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Nothing makes an argument more frustrating than when 2 people are using the same words to argue over 2 different things.  When discussing strategies to get out of the recession, market fundamentalists (usually conservatives) argue to let the markets work.  Others, usually liberals who sorta-kinda understand Keynesian economics, argue that we need more stimulus to jump-start the economy.  Then the market fundamentalists respond with "markets are more efficient than government" it is always better.  Then they give some example of the government, in fact, screwing something up.  Then the liberal Keynesian says, free markets got us into this mess, and then gives an example of a corporation, in fact, either screwing something up or doing something evil.  This goes back and forth and is never resolved because they are talking about two different things.

If you're arguing for more stimulus or increased aggregate demand and end up arguing over how much governments and markets do or don't suck, you've lost the argument or - at best - will stalemate.  The reason is that in most cases markets are more efficient than government trying to do it.  Be it selling shoes or setting apartment rent prices.  The liberal position is not to suggest otherwise.  The problem is that it has nothing to do with your argument for demand management.  An economy that is deficient of aggregate demand can not fix itself because it has nothing to do with an individual product or industry.

To understand why these are two different things, let's take a look at a proto-typical private market.  Let's say that you run a company that sells dish soap and one day people  buy less dish soap.  Pretty soon you'll notice you're selling less dish soap and will start making less of it.  You'll now need fewer employees and equipment to make that dish soap.  You can either move those employees and equipment to make other things(like paper plates) or you can lay off your employees and sell the equipment.  In a good economy those employees and equipment would eventually go to a company making other things.  That is economic efficiency that government should stay out of.

What happens when people start buying less of everything?  Those employees that were laid off would have no where to go because all companies are making less things because they are selling fewer things.  That's what happens during a recession.  Now you have high unemployment and nowhere for those employees to go.  It is the difference between micro and macro economics.  If one is thinking "micro" they will think that the economy will simply sort things out - "let the markets work".  However, when one looks at the big picture you'll see that private markets can't sort it out because it has nothing to do with the efficiency that markets are good at.

Additionally, if one takes a micro approach to a recession and sees that workers are being laid off, they might (rightfully, in a "micro" approach) suggest that the workers need to take a pay cut to stay employed.  Take our dish soap example.  If consumers are buying only less dish soap, then workers could take a pay cut to keep everyone employed.  If workers demand less money, then it might be better for the company owner to hire people instead of buying and maintaining expensive machines and computers to do the same work.  If however, the problem is that consumers are buying less of everything, pay cuts for all workers will only make the problem worse.  If all workers in an economy take a pay cut, those workers will then turn around and buy less of everything because they now have less money.  That must then be followed by another pay cut which would then lead to another general drop in people buying stuff which would lead to another pay cut... etc...

To suggest that an economy needs increased demand does not require one to reject free enterprise.  The private market cannot deal with a drop in aggregate demand because no single company or person can control overall demand.  John Maynard Keynes was the first to show this systemic problem.  His recommendation was for the government to be that outside force that adds demand to the economy by doing social investment.  The idea was that government would give more people money to work, and then they would spend that money which would then cause people beyond the government to get jobs.  Doing this restored demand and had the bonus of providing public works that society could benefit from like parks and libraries.  Since his time, economists have come up with further refinements to his original recommendation.

For market fundamentalists of course, this is all heresy.  Instead, the market fundamentalists continue blaming the government for everything.  To any other reasoned person, you see a deep systemic problem that requires outside intervention to balance.  These two concepts don't have to conflict.  You can advocate for private markets and government intervention to restore aggregate demand.  Only dogmatic market fundamentalists can't see the difference between that and eliminating free enterprise.

Cross posted from Our Dime.

Originally posted to maddogg on Tue Nov 01, 2011 at 06:49 AM PDT.

Also republished by Keynesian Kossacks, The Royal Manticoran Rangers, Money and Public Purpose, and Community Spotlight.

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Comment Preferences

  •  Shared w/family & friends. Thanks. n/t (2+ / 0-)
    Recommended by:
    maddogg, psyched
  •  Efficiency unchallenged irks me (11+ / 0-)

    The only type of efficiency that seems to be embraced by the so-called Free Marketeers is that which enriches a handful of people.

    Financial Markets are "efficient" because they employ so very few people in order to amass profits. But everyone cannot be in the FIRE economy. Building roads, bridges, tunnels, sewers, rail, etc. is inherently "less profitable" than speculating in "exotic financial instruments." S&L operators before deregulation made less profit than their Investment Bank counterparts, but I recall their very popular guideline:

    3-6-3: Pay deposits at 3%, make mortgage loans at 6% and be on the golf course at 3PM. Note that they could very reasonably expect to be on the golf course. Note also that they experienced few downturns that would have cancelled a tee time, let alone force liquidation of the institution or massive damage to the sector.

    As an aside, I chafed at an NPR show I listened to when a caller decried students for pursuing Humanities degrees when there clearly wasn't any "market" for that sort of education (decades of pursue what interests you discarded like trash!!). Do they really think that most creators of "exotic financial instruments" write that enticing, alluring prose that forms the marketing "hook" to reel in mullets - I mean to say "potential late-to-the-party investors"???

    We all depend on each other to maintain civil society. Some of our fellow citizens clearly don't value that as much as

    Occupy Wall Street AND K Street!!!!

    by Egalitare on Tue Nov 01, 2011 at 08:00:18 AM PDT

    •  Financial Markets (13+ / 0-)

      The so-called Financial markets are a leach on the REAL economy.  As Warren Mosler says, "a lot more trouble than its worth".  It should be as small as possible.  The financial market(or FIRE sector) is not one of those "most" markets that is efficient when left completely alone.

