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Explanation of the different economic policies

Spriggs05

Spriggs05

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Can i have the explanations and political orientations of different economic systems?

Supply-side
Keynesian
Monetarism
any others.
 
Spriggs05 said:
Can i have the explanations and political orientations of different economic systems?

Supply-side
Keynesian
Monetarism
any others.
Click to expand...

Supply-side...conservative
Keynesian....used all across the spectrum in practice but demonized by anti-government types
Monetarism....used to be conservative but now even monetary policy has come under attack from the extreme conservatives.

That's in the US.
 
Spriggs05 said:
Can i have the explanations and political orientations of different economic systems?

Supply-side
Keynesian
Monetarism
any others.
Click to expand...

Supply side, aka trickle down. It is the belief that if you supply money to people they will buy things. This is true. The problem is that the right has hijacked it and only apply it to the rich.

Keynes- the belief that you supply people directly with money so they could go out and buy things. Sales drives the economy and thus creates jobs. This works and is used by all governments.

Monetarism - the belief that you could supply money through the banking system only. This is false in recessions though, when people borrow less and pay off debts. It works in boom times.
 
JP Hochbaum said:
Supply side, aka trickle down. It is the belief that if you supply money to people they will buy things. This is true. The problem is that the right has hijacked it and only apply it to the rich.

Keynes- the belief that you supply people directly with money so they could go out and buy things. Sales drives the economy and thus creates jobs. This works and is used by all governments.

Monetarism - the belief that you could supply money through the banking system only. This is false in recessions though, when people borrow less and pay off debts. It works in boom times.
Click to expand...
Ok then thanks, although you do seem to have written it from a bit of a left wing economic position. But it gives me a general idea, Thanks.
Also Supply side, generally the rich people are the ones who own the businesses that people work for yes? Therefore giving money to them increases their profits and allows them to increase the pay rises to ordanairy workers (depending on how much the government gives) which boosts sales and in your words "Sales drives the economy and thus creates jobs."
 
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JP Hochbaum said:
Supply side, aka trickle down. It is the belief that if you supply money to people they will buy things. This is true. The problem is that the right has hijacked it and only apply it to the rich.

Keynes- the belief that you supply people directly with money so they could go out and buy things. Sales drives the economy and thus creates jobs. This works and is used by all governments.

Monetarism - the belief that you could supply money through the banking system only. This is false in recessions though, when people borrow less and pay off debts. It works in boom times.
Click to expand...

Supply side economics has nothing to do with giving people money. It has to do with allowing them to keep the money that they earn thus allowing them to produce more (increase the supply of available goods thus lowering the per unit price at point of sale).

Keynesian economics is economic theory based on principles developed by John Maynard Keynes and tends to focus on "aggregate demand" as being the primary driving force of an economy. Part of that theory is that increased government spending adds to "aggregate demand".

Monetarism is theory regarding the effects of money supply in an economy.


Your attempt to politicize the explanation does a deep discourtesy to anyone who might actually be interested in learning about these things.
 
Spriggs05 said:
Ok then thanks, although you do seem to have written it from a bit of a left wing economic position. But it gives me a general idea, Thanks.
Also Supply side, generally the rich people are the ones who own the businesses that people work for yes? Therefore giving money to them increases their profits and allows them to increase the pay rises to ordanairy workers (depending on how much the government gives) which boosts sales and in your words "Sales drives the economy and thus creates jobs."
Click to expand...
Yeah that's what they say. It's political rhetoric without evidence, aka complete crap.

The disconnect lies in the type of investments they make with any extra money they're given. In a recession, where stimulus is applied, typically fewer business owners expand operations, hire more people, or give their workers more pay--why should they? The wealthy, being only intelligent, put money into financial markets, which is nonproductive capital, and it doesn't put people to work or stimulate the economy at all.

Keynesian economic theory is much more realistic. It knows that when the middle and lower classes have more money, they buy stuff, which keeps demand high, which keeps business growing. If you're going to stimulate the economy, you need to put money into the hands of those who have a higher marginal propensity to consume--in other words, the rich don't spend their money on real goods, while the lower and middle classes normally always do.

