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Boiling it down
Coordination Problem ^ | 07/24/2012 | Peter Lewin

Posted on 07/24/2012 8:14:27 AM PDT by SeekAndFind

Keynesian (and some Monetarist) versus Austrian views on the business cycle revolve around two basic empirical issues: the nature of capital and production and the nature of the national budget constraint.

Concerning capital: Ironically, Keynesians appear to assume a kind of “equilibrium always” story in which productive (human and physical) resources can, at low cost, be simply shifted to and plugged in to the production of whatever product or service happens to be the object of demand stimulus; and, further, that if enough of this is done, income, employment and tax-payments will rise precipitously. In this way economic-policy can produce economic growth that will expand the budget constraint sufficiently to be able to pay off the large past deficits (the accumulated national debt).

Austrians maintain that both of these (connected) assertions are false. Productive resources are not fungible. They cannot be easily moved and reassembled to produce whatever has been arbitrarily stimulated. The formation of productive resource combinations is the spontaneous result of idiosyncratic entrepreneurial judgments about future demand and revenue. There is nothing mechanical about it. Amorphous stimulus spending is not likely to produce an environment which entrepreneurs are willing to bet on. Rather, the result will be a malaise of uncertainty and reluctance to borrow and lend. The intertemporal budget constraint is real, not only for private citizens, but for the nation as a whole.

We cannot spend our way out of debt by hoping that the spending will lead to growth, especially when those doing the spending have no idea how to plant the seeds.

TOPICS: Business/Economy; Society
KEYWORDS: austrian; businesscycle; keynesian

1 posted on 07/24/2012 8:14:35 AM PDT by SeekAndFind
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To: SeekAndFind
Wealth is created by initiative and hard work, money is a way of keeping score.
The left think they can make things "fair" by fiddling with the score card, i.e. moving money around.
Taking money from successful businesses or individuals and hand it over without recompense to someone less industrious hurts the good guys.
The bad guys get to party but they won't produce anything of value.

2 posted on 07/24/2012 8:28:21 AM PDT by BitWielder1 (Corporate Profits are better than Government Waste)
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To: SeekAndFind

This just hit me: What if a significant minority in the US find themselves “unintintionally going Galt”.

That is, what if, not just a person here and there, but a lot of people get burned out on technology and the pace of city life, etc. and just “give up a high standard of living for a high quality of life”? The economy would shrink dramatically.

Imagine if a LOT of families:

1. Went with a tent instead of a motorhome
2. Grew a garden and actually ate what it produced.
3. Went to basic cable.
4. shopped at garage sales and estate sales.
5. explored the nearby area instead of hawaii or disney world.
6. Avoided restaurants, except for a rare treat.
7. After a long and fruitless search for work, found a way to live on one income, affording the other partner to invest their time in the above endeavors.

Just as our culture went from “dressing up for church or an airliner trip” to “jeans and jammies” on airplanes, what’s to say the whole culture won’t just burn out on all the expensive toys and activities? If that happens, this could be very, very bad. No amount of stimulus would matter. People simply would not be interested in borrowing.

I’m being very incomplete, but trying to be brief.

Any thoughts?

3 posted on 07/24/2012 8:32:12 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: cuban leaf
We've made a couple of adjustments to our lifestyle just in how we grow our lawn. A few years ago, I discovered the joy of clover lawns. It started out quite by accident with a few patches here and there. Then I noticed they stayed greener during dry seasons and grew slower when it was wet.

Everybody else in the neighborhood was mowing every two weeks like clockwork and pouring lawn chemicals on their grass to encourage uniform growth.

Every fall, I would take plugs of the clover from the patches in the yard and transplant it into the grass patches. My lawn is now about 80% clover.

Two summers ago, the mover broke down and, instead of spending the $90 to fix it, I spent it to buy one of those reel mowers from a catalog which I could assemble and maintain myself. Best of all, the reel mower is light enough to hang in the garage and I don't have the footprint of a smelly gasoline mower to add to the clutter.

Yeah, it doesn't cut quite as evenly. So a couple of times a summer, I indulge the wife by hiring a kid in the neighborhood to cut the yard. The money I spend is still way, way less than maintaining and garaging a gasoline mower, pouring chemicals on my lawn and having a hissy fit over clover and dandelions. The neighbors who are doing pretty much the same now outnumber the complainers.

Our reasons are as sound ecologically as they are financially. And we aren't shrinking the economy-- just the amount of money spent on lawn care. The money saved is going into things we value more than a standard uniform, green, chemically polluted lawn.

People will either go Galt on purpose or they will be forced to do so unintentionally by the nanny state shrinking disposable income. Former residents of the Soviet Union told me this is exactly what happened there. In agriculture alone, almost all of the fruits and vegetables were produced on the tiny percent of arable land (5% or less) which wasn't owned by the collective.

The nanny staters are destined to fail because they sponsor a failing system. It isn't a matter of if, it is a matter of when. It is also a matter of how much misery they will drag the rest of us through until it fails.

4 posted on 07/24/2012 9:07:04 AM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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