      I like the way Krugman puts it.  Banking needs to be boring again.  The reeling and dealing needs to be reigned in.  But, even if wall street is reigned in.  We'll still need to restore aggregate demand to get us out of our current mess.

      Our Dime Understanding the U.S. Budget

      by maddogg on Tue Nov 01, 2011 at 09:08:56 AM PDT

      [ Parent ]

      •  The resisitance to AD increase (6+ / 0-)

        lies in the environmental destruction being caused by over-consumption.  But there is no need to increase demand for anything but labor.  And cutting the work week at the expense of RENTS is the proper solution.  And BTW, I have a page in wikipedia devoted to the distinction of wages, rent, profit, and interest.

        http://en.wikipedia.org/...

        If you disagree, please cite your changes and make them.

        •  I will check it out. n/t (0+ / 0-)

          Our Dime Understanding the U.S. Budget

          by maddogg on Wed Nov 02, 2011 at 05:01:53 AM PDT

          [ Parent ]

        •  An AD shift is needed (1+ / 0-)
          Recommended by:
          maddogg

          If the aggregate demand for solar energy increases, the "over-consumption" results in less environmental destruction. A shift to LED light bulbs (at a reasonable price) reduces landfill needs as well as electricity usage. There is nothing wrong with "over-consumption" if the products consumed are environmentally benign or helpful.

          How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

          by edg on Wed Nov 02, 2011 at 10:41:49 AM PDT

          [ Parent ]

      •  What neoliberal tripe (0+ / 0-)

        Who promoted this bullshit to the the Spotlight section?

        The diarist makes a blanket assumption that he presents as beyond challenge, and sure enough, no one challenges it.

        The reason is that in most cases markets are more efficient than government trying to do it.

        Really? Says who? The plutocrats and their hired mouth-pieces? The American Enterprise Institute?

        Let's get something straight here. There is zero evidence to support the assertion that markets are more efficient at anything.

        In fact, to even make such a blanket statement, without first carefully defining what kind of "markets" and what king of "government" and what you mean by "efficient", its really pretty dumb to even approach the subject.

        Did you get that? There are different kinds of markets, different kinds of governments or government entities, and different ways of defining efficiency.

        Like, by "efficiency" do you mean requires less workers? If so, how is that beneficial to a society with over 20% unemployment and another 30% underemployment?

        Nevermind...

        Actually I'm more interested in why a diary "recommended" by one person gets better real estate on Daily Kos's front page than a diary recommended by 700 people.

        I'm sorry maddog. You may be a great guy, but you're selling an insipid, and false right wing talking point here.

        •  Defining Markets (2+ / 0-)
          Recommended by:
          Calamity Jean, Remillard

          Thanks rocklawyer for your comments.  Perhaps I do need to qualify what I mean by "markets".  By market, I just mean that people are free to make, sell, and buy whatever they choose as long as they aren't harming anyone.  The government has a role to make sure no one is harmed, externalized costs(pollution and other use of "the commons") are recouped, and market failures are addressed. This doesn't mean their profitsconsumption can't be taxed, or even highly taxed.  I'm not one of these libertarians who thinks tax is theft, but neither am I a socialist who thinks profit is theft.

          >>Let's get something straight here. There is zero evidence to support the assertion that markets are more efficient at anything.<<
          I seriously doubt this is true.  The only way I would think this is true is if you are using the market fundamentalist definition of a market that has zero government involvement.  The market fundamentalists are trying to change the way we use words.  They try to define markets as only the way they think of them.

          The United States is a mostly market economy and it mostly works.  The problem with the neoliberal agenda is that it tries to impose markets where there isn't one and shouldn't be one.  I am well aware of the dangers of neoliberalism.

          Like, by "efficiency" do you mean requires less workers? If so, how is that beneficial to a society with over 20% unemployment and another 30% underemployment?

          Did you read the entire diary?  If we maintained proper aggregate demand we wouldn't have that problem.
          I'm sorry maddog. You may be a great guy, but you're selling an insipid, and false right wing talking point here.

          Well thank you, I'm sure you're a great guy too.  However, are you sure you're not the one who has fallen for right-wing framing of what a market looks like?

          Our Dime Understanding the U.S. Budget

          by maddogg on Wed Nov 02, 2011 at 05:01:24 AM PDT

          [ Parent ]

          •  It is not polite ... (1+ / 0-)
            Recommended by:
            maddogg

            to hide-rate a commenter in your own diary like you did to rocklawyer below. You may want to reconsider.

            How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

            by edg on Wed Nov 02, 2011 at 10:50:53 AM PDT

            [ Parent ]

            •  It's not polite to insult other commenters (0+ / 0-)

              I hide-rated it because he insulted MGross 4 different times in one comment, basically calling him stupid.  "Disconnect brain from tv", "no idea what you're talking about", "CNBC bot", and "shallowness" of thought.  On top of that it added no new information to the conversation.

              If the insults had been leveled against myself, I would've just ignored.  Rocklawyer has several different comments very critical of myself and others.  I did not hide rate those because they weren't calling anyone stupid.

              Believe me I thought about it a while before doing it, but in the end, I decided that it was the right thing to do and I still stand by it.  I'm willing to stand by my decision to site admins and fellow kossacks.  I'm also willing to endure rocklawyer retaliating against me.

              Politeness is no excuse for allowing a destructive conversation.