Supply-side economics might work if we passed regulation that better incentivized business owners to invest in productive capital. To my knowledge, we haven't tried that sweepingly yet, because conservatives also argue against any and all regulation.


Economics doesn't have a bias, btw. As soon as you think it does you're sliding into the cesspit of partisan hackery. You can disagree, but only to the point at which there's no historical data to support it, and we're pretty far from that point now.
 
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Spriggs05 said:
Therefore giving money to them increases their profits and allows them to increase the pay rises
Click to expand...

The problem with your assertion is that labor is an expense and all businesses strive for the lowest expenses - no business in it's right mind is going to give voluntary raises.

That said JP, i am interested in what an un-hijacked supply side model would consist of.
 
pdog said:
The problem with your assertion is that labor is an expense and all businesses strive for the lowest expenses - no business in it's right mind is going to give voluntary raises.

That said JP, i am interested in what an un-hijacked supply side model would consist of.
Click to expand...
The way I always understood supply-side economics was that it purports the primary driver of the economy is investment. Assuming this investment is all productive capital, we can see how this might be. When the rich invest more, new companies get started, businesses expand, people get hired.

It's still most certainly looking at it the wrong way. No company expands without there being a healthy projected demand. Demand is the primary driver of the economy.
 
pdog said:
The problem with your assertion is that labor is an expense and all businesses strive for the lowest expenses - no business in it's right mind is going to give voluntary raises.

That said JP, i am interested in what an un-hijacked supply side model would consist of.
Click to expand...

Labor is a resource and if you can get better productivity out of a better quality but more expensive resource then you spend the money for it.
 
Lutherf said:
Your attempt to politicize the explanation does a deep discourtesy to anyone who might actually be interested in learning about these things.
Click to expand...

Like people such as myself
 
What happened to my original question, i just wanted to know what each one consisted of without looking on wikipedia, i didnt want any politicised debate but if you must dont quote me on it OK? :roll:
 
It's not a topic that can be intelligently politicized in the first place. The more we educate ourselves, the closer we'll agree. Any disagreement on reality-based economics is a result of nothing more than arranging your prejudices.
 
Spriggs05 said:
Like people such as myself
Click to expand...

If you really want to learn this stuff be prepared to do a whole lot of reading. I'd recommend the following for a start -
Adam Smith - Wealth of Nations
John Maynard Keynes - The General Theory of Employment, Interest and Money
Milton Friedman - Free to Choose
Thomas Sowell - Basic Economics: A citizens guide to the Economy
Jean-Jacques Rousseau - The Social Contract....
John Stuart Mill - Principles of Political Economy
Peter Schiff - How an Economy Grows and why it Crashes


Smith, Keynes, Mill and Rousseau are deeply intellectual reads and even though they are, in my opinion, the most important they also may well not be the best place to start. Sowell would probably be the one I would start with.
 
gavinfielder said:
Yeah that's what they say. It's political rhetoric without evidence, aka complete crap.

The disconnect lies in the type of investments they make with any extra money they're given. In a recession, where stimulus is applied, typically fewer business owners expand operations, hire more people, or give their workers more pay--why should they? The wealthy, being only intelligent, put money into financial markets, which is nonproductive capital, and it doesn't put people to work or stimulate the economy at all.
Click to expand...

But you fail to make an argument for why recessions occur in the first place. Gamble your home on a failed business idea and you'll experience a recession...but your neighbor will not. What caused your recession? You misallocated your limited resources...you bet on the wrong horse...but the scale was minimal because you didn't have the opportunity to misallocate your neighbor's resources.

So what causes massive misallocations resources? You do....

gavinfielder said:
Keynesian economic theory is much more realistic. It knows that when the middle and lower classes have more money, they buy stuff, which keeps demand high, which keeps business growing. If you're going to stimulate the economy, you need to put money into the hands of those who have a higher marginal propensity to consume--in other words, the rich don't spend their money on real goods, while the lower and middle classes normally always do.
Click to expand...

