Keynes vs Classic economics

[Odelay]

The banter on this Hung Angel Politics board is really the age old argument between Keynsians and Classic economic theorists such as Milton Friedman. The argument will never be resolved. There will be no agree to disagree moment. The gulf is too wide to bridge. Although it took me some time to figure out who the Tea Partiers were and where they were going, it eventually became clear that they sided with Classical economics theory.

Meanwhile, Obama has become the first President in 40+ years to give Keynsian economics another try, which automatically places him in opposition to Classicists and the Tea Party. The Keynes v Classic argument pits labor against market equity. Keynsians want the Government to save jobs that might otherwise be lost in a deep depression or from industry wide collapses as almost occurred in banking and automobiles. Classicists want the market to resolve all anomolies associated with a recession, and reward those who have taken an equity position the most.

The debaters here in this Political forum have similarly aligned with one of these 2 poles. And just as academia, political punditry, and corporations will not bridge the gap btwn Keynes and Classicisim, nor will we be able to do the same here.

[hippifried]

So "supply side economics" is now classicist?

I think you're giving all this political rancor way too much credit for high mindedness. from what I've seen, this is nothing but warmed over cold war & depression era nonsense & the TV is just a giant bullhorn for fanatics. Every modern economist is either a Keynesian or an anti-Keynesian, but they all defer to Adam Smith. Keynes & Freedman too. Why?

Personally, I think all the theories are skewed. Economists for the most part are just trying to explain what's already happening by trying to match the current to a past model. There's always a tweak to force a fit. Nothing's static. So why are we still using a model that's over 2 centuries old & based on the transition from feudalism?

We need a total rethink on all this.

[Odelay]

I think you're giving all this political rancor way too much credit for high mindedness. from what I've seen, this is nothing but warmed over cold war & depression era nonsense & the TV is just a giant bullhorn for fanatics. Every modern economist is either a Keynesian or an anti-Keynesian, but they all defer to Adam Smith. Keynes & Freedman too. Why?

When I weed out all the name calling and "gotchas" in the posts on this board, what I see are people who either line up with the idea that government intervention can help soften the blow associated with recessions and industry collapses, and those who believe government should steer clear of any intervention and allow the capital markets to reach a natural equilibrium during this time of economic crisis. That's Keynes v Classic economic theory in a nutshell.

When debating the use of debt and adjusting the money supply to cushion the hard effects of the depression, Classic economists were making arguments that all of it was unnecessary and that capital markets would bring about natural equilibrium in the long run. Keynes deadpanned, "In the long run, we'll all be dead." That's where I side. Why endure 5, 10, 30 years of misery waiting for an equilibrium when there are alternative solutions that can bring it about earlier.

As for "supply side" economics, I'll grant you that the Reagan administration used a hybrid form of Keynsian economics in order to vastly increase defense spending for the intended purpose of "defeating communism".

[onmyknees]

When I weed out all the name calling and "gotchas" in the posts on this board, what I see are people who either line up with the idea that government intervention can help soften the blow associated with recessions and industry collapses, and those who believe government should steer clear of any intervention and allow the capital markets to reach a natural equilibrium during this time of economic crisis. That's Keynes v Classic economic theory in a nutshell.

When debating the use of debt and adjusting the money supply to cushion the hard effects of the depression, Classic economists were making arguments that all of it was unnecessary and that capital markets would bring about natural equilibrium in the long run. Keynes deadpanned, "In the long run, we'll all be dead." That's where I side. Why endure 5, 10, 30 years of misery waiting for an equilibrium when there are alternative solutions that can bring it about earlier.

As for "supply side" economics, I'll grant you that the Reagan administration used a hybrid form of Keynsian economics in order to vastly increase defense spending for the intended purpose of "defeating communism".

While you've correctly captured the essence of the discussions here, and lamented about the inability to close the gap, yet you've done little about it yourself ...perhaps that was your intent? You come off as a professor and we as unruly economics grad students.

Your suggestion of a quick fix ( my word) to bring about the equilibrium of private markets and government spending is exactly what many of us fear. As you well know....there's only 2 places to get the dollars needed to satisfy you Keynsians....print it, or borrow it from China. It's the borrowing from China that most worries us deciples of Art Laffer and Friedman. The interest on that loan will eat more and more of the GDP and squeeze available capitol for private sector expansion, and our offspring will bear that burden ong after we're taking dirt naps. You need only to look to the EU for your labratory of large deficit spending by social democratic governments. Needless to say....Krugman has had his shorts in a knot since the first signs of the Greek move to austerity. Fortunately his voice is becoming fainter and fainter with each subsequent bailout.

Having said that....I respect your thoughts and insights, but just find them shortsighted.

[Odelay]

While you've correctly captured the essence of the discussions here, and lamented about the inability to close the gap, yet you've done little about it yourself ...perhaps that was your intent? You come off as a professor and we as unruly economics grad students.

I'm a full two advanced degrees away from being any sort of professor. Although I do find it funny how someone like Megan McArdle can land a sweet job as Business & Economics editor of a magazine like Atlantic with no more than an MBA. With my BS in Engineering and a severe hangover I think I could make more sense than her on any given day.

Krugman has the bullhorn, obviously, from his NY Times gig, but I don't really read him much. I mostly listen to and read Dean Baker for my keynsian fix, and others, of various economic inclinations, in other venues.

As for "closing the gap", I think I'm pretty clear that that isn't possible, so if it looks like I've done little to accomplish that feat, then mission accomplished. My intent was to demonstrate that I see some root elements of these debates on this board. That's all.

[NOTE: The McArdle rant is a pet peeve. I'm not insinuating that anyone else on this board is a fan of hers.]