              Our Dime Understanding the U.S. Budget

              by maddogg on Wed Nov 02, 2011 at 11:32:03 AM PDT

              [ Parent ]

              •  Let the community work. (0+ / 0-)

                If others find rocklawyer's comments offensive or objectionable, they will hide rate. A rude jerk, if that is what s/he is, is best shunned and ignored.

                How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

                by edg on Wed Nov 02, 2011 at 01:25:14 PM PDT

                [ Parent ]

        •  Markets versus government (3+ / 0-)
          Recommended by:
          maddogg, Calamity Jean, Remillard
          The reason is that in most cases markets are more efficient than government trying to do it.

          Truthfully, I would be inclined to agree with the above statement, but perhaps the diarist should have fleshed it out more.

          Look at automotive markets as an example.  In Europe, when the governments tried to step in and run car companies for an extended period of time, the result was pretty much a disaster.  But here in the US, having the government temporarily step in to save two large auto companies appears to have been a success.  We can also see that government regulatory intervention was required to drive certain kinds of innovation in the industry (reduced pollution, greater efficiency, safety features), while the markets were able to successfully drive other kinds of innovation (comfort features, improved handling and driveability, better electronics, etc).

          So I look at that and I see some things that government did well (such as seat belt mandates and emissions controls), and other things that it couldn't do as well as the markets (running those European car companies).

          There's a place for both government intervention and free markets, and I saw nothing in the original diarist's statement to suggest otherwise.  

          But perhaps someone else might want to step up and discuss why markets don't work so well for certain applications, such as providing essential services (medical care, utilities, police protection) and features (safety, pollution control).

          Political Compass: -6.75, -3.08

          by TexasTom on Wed Nov 02, 2011 at 05:32:06 AM PDT

          [ Parent ]

          •  Thanks! (3+ / 0-)
            Recommended by:
            Calamity Jean, TexasTom, Remillard

            TexasTom, you and I are pretty close in our views here.  

            "There's a place for both government intervention and free markets".  I agree with this statement and was my point of the diary.  The problem that this gentleman is referring to is the neoliberal agenda which tries to impose "free markets" where there isn't any and nor should there be.

            For instance, when it comes to medical care there is no real, functioning market.  In a functioning market, you have choices and the ability to turn down a sale.  For instance, if the price of shoes goes up ridiculously high, you always have the option of not wearing shoes and finding an alternative, like wearing 3 pairs of socks, instead.  With health care you don't have those options.  If the doctor says you need surgery, you need to either have surgery or die.  You can't walk away from death!  Neoliberals ignore this because they value markets above all else.

            Our Dime Understanding the U.S. Budget

            by maddogg on Wed Nov 02, 2011 at 07:55:22 AM PDT

            [ Parent ]

          •  They didn't "run" the car companies. (0+ / 0-)

            Uncle Sam gave them money, we were (are) pretty much a silent partner.

        •  We've had over 50 years of empirical evidence... (1+ / 0-)
          Recommended by:
          Sparhawk

          ...on the efficiency of centralized economies versus the free market.

          To say the results were dramatic would be to put things mildly.

          different ways of defining efficiency.

          Indeed, redefining efficiency is the only way you could even hope to make the argument plausible.

          •  Ridiculous (1+ / 1-)
            Recommended by:
            edg
            Hidden by:
            maddogg

            You need to disconnect your brain from your TV.

            You don't know what a free market would look like.

            And did I say anything about "centralized" anything? I said there are many different kinds of governments. Twice.

            Sigh. I have no interest in having a discussion with the CNBC bot. This stuff is very complicated. There's zero place for such shallowness as "centralized economies versus the free market" as though you have any idea what you're talking about.

            The amusing part though, should any of my friends stroll by who know me , is that someone on the internet is trying to say bad things about centralization. To me. lol. Decentralization is practically my religion. So it's kind of funny you would assume I meant centralized government.

            I'm sleepy now. Naptime.

             

            •  Uprated (0+ / 0-)

              to counter unreasonable hide rating. Rocklawyer posted nothing that is hr-able.

              How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

              by edg on Wed Nov 02, 2011 at 10:47:31 AM PDT

              [ Parent ]

            •  Pointless? (0+ / 0-)
              Sigh. I have no interest in having a discussion with the CNBC bot. This stuff is very complicated. There's zero place for such shallowness as "centralized economies versus the free market" as though you have any idea what you're talking about.

              Kind of pointless then to even bring it up?  If you're going to engage, bring out your material.  Poking and then retreating with "oh this is too complicated to discuss and I'm tired" is pretty lame.

              It is a mistake to think you can solve any major problems just with potatoes. ~~ Douglas Adams

              by Remillard on Wed Nov 02, 2011 at 11:29:02 AM PDT

              [ Parent ]

          •  No, we have not. (0+ / 0-)

            We have 50 years of empirical evidence of what happens when a rich nation (the US) spends vast sums of money "containing" centralized economies for fear that the shortcomings of the "free market" might receive wider exposure.

            How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

            by edg on Wed Nov 02, 2011 at 10:49:25 AM PDT

            [ Parent ]

            •  Always someone else's fault, eh? (0+ / 0-)

              I suppose if Stalin had just starved more people, it would have all turned up daisies.

              The US doesn't have to suppress centralized economies.  They do a great job of it themselves.  If it wasn't for oil, there'd be essentially none left.

              •  Alwasy someone else's fault, eh? (0+ / 0-)

                I suppose if we had just killed more commies, it would have all turned up roses. And if we had just killed more Iraqis, your love affair with oil would continue unabated.