You support allowing far too many eggs to be placed in one basket...and then when all the eggs break...you fail to recognize that the extent of the damage was a direct result of having too many eggs in one basket. So what do you do? You advocate using the problem to solve the problem! It's a vicious cycle.

When a corporation misallocates a huge amount of resources...how do we know that it did so? The shareholders respond accordingly. When the government misallocates a huge amount of resources...how do we know that it did so? We don't.

But are you going to argue that corporations are more likely to misallocate resources than a government is? No way...everybody makes mistakes. We are all fallible. The people who fail to appreciate this are the people who are the most willing to put too many eggs in one basket. So if anything the government is more likely to misallocate massive amounts of resources. Corporations depend on profits while the government does not. Therefore corporations have far more incentive to do their due diligence. So combine all that with the fact that a government can misallocate far far far far more resources than the largest corporation...and you have the culprit for recessions and depressions.

But the government is not the culprit...you are. And you're not really the culprit...I am. I tried and failed to explain the concept of heterogeneous activity to you. Therefore...I'm the cause of recessions/depressions.

The solution is so simple though. We should just allow taxpayers to directly allocate their taxes. What will they do? What do shareholders and consumers do? They seek value. Will taxpayers be able to find value in the public sector? If they can...then great! If they can't...then surely this is something that's good to know.
 
Xerographica said:
But you fail to make an argument for why recessions occur in the first place. Gamble your home on a failed business idea and you'll experience a recession...but your neighbor will not. What caused your recession? You misallocated your limited resources...you bet on the wrong horse...but the scale was minimal because you didn't have the opportunity to misallocate your neighbor's resources.

So what causes massive misallocations resources? You do....



You support allowing far too many eggs to be placed in one basket...and then when all the eggs break...you fail to recognize that the extent of the damage was a direct result of having too many eggs in one basket. So what do you do? You advocate using the problem to solve the problem! It's a vicious cycle.

When a corporation misallocates a huge amount of resources...how do we know that it did so? The shareholders respond accordingly. When the government misallocates a huge amount of resources...how do we know that it did so? We don't.

But are you going to argue that corporations are more likely to misallocate resources than a government is? No way...everybody makes mistakes. We are all fallible. The people who fail to appreciate this are the people who are the most willing to put too many eggs in one basket. So if anything the government is more likely to misallocate massive amounts of resources. Corporations depend on profits while the government does not. Therefore corporations have far more incentive to do their due diligence. So combine all that with the fact that a government can misallocate far far far far more resources than the largest corporation...and you have the culprit for recessions and depressions.

But the government is not the culprit...you are. And you're not really the culprit...I am. I tried and failed to explain the concept of heterogeneous activity to you. Therefore...I'm the cause of recessions/depressions.

The solution is so simple though. We should just allow taxpayers to directly allocate their taxes. What will they do? What do shareholders and consumers do? They seek value. Will taxpayers be able to find value in the public sector? If they can...then great! If they can't...then surely this is something that's good to know.
Click to expand...

We know what causes recessions (at least big ones). The income gap produces a small class of very wealthy people who engage in high risk nonproductive "investing", also called bubbles, leading to inevitable collapse, especially if there is little regulation.

See Reich's "Aftershock". It goes into detail
 
head of joaquin said:
We know what causes recessions (at least big ones). The income gap produces a small class of very wealthy people who engage in high risk nonproductive "investing", also called bubbles, leading to inevitable collapse, especially if there is little regulation.

See Reich's "Aftershock". It goes into detail
Click to expand...

We take 10 steps forward...and then one step back...and you use that one step back as an excuse for government intervention. Does the government prevent us from taking one step back? Sure...but it also prevents us from taking 10 steps forward. That's not a recipe for progress.

... an increase in the power of the State ... does the greatest harm to mankind by destroying individuality which lies at the heart of all progress... – Gandhi​

How do you become wealthy?

