me: >> I don't _assume_ that Keynesian theory is correct. I came to this conclusion based on empirical evidence and logical/mathematical reasoning. (Even so, I don't think that K-ism presents a _complete_ theory.) <<
David Shemano wrote: > What is the empirical evidence for Keynesian theory?< First, I must correct -- or rather amend -- what I said. Empirical evidence cannot prove any theory (since no theory is a totally accurate picture of empirical reality). Rather, it can say that one theory (e.g., Keynesianism) is superior to another (e.g., supply-side economics). One good piece of evidence for Keynesianism (including its many variations, e.g., Marxo-Keynesianism): the US national unemployment rate soared between 2007 and 2010 for large numbers of different occupational & demographic groups, associated with a fall in both consumer spending and gross private domestic fixed investment. An "Austrian" theory would predict that the latter type of spending would fall but the former would rise, causing excess supply of labor-power in capital goods-producing sectors at the same time there's excess demand in consumption goods-producing sectors (leading to unemployment that persists until labor-power markets adjust). But that didn't happen. The "Austrian" theory predicts that they rise in the unemployment rate would be associated with a rise in the vacancy rate (open jobs). But in reality, unemployment rose at the same time that the number of vacancies plummeted between 2007 and 2010. me: >> In any event, please explain the "logic" behind supply-side macroeconomics, >> e.g., the belief in Say's Law.<< > Do I have to do it on one foot? Gerard Depardieu? If you can. The theory has been debunked so many times, the burden of proof should be on those who believe in it. > Why don't you tell us exactly what Say said (and not what others said he > said), and then explain what you think is the logical error. It was > apparently compelling for over 100 years, other than to monetary cranks, and > remains compelling to many smart people.< Of course, since many smart people are cranks. I learned a long time ago that some very smart people are wrong. That's one reason why appealing to authority is fallacious. The big logical error of Say's "Law" is that in real-world economies, people do not simply use money as a means of exchange (as for Say) so that the world works _as if_ exchange were barter. Money is also used as an asset, so that people can hoard it and can increase their hoards. An excess supply of goods (and services) or "unwanted inventory accumulation" that results from a recession can thus coexist with an excess demand for money (hoarding). In simplistic theory, prices (including interest rates) immediately adjust to end both the excess supply of goods and the excess demand for money. The problem is that at the same time that prices adjust -- and often more quickly -- there is also _quantity adjustment_: the firms producing goods see that they have too many inventories and so cut both production and employment of labor-power (or cuts wages). This reduces national income and spending, which makes the excess supply of goods even worse, but it does reduce the excess demand for money (fewer transactions = less demand for money). Luckily, the downward spiral of goods demand and production doesn't continue forever, as Keynes pointed out. > In my view, the issue surrounding Say's Law today is the same as it was 200 > years ago: politicians, as a class, are always interested in justifications > for monetary inflation to create an illusion of greater current wealth than > actually exists.< Oh, those evil/stupid/incompetent politicians! But what about their owners, who are usually very rich people and their corporations? aren't they responsible in any way? To my mind, capitalists are always interested in justifications for maintaining high unemployment, since it disciplines labor (keeping wages low and labor-effort high, promoting profits) and protects the purchasing power of their paper assets. (Except for a small minority, they totally lack a macroeconomic perspective.) Of course, to some extent the problem is ignorance, as with those who believe that the current government deficit is a much bigger problem than the deficit in the availability of jobs. (There are some very rich people, such as Peter G. Peterson, who pay a lot of money to reinforce this ignorance.) -- 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