                How quickly the Pacifist becomes the Warrior when it's "our side" doing the killing.

                by edg on Wed Nov 02, 2011 at 01:20:03 PM PDT

                [ Parent ]

  •  Thanks, maddogg, for this (3+ / 0-)

    very understandable explanation of a confounding economic misunderstanding.


    For the first time in human history, we possess both the means for destroying all life on Earth or realizing a paradise on the planet--Michio Kaku.

    by psyched on Tue Nov 01, 2011 at 11:41:10 AM PDT

  •  Thanks for the links (1+ / 0-)
    Recommended by:
    Bob Guyer

    I have already read the first part of the Paul Davidson's article from the journal of economic issues. I took classes from a samuelson disciple in the early 1980's and now thie discrepancies pointed out between what Samuelson claimed to be "Keynesianism" and ACTUAL Keynesian policies. This guy mainly taught micro-economics based on the (relatively new at the time) Friedmanite free market principles but MAcro-economics based on Samuleson's interpretation of Keynes( which this current set of articles , e.g. Tarshis, you have provided points out as "laughable"). I never knew my parents paid for someone to trick me with "voodoo economics"!

    Those who make peaceful revolution impossible make violent revolution inevitable-John F. Kennedy

    by TexasTwister on Tue Nov 01, 2011 at 01:20:59 PM PDT

  •  The only thing markets are efficient at (4+ / 0-)

    ...is connecting buyers and sellers and clearing the goods from the marketplace.

    The idea that markets lead to innovation which leads to cost reductions and increases in efficiency is not a function of the market.  It is an emergent property of all the means of decision-making in the economy - tradition, bureaucratic decree, and markets.

    The failure to note that distinction has caused the world no end of trouble.

    50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

    by TarheelDem on Tue Nov 01, 2011 at 01:58:59 PM PDT

    •  Exactly. I blame Finance for the confusion. (4+ / 0-)

      The field of Finance has a concept called "the Efficient-Market Hypothesis".  It is reasonably well documented and many Ph.Ds make good livings researching it and debating it.

      It says that it is difficult to make money buying and selling commodities.

      I think that people hear about the EMH and the fact that there is said to be "strong" evidence for it and get confused. They think that efficient markets" means that markets allocate resources efficiently. They don't. There's no evidence that they do. In fact, any bank failure or busted hedge fund is proof that they don't.

      But the myth persists. We hear people say "markets are efficient!" as if it is a Proven Fact. They don't realize that the Efficient Market Hypothesis refers to making profits from trading, not that "markets" have a freakin' clue how much a schoolteacher, foreclosed home, bar of gold, or CEO is actually worth.

      •  Everything fails at perfect efficiency. (1+ / 0-)
        Recommended by:
        Sparhawk

        We shouldn't forget that a centrally planned economy has been tried multiple times, significantly underperforming the free market (and resulting in mass starvation) each time.

        While I won't state that it's impossible to outperform the market for resource allocation, nothing else has managed to do so, so far.

        •  What about healthcare? (0+ / 0-)

          Look at healthcare systems in the US and compare them to systems with more government control...notably Western Europe.

          When it comes down to bang-for-the-buck, who wins?

          In fact, most Western European countries have much more government control and allocate resources much more efficiently.

          True, they are having pain paying off their debt, but they also take very long vacations, have healthcare, education, and work fewer hours. They live longer and their kids score higher on tests.

          Here in the USA many of us work like dogs and still must send our kids to crappy schools and mus go without healthcare.

          •  It doesn't succeed there, either. (0+ / 0-)

            You're assuming "more equitable" allocation is more efficient allocation.  A private healthcare system allocates healthcare towards preserving the most (monetarily) productive members of society.  Preserving the most total amount of life time is not the goal across the population is not the goal, optimizing total productivity is the goal.

            From an efficiency standpoint, if you spend a million keeping a very economically member of society alive and working for a year, you could easily outperform, say, keeping 100 less productive members alive.

            Obviously, most people don't base all their decisions purely on economic efficiency...

            •  Neoliberal efficiency. (1+ / 0-)
              Recommended by:
              ManhattanMan

              Well, I think you just recited the conservative position.  Rationed healthcare only to those who can afford it.  There are a couple moral and economic flaws with this though.  Morally, I think healthcare is a very much part of the deceleration of independence's inalienable right to life.

              Economically, Just because one has money doesn't mean that it was earned through productive means.  That isn't always the case (inherited, exploited, or passive "economic rent").  Second, you don't know who is going to be productive, so you need to keep everyone healthy.  Healthcare is one of those things that isn't a real market and shouldn't be treated as such.

              Our Dime Understanding the U.S. Budget

              by maddogg on Wed Nov 02, 2011 at 12:14:40 PM PDT

              [ Parent ]

  •  Their "blame" of government is ... (2+ / 0-)
    Recommended by:
    jellyyork, DBunn

    largely either one of two things

    1.  Ideology based:  they just have a quasi-religious view that government is bad in some way.

    2.  Ignorance based:  They may be repeating what they have been taught or have been given information that is inaccurate or certainly subject to debate.

    I don't think in the case of Ideology based blame, their "blame of government" is dishonest.

    I believe most people in this 'blame government" category are doing so out of a position of ignorance.  That's what we have to believe if we think we can change minds on this.  

    I have a friend who was in the latter category until a combination double-whammy of the "dot-bom" bubble and the 2008 meltdown left her with worthless investments, no job and under water on her home.