In other words, people will start buying something in large numbers if it solves a big problem for them. But most first-world problems—needing an easier way to record your favorite TV programs or keep track of what’s in your fridge—just aren’t that pressing. In developing countries, on the other hand, technology can transform lives. - Christopher Mims, How a $20 tablet from India could blindside PC makers, educate billions and transform computing as we know it​

You're blaming the wealthy for the income gap here in America but you tragically fail to understand that they are narrowing the gap between America and developing countries...

These improvements have not taken place because well-meaning people in the West have done anything to help--foreign aid, never large, has lately shrunk to virtually nothing. Nor is it the result of the benign policies of national governments, which are as callous and corrupt as ever. It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better. - Paul Krugman, In Praise of Cheap Labor​

Rising wages in emerging markets and higher shipping costs are also closing the cost gap between developing markets and the United States. - Scott Malone and Ernest Scheyder, Outsourcing Losing Its Allure As China Costs Soar​

Do you think Americans are the only ones who benefit form American innovation? The world benefits from American innovation just like we will benefit from the world's innovations. And you'll be able to thank the greedy capitalist pigs. Except...who these people are is constantly changing...

These economic facts have certain social consequences. As the critics of the market economy nowadays prefer to take their stand on “social” grounds, it may be not inappropriate here to elucidate the true social results of the market process. We have already spoken of it as a leveling process. More aptly, we may now describe these results as an instance of what Pareto called “the circulation of elites.” Wealth is unlikely to stay for long in the same hands. It passes from hand to hand as unforeseen change confers value, now on this, now on that specific resource, engendering capital gains and losses. The owners of wealth, we might say with Schumpeter, are like the guests at a hotel or the passengers in a train: They are always there but are never for long the same people. - Lachmann, The Market Economy and the Distribution of Wealth​

As protected firms become less innovative, a country’s overall economic growth may suffer. This is because, as Schumpeter emphasized nearly a century ago, economic growth thrives on “creative destruction.” In a healthy economy, new firms constantly arise to challenge older, less-innovative behemoths. - Matthew Mitchell, The Pathology of Privilege: The Economic Consequences of Government Favoritism.​

But have you ever asked yourselves sufficiently how much the erection of every ideal on earth has cost? How much reality has had to be misunderstood and slandered, how many lies have had to be sanctified, how many consciences disturbed, how much "God" sacrificed every time? If a temple is to be erected a temple must be destroyed: that is the law - let anyone who can show me a case in which it is not fulfilled! - Nietzsche​

The problem is that you're not thinking things through...

But matters are not that simple, and the moral lines are not that clear. In fact, let me make a counter-accusation: The lofty moral tone of the opponents of globalization is possible only because they have chosen not to think their position through. While fat-cat capitalists might benefit from globalization, the biggest beneficiaries are, yes, Third World workers. - Paul Krugman, In Praise of Cheap Labor​

If you think things through then you'll understand that any step back in the private sector can be offset by 10 steps forward in the public sector. How? Simply by allowing taxpayers to use their own taxes to reward the government organizations that are doing new and better things with society's limited resources.
 
gavinfielder said:
The way I always understood supply-side economics was that it purports the primary driver of the economy is investment. Assuming this investment is all productive capital, we can see how this might be. When the rich invest more, new companies get started, businesses expand, people get hired.

It's still most certainly looking at it the wrong way. No company expands without there being a healthy projected demand. Demand is the primary driver of the economy.
Click to expand...

Yeah I get that, but JP's post seems to imply there is a version of supply side that doesn't favor the upper class so much. Supply-side as we know it and as you described is totally rooted where the money is. The rich get more money simply for moving money around and unfortunately innovation is simply a side effect and not the primary goal (making money is). Consequently investment cannot be said to create more companies it can only be said that it creates more wealth. However, the money is not necessarily where the innovation is. When you think of some of the great rises of the past decade or two, they didn't start where the money was - Microsoft, Oracle, Facebook, Google, Apple, