Skip to comments.YOUNG: Killing Keynesianism?
Posted on 09/15/2010 10:59:37 AM PDT by fightinJAG
Is the recession's great irony that government spending killed Keynesianism? With economists, bankers and investors perplexed over the economy's continued funk, we cannot be blamed for looking in odd places for answers. Could it possibly be that continuously increasing spending over eight decades has left little ability for government spending to affect the economy?
How could increased overall government spending have priced stimulative spending out of the market? To understand what has happened, we must look back to the 1930s. The New Deal was a concerted effort for government to take up the economy's slack.
In 1930, federal government spending (a 6 percent nominal increase from 1929) amounted to 3.4 percent of gross domestic product (GDP). Under President Franklin D. Roosevelt's New Deal, federal spending would top out at 10.7 percent of GDP in 1934 - only breaking the 10 percent threshold twice more in the 1930s. The increase of government relative to the economy was roughly threefold.
In contrast, the federal government consumed 24.7 percent of America's GDP last year. As large as the economic stimulus nominally was, it was just a fraction of the nation's $14 trillion economy.
While arguments still rage as to the New Deal's efficacy, at least government intervention was fiscally plausible then. Because of the government's previously minor economic impact, it could grow so much larger because it historically had been so much smaller.
In that regard, it was in line with John Maynard Keynes' own theorizing. He had envisioned government performing a countercyclical economic function. Government intervention would increase during an economic downturn but, just as important, it would decrease once the economy recovered. It would dampen the cycle he believed to be inherent in the economy: eliminating innate volatility by filling in the troughs and pulling down the peaks.
(Excerpt) Read more at washingtontimes.com ...
Keynesianism or Kenyansianism?
The engineering equivalent of Keynesianism is the naive freshmen who thinks you can hook a battery to a motor which both propels you forward whilst simultaneously charging the battery.
Such students soon become “studies” and poly sci majors.
Then they become public servants.
Be afraid. Be very afraid.
Kenyan killed Kenyansianism.
Keynes isn’t even being followed by Obama. Keynes even said the gov’t should try to balance the budget
I believe that’s why they are now calling Obamanomics “Kenyanesian policies.”
I read Bertrand Russell’s 2 volume autobiography. He was a contemporary of Keynes, and reviewed his theories in brief.
What struck me is how these intellectuals of a century ago flowed around in their little academic bubble, trying to get attention from their peers by re-inventing the wheel and exploring far outside the margins of common sense.
The amazing thing is that people take Keynes seriously, and that his theories are being practiced today. He was just a reality-disconnected geeky intellectual pulling thoughts out of his fanny.
Could it be that they simply didn’t spend enough to boost the economy and $1.8T isn’t enough - they needed a bigger boost??? I’m sure that is what the Obama/Pelosi radicals will argue.
This is what passed for edgy pop culture between the era of the great composers (who were simply the rock stars -- in every sense -- of their day) and Madonna/Lady Gaga, when singing and dancing around the house in one's underwear constittued anti-establishmentarianism.
Yes, it is amazing Keynes is being taken seriously at all today.