    She is now living in a room in her sisters home and surprisingly, the things she emails me are remarkably different.

    I think the path with ignorance based "market fundamentalism" is to use cases like that to incite empathy and show that things are not so black and white.

    If that does not do the trick then it's #1 above and there is nothing that will convince those people.

    •  I believe that "goverment became the problem" (1+ / 0-)
      Recommended by:
      Calamity Jean

      only in the wake of desegregation. We tend the think that the Civil Rights movement all happened in the 50's and 60's. But desegregation of housing, workplaces and schools didn't have wide impact until years of lawsuits and court orders had played out.

      It wasn't until the late 70's that White America figured out that it had lost the war. Naturally, they blamed the Federal Government, and - with a little help from RepubliCorp - their racist resentment was sublimated into a general hostility toward government. The property tax "revolt" that started in California in 1978 came close on the heels of a very ugly school busing controversy in Los Angeles County.

      The backlash to the election of America's First Black President has made this connection pretty obvious to me. Hopefully, the excesses of RepubliCorp will persuade the Amerikaaners that they've lost this battle too. Their children are probably persuadable. But we'll have to keep fighting until the old ones just die off.

      Have you noticed?
      Politicians who promise LESS government
      only deliver BAD government.

      by jjohnjj on Tue Nov 01, 2011 at 10:42:59 PM PDT

      [ Parent ]

  •  There are some Conservatives... (2+ / 0-)
    Recommended by:
    DBunn, FishOutofWater

    ...that you will never convince.

    After you have laid out facts, figures, logic, equations, and proofs, you can convince a reasonable Conservative that government intervention creates:

    - A more efficient use of resources
    - More wealth for more people
    - Less dangerous environmental damage

    But even so, healthy percentage of them still won't vote with us.  These guys actually don't care about recessions and wages and putting food on the table. They like Markets because they believe that Markets are somehow morally superior. Because markets make them feel "free".

    It's important that we never miss a chance to back these guys into their intellectual corner.

    Voters need to see that many who advocate Pure Capitalism do so from ideological grounds and will continue to do so no matter how many Americans become unemployed, uninsured, foreclosed-on, outsourced, or hungry.

  •  One way of seeing it is that (2+ / 0-)
    Recommended by:
    DBunn, Bob Guyer

    unemployment is an "economic activity".

    So, to match the "micro" concept, when a company faces decreased demand, you can lay off your workers and they can find other activities. One of them is staying at home watching TV, for example. Continously looking for a job is another one.

    An official "market", with products and prices, covers only a part of people economies: The part where you produce goods and services and exchange them for a price.

    I think that people tend to forget that about economics. A government "jump-starting" an economy is not trying to create something out of nothing. It's actually trying to move people out of low or no productivity activities, to better uses of our time. Instead of hanging out on your porch or walking all over town trying to find a place that hires you, the government is telling you "save your time, here's some work for you."

    (BTW: other less-desirable activities, such as robbery or selling drugs, are also economic in nature. They're also a good reason for avoiding unemployment)

  •  World faces years of social unrest (2+ / 0-)
    Recommended by:
    DBunn, Calamity Jean
    World faces years of social unrest as economies falter
    The international economy is on the brink of a deep new economic crisis that could cost millions of jobs around the globe and trigger mass social unrest, the world's most powerful nations were warned yesterday

    That’s the headline I just read of the independent, that’s what they’re talkin’ at the G-20—JOBS!

    http://www.independent.co.uk/...

    Nudniks need not apply.

    by killermiller on Tue Nov 01, 2011 at 04:48:46 PM PDT

  •  What if there is just nothing to do? (1+ / 0-)
    Recommended by:
    DBunn

    What if robots are making the dish soap and paper plates and harvesting the food and generating the electricity?

    •  When that happens... (2+ / 0-)
      Recommended by:
      DBunn, Calamity Jean

      ... Then we can have paradise.  But until that time, there's electric wires to be buried, solar panels to be made, elderly to be properly taken care of, and children who would love someone to read to them.

      Our Dime Understanding the U.S. Budget

      by maddogg on Tue Nov 01, 2011 at 08:02:19 PM PDT

      [ Parent ]

      •  But we're firing teachers, not hiring them to (0+ / 0-)

        read to kids.  And if the government just spent money to do stuff that can and should be done, but isn't required, well isn't that kindof outside the economy, since the point isn't making money or even market efficiency...???

        PS.  You say 'when that happens we'll have paradise'.  Really?  Won't we have 50% unemployment since "who needs to pay workers when robots do it for near-free?"  And, how do we know when we are there...???

        •  Prosperity derived from automation and efficiency (2+ / 0-)
          Recommended by:
          TexasTom, Calamity Jean

          can be used to create more billionaires. Or it can be used to give everyone a 20-hour workweek with no change in income.

          We just haven't figure out how to do this yet. It won't be capitalism, it won't be socialism... it will some made from parts of each, and better than either one.

          It's very hard for Americans to wrap their heads around a life of leisure. We are only shown what the wealthy do with leisure time. We all think we'd go nuts with twenty extra hours in a week, unless we had the money to go on cruises, play golf, and attend charity balls.

          I ask people what they would do if they could make the same income in half the time, and most of them say, "get second job... so I can go to the Bahamas for Christmas".

          But poor people around the world can teach us that there's another way to live life. It's slower-paced, more intimate, healthier, and more satisfying. In such cultures people spend time with their kids instead of working eight hours, they spend a lot of time preparing meals instead of going to restaurants, they tend their own gardens instead of shopping at the supermarket, they walk instead of driving, they make art and music rather than buy it,  they play sports rather than watching it on TV.

