Keynesianism Part I - It's All About Spending

Is our prosperity derived from a continual circular flow of spending? Is it impossible for a society to increase it's total savings? Can deficit spending by a government step in to replace private activity in order to maintain full employment and restore lasting economic growth? What is a liquidity trap and what does it mean for the economy? What did Keynes really mean by "in the long run, we're all dead"?

In this EconStories mini-documentary, we explore the foundations of Keynesian economics with Keynes most famed biography, Lord Robert Skidelsky.

In the next episode, we'll dig deeper into some of the most controversial aspects of Keynesianism including the notion that ditch digging or world war could provide a pathway to economic recovery and prosperity.

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Education

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• Keynesianism
• Part I
• It's All About Spending
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[kraskata2012]

according to Keynes, there is no such thing as stagflation = stagnation + inflation, which is obviously not the case

[tadaa11]

Continued...

His theories are really just creative thinking of what the implications are of the flawed original idea. Its sort of like making the assumption that gravity doesn't exist because we can fly in a plane. There's only so much gas, people, we cant add leverage forever. Put the plane back on the ground. We built a highly speculative and leveraged society, giving the false impression of prosperity. All we have today is too much debt, high prices, and a world banking system thats failed.

[radix3d]

@kraskata2012 Here my argument, which may be wrong, is that the type of government spending is entirely relevant. Gov spending with marginal disutility would cause inflation, but gov spending lacking marginal utility might increase GDP, up to full employment anyway.

[radix3d]

@kraskata2012 Too many people put words in Keynes's mouth is my point, both economists and politicians. For example, people credit tax cuts as Keynesian, but he never said it as far as I know. People blame the housing crisis on Keynes, but he actually warned against stimulating housing in General Theory, Chapter 10. At least provide something a little more credible than a wikipedia quote with no sources to back it up.

[kraskata2012]

@radix3d Keynes basically says inflation leads to real income growth until reaching full employment, i.e. he does not consider a scenario of rising prices (inflation) and stagnation. He is only concerned that governments might overshoot inflation. He doesnt consider a scenario when full employment is not achieved at all.

[kraskata2012]

@radix3d A quote from the General Theory: "When full employment is reached, any attempt to increase investment still further will set up a tendency in money-prices to rise without limit, irrespective of the marginal propensity to consume; i.e. we shall have reached a state of true inflation[4]. Up to this point, however, rising prices will be associated with an increasing aggregate real income."

[radix3d]

@kraskata2012 Did you not notice that that statement provided no works cited and thus was some random persons opinion? Look up "Hayek on Keynes" and "Milton Friedman Discusses John Maynard Keynes" on youtube. They both say Keynes was horrified by the inflation being agitated by his overzealous disciples. His prior book The Economic Consequences of the Peace discusses the consequences of government induced inflation as well.

[kraskata2012]

@radix3d From Wikipedia: The concept is notable because, in the version of Keynesian macroeconomic theory which was dominant between the end of WWII and the late-1970s, inflation and recession were regarded as mutually exclusive, the relationship between the two being described by the Phillips curve. Stagflation is also notable because it has generally proven to be difficult and, in human terms as well as budget deficits, very costly to eradicate once it starts.

[radix3d]

@kraskata2012 Where did Keynes refute stagflation? Provide sources please. I say you're talking out of your ass.

[Darthwannabe]

@libanadam Learn a little bit about the Wiemar Republic and how they printed money... doesn't work. They burned the money because it was cheaper than buying firewood. Printing money is a slippery path that ends in hyper inflation.

[SocietyIncollapse]

@tadaa11 "We built a highly speculative and leveraged society, giving the false impression of prosperity." Hit the nail on the head with that statement.