically from > government spending--< What part of "to the extent that" don't you understand? _Of course_ my statement was "all else constant" or referred to only one part of an overdetermined process. There is nothing "mechanical" about real-world macroeconomics. > But if you think that one pulls back on public spending too soon, as Obama > has in fact done--this is the pump priming fallacy--< The _alleged_ pump-priming fallacy; we shouldn't assume what hasn't been demonstrated. To he extent that an initial fiscal stimulus encourages private fixed investment (for reasons that I limned), pump-priming can work, at least in theory. Of course, in practice Obama did pull back too soon. That's because he's a political man, responding to GOP and "Blue Dog" pressure. I don't think serious Keynesian stimulus will be tried until there's enough mass pressure for it. It would likely be most successful on a global level. (In today's globalized economy, Keynesianism in one country might be as difficult as socialism in one country.) > or perhaps the Keynesian needs [??? responding to a psychological need???] to > assert that private fixed investment will be stimulated because he is > actually anxious about the wrath of the confidence fairies if the government > makes a clear commitment to debt-financed spending until pre-crisis levels of > employment are restored. < I don't understand this. Keynesians such as Krugman are not afraid of the confidence fairies. Rather, they know that there are "accelerator effects" (which is something different from mechanistic accelerator models) in which increases in GDP lead to increases in business fixed investment (all else constant, natch). -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