          Hard to imagine, for most of us. But our current lifestyle is fueled by cheap oil. It's got to change.

          Have you noticed?
          Politicians who promise LESS government
          only deliver BAD government.

          by jjohnjj on Tue Nov 01, 2011 at 10:11:14 PM PDT

          [ Parent ]

          •  We're already there, busily marching down option 1 (1+ / 0-)
            Recommended by:
            TexasTom

            Making billionaires who control the automation while masses scramble for the few jobs there are.  We're too afraid to raise taxes or (gasp!) print money to fund teachers to read to kids or healers to tend to the poor or just reduce the workweek.  We give everything to the 1% then grovel.

          •  PS. Now I'm curious why you ended with the (0+ / 0-)

            'cheap oil' shot.  Not that I don't disagree that current oil consumption is unsustainable.  But what if it was?  What if fusion-in-a-bottle were made to work?  What if there were endless amounts of nearly-free energy?  How would anyone pay for it without a 'job' since the robots took care of it all?

            This sounds snarky, but substitute 3rd-world-sweat-shop for robot and this all quickly becomes relevent.

            •  I guess I misunderstood your first comment (0+ / 0-)

              I thought you were one of those who could not imagine a world without a 40-hour workweek.

              Now I'm guessing that you don't believe that our financial overlords will permit the majority of us to be anything but serfs.

              The arc of history doesn't bend that way. Science, as an organized human activity, is only been around for 350 years. During that time, the human race has enjoyed an ever-increasing abundance of liberty and prosperity. The distribution has been uneven, and political power still swings between concentration and dispersion, but the historic trend always points toward progress.

              In 1900, 40% of America's workforce was employed in agriculture. Then the "robots" - mechanization - took over. Now only 2% of the workforce is engaged in agriculture. But we don't have a vast population of destitute peasants living in rural areas. The economy adapted, the rural population moved to the cities and started working in factories.

              They told us that displaced factory workers would be absorbed by the "service economy". Well, we've found out that there are limits to that. But despite the current crisis, I don't hold a dystopian view of our future. There will be struggles for sure, and sacrifices. But I think of them as "growing pains", not disasters.

              Have you noticed?
              Politicians who promise LESS government
              only deliver BAD government.

              by jjohnjj on Wed Nov 02, 2011 at 01:31:56 PM PDT

              [ Parent ]

    •  There's always something to do. (0+ / 0-)

      As fewer and fewer people are needed to perform the jobs at the bottom of Maslow's Heirarchy of Needs they are freed instead to work higher up the pyramid.

      The less people needed to shovel coal, the more get to work in entertainment. It's just that the market doesn't convey one painlessly from Profession A to Profession B.

  •  Re (2+ / 0-)
    Recommended by:
    DBunn, MGross
    His recommendation was for the government to be that outside force that adds demand to the economy by doing social investment.

    You are ignoring the fact that you appear to be trying to get a free lunch.

    So, the government whisks this "demand" into existence where there was nothing before. What does it cost? When do we have to pay it back?

    The libertarian / Austrian argument is "of course the government can 'generate demand' in the short term... at the cost of drying up more demand in the future!"

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Tue Nov 01, 2011 at 07:50:04 PM PDT

    •  Questions (4+ / 0-)

      >>What does it cost? When do we have to pay it back?
      This gets back to the question of market efficiency vs. idle resources.  In the diary I used "unemployment" since it is the resource that costs the most when idle.  To get to your answer you, again, have to think "macro" not "micro".

      Ask yourself, "what is government spending?".  Government spending is moving resources from the private sector to the public sector.  When the government "spends" money, what it's actually doing is taking private sector workers and telling them to do something else.   If the private sector is 100% employed, then any public sector spending has a real cost.  For instance, if the government offers money to home builders to become soldiers, that has a very real cost.  The supply of homes will dip since there won't be as many homebuilders.  However, in a recession, those home builders aren't working because there is no demand.  They are idle.  When the government 'spends' to make them soldiers there is little cost to the private sector because it didn't lose anything it was using.  So for your first question, "what does it cost"?  Almost nothing.  Even better, if instead of soldiers, the government pays them to do community improvement projects, then not only is the cost next-to-nothing, it is actually a net gain.  Our lives are being improved by using the workers the private sector isn't currently using.

      "When do we have to pay it back?"  I'm not sure what you're referring too.  Pay what back to who?  If you're referring to the national debt, I would point out that The United States has payed off the entire debt since the 1830s.  We are still "paying" for the civil war.  But who are we paying, and how do we pay it?  Are our factory workers building rifles and sending them back in time?  So please specify what you think it is that we must "pay it back".

      >>The libertarian / Austrian argument is "of course the government can 'generate demand' in the short term... at the cost of drying up more demand in the future!"<<

      The answer to this was the real genius of Keynes and Aggregate Demand management.  Before I answer it though, let me ask you what causes material wealth?  I'll answer that for you.  It's knowledge and past investments.  When employers invest in automation and new technology, that investment pays for itself over and over again.  We are able to make more with less effort.  So why do I bring this up?  Keynes insight was that if businesses knew that aggregate demand would be maintained, they would make long term investments in new equipment and research.  Those investments would then let them build or service their customers with less effort.  That resulted in lower costs and higher profits by businesses.  By stimulating - and committing to maintain - aggregate demand, government creates a real pro-growth environment that encourages businesses to invest in the things that actual cause a society to have material wealth.  Those investments put more people to work. In short, the Austrians are wrong.  Short term aggregate demand increases encourages future demand and investment, not diminishes it.

      Our Dime Understanding the U.S. Budget

      by maddogg on Tue Nov 01, 2011 at 08:28:13 PM PDT

      [ Parent ]

      •  Market blindness is a good term (2+ / 0-)

        for indicating the observable tendency for market fundamentalists like Milton Friedman to not see anything outside the lens of a profit maximizing business framework. If they could see outside that frame they would see all sorts of things that markets do poorly or can't do at all. The free market folks are blinded by concentrating on one thing and then imagining that it is the answer to everything. The systems within which market economics emerge and function are much more complex and diverse than the markets that emerge and only a blind person will be unable to see this.

        Love = Awareness of mutually beneficial exchange across semi-permeable boundaries. Political and economic systems either amplify or inhibit Love.

        by Bob Guyer on Tue Nov 01, 2011 at 10:02:19 PM PDT

        [ Parent ]

    •  You take money currently being funneled into the (1+ / 0-)
      Recommended by:
      Calamity Jean

      pockets of those who don't have to spend it, ie the 1% and redirect it to the 99%, who do have to turn around and spend it.  Thanks to capitalism, it will always eventually end up back with the 1% anyway, just at a far slower rate.

      And by doing so, the government doesn't magically 'create' demand.  It allows the demand that was present but had no money to be expressed.  A broke, starving man still has 'demand' for food, he just doesn't have any money with which to satisfy that demand economically.  Give him the money to do so, and he expresses his demand in a way that seems like it was 'whisked into existence'.  And the fact that he 'demands' food now in no way 'dries up more demand in the future'.  He'll still need food then, even though he ate now.

      The basis for sustainable demand, now and forever, lies in humans having enough money to meet what society deems as their needs.   And if people are capable of being productive, then why not actually employ them to do something rather than simply handing the money over?  The government creating jobs is far more satisfying to even the most extreme liberal than the government simply handing out money.  Most people want to feel their life has some purpose, that they're doing something productive, so by creating jobs, you're actually fulfilling yet more human needs that simple welfare leaves unsatisfied.

      In study after study, by both right and left wing groups, it's been proven that the most effective uses of stimulative dollars lie in simply moving them into the pockets of the poorest people around, who have to spend them simply to stay alive.  So far better to hire them to start fixing up infrastructure or building things we don't need yet that we can stockpile for the future than simply to give them cash to stay alive with nothing to show for it.

      •  Re (0+ / 0-)
        A broke, starving man still has 'demand' for food, he just doesn't have any money with which to satisfy that demand economically.  Give him the money to do so, and he expresses his demand in a way that seems like it was 'whisked into existence'.  And the fact that he 'demands' food now in no way 'dries up more demand in the future'.  He'll still need food then, even though he ate now.

        All of this is a net economic loss if the broke, starving man cannot produce a good or service at market prices (eventually) to offset the resources provided to keep him alive.

        What you are describing is a roundabout form of charity. That's probably OK as a matter of public policy, but not as a matter of economics. If you consume resources and don't produce any, you are a net economic sink, period! Being a consumer isn't a service!

        Most people want to feel their life has some purpose, that they're doing something productive, so by creating jobs, you're actually fulfilling yet more human needs that simple welfare leaves unsatisfied.

        These jobs need to actually do something useful, i.e. something a third party would be willing to pay money for, and at prices that compete with prices elsewhere. If they do not, it's just welfare again. Whether you're providing welfare or providing a non-value-add "job" is irrelevant, they are both welfare.

        In study after study, by both right and left wing groups, it's been proven that the most effective uses of stimulative dollars lie in simply moving them into the pockets of the poorest people around, who have to spend them simply to stay alive.

        Yeah, it's stimulative now. But when the deficits we've run up doing this have to be paid down, isn't that as precisely anti-stimulative as the deficits were stimulative? Even more because of the interest payments?

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Wed Nov 02, 2011 at 09:00:27 AM PDT

        [ Parent ]

        •  Certain Assumptions (0+ / 0-)
          All of this is a net economic loss if the broke, starving man cannot produce a good or service at market prices (eventually) to offset the resources provided to keep him alive.

          What you are describing is a roundabout form of charity. That's probably OK as a matter of public policy, but not as a matter of economics.


          Yes, there is a form of charity.  Implicit in my analysis as well as Dr Erich's analysis is the assumption that society is not going to let some one starve to death.  Therefore them having a job means less charity - not more.  Less chairty, and more efficient then handing them money.

          Also, implicit in your assumption is that the work they would be doing isn't useful.  In a world of infinite demands, there is always useful work to be done.  Therefore, it is more efficient to pay people to do some of that useful work than to do nothing.  Additionally, If proper aggregate demand is maintained, most jobs will be created by the private sector.

          >>Yeah, it's stimulative now. But when the deficits we've run up doing this have to be paid down
          There is not a time when budget deficits by the federal government would have to be paid.  The federal government is the only entity that can create dollars and therefore can always pay back it's so-called debt.  The idea that budget deficits are inherently limited is a left-over vestige of the gold-standard.  The only real limit on federal spending is inflation.  If there is too much inflation then it just means there's too much aggregate demand and government can step back.

          Our Dime Understanding the U.S. Budget

          by maddogg on Wed Nov 02, 2011 at 09:19:39 AM PDT

          [ Parent ]

        •  What? There's got to be a clearer definition (1+ / 0-)
          Recommended by:
          JeffW
          These jobs need to actually do something useful, i.e. something a third party would be willing to pay money for, and at prices that compete with prices elsewhere.
          of "useful" than "something a third party would be willing to pay money for".  Must the "third party" be a single individual, or can it be a group of people paying for something that benefits the whole group?  Because a group doing or paying for things that benefit the group is the essence of government.  Whether it's a club or association chartering a bus for an excursion, or two towns repairing the bridge over the river between them using tax money, the bus and the bridge are useful, but no one person outside of the Koch brothers is going to pay for it.  
          Yeah, it's stimulative now. But when the deficits we've run up doing this have to be paid down, isn't that as precisely anti-stimulative as the deficits were stimulative?
          Yes, exactly.  That's a feature, not a bug.  The government runs up debt in recessionary times to stimulate the economy, and should pay down the debt in boom times to help the economy cool off and discourage bubbles.  IOW, government spending should be anti-cyclic.  

          Renewable energy brings national global security.      -6.25, -6.05

          by Calamity Jean on Wed Nov 02, 2011 at 10:32:32 AM PDT

          [ Parent ]

          •  Re (0+ / 0-)
            Whether it's a club or association chartering a bus for an excursion, or two towns repairing the bridge over the river between them using tax money, the bus and the bridge are useful, but no one person outside of the Koch brothers is going to pay for it.  

            The bridge is only useful as a means to an end. If it isn't being ultimately used to transport goods and services (thus enriching your area by allowing exports), you might as well not bother.

            The bridge itself isn't useful. It's the private sector activities enabled by the bridge that are useful. Virtually all infrastructure is like that.

            (-5.50,-6.67): Left Libertarian
            Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

            by Sparhawk on Wed Nov 02, 2011 at 11:20:41 AM PDT

            [ Parent ]

            •  I would say that the bridge is a (2+ / 0-)
              Recommended by:
              maddogg, JeffW

              provider of service in itself.  If I want to get across the river to visit people I know on the other side, I find that the bridge is worth the taxes I paid for my share of the construction and maintanance, even if I'm not going to "transport goods and services".  Of course the bridge itself is useful.  

              Compare a bridge to a ferryboat.  If I take a ferry across the river for any reason, the ferry has provided a service to me, right?  Similarly, if I take a bridge across the river, the bridge has provided a service to me.  But a bridge is more productive (carries more people per unit time), more reliable (less affected by bad weather), and probably more economical.  I can't see how you can say the bridge isn't useful.  Would you say that a privately run ferry is useful, but a public ferry isn't?  Is a privately run toll bridge useful, even if a public tax-supported bridge isn't?  

              Renewable energy brings national global security.      -6.25, -6.05

              by Calamity Jean on Sat Nov 05, 2011 at 11:18:30 AM PDT

              [ Parent ]

    •  Austrian economics is wrong and stupid. (0+ / 0-)

      There isn't a fixed pot of money that produces a zero sum game as you assert.

      Government investment during periods of high unemployment grows the pot of money so that everyone is better off in both the present and the future.

      You are advocating Hooverism - continued stagnation during a period of high unemployment.

      look for my eSci diary series Thursday evening. "Forgive them; for they know not what they do."

      by FishOutofWater on Wed Nov 02, 2011 at 06:20:58 AM PDT

      [ Parent ]

      •  Re (0+ / 0-)
        There isn't a fixed pot of money that produces a zero sum game as you assert.

        "Money" is natural and other resources, not paper. Oil isn't a fixed resource? Metals aren't a fixed resource?

        Government investment during periods of high unemployment grows the pot of money so that everyone is better off in both the present and the future.

        Sure, if it's an actual investment, but if it's an actual investment that makes sense the level of employment shouldn't matter. The investment stands on its own merits, or it doesn't. High unemployment might mean we get more employees available to work on it cheaper, but I'm sure you don't consider that an 'advantage', so it's hard to argue that now is a particularly good time to invest.

        For any government investment, the position needs to be "this thing really needs to be done, so I guess we'll grudgingly hire some people to do it", not "wow, there's high unemployment! Let's find a project, any project, to hire some people!"

        (-5.50,-6.67): Left Libertarian
        Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

        by Sparhawk on Wed Nov 02, 2011 at 09:11:16 AM PDT

        [ Parent ]

        •  Money (0+ / 0-)
          "Money" is natural and other resources, not paper. Oil isn't a fixed resource? Metals aren't a fixed resource?

          This is the ultimate fall down of austrian economics.  Money does not necessarily have to be based on a natural resource.

          Our Dime Understanding the U.S. Budget

          by maddogg on Wed Nov 02, 2011 at 09:25:15 AM PDT

          [ Parent ]

        •  2 Types of Government investment (1+ / 0-)
          Recommended by:
          Calamity Jean
          Sure, if it's an actual investment, but if it's an actual investment that makes sense the level of employment shouldn't matter.

          There should be two types of government spending.  The first is what you describe: investment that makes sense to be payed at the currently going market rate.

          The second type of investment should be to use whatever labor is left after the initial government investment and private sector have taken what the need.  These projects do not need to be as "efficient" because any results are essentially free because it would be employing only otherwise idle resources.

          Our Dime Understanding the U.S. Budget

          by maddogg on Wed Nov 02, 2011 at 09:27:49 AM PDT

          [ Parent ]

  •  A wild market is not a free market. (0+ / 0-)

    Have you noticed?
    Politicians who promise LESS government
    only deliver BAD government.

    by jjohnjj on Tue Nov 01, 2011 at 10:11:59 PM PDT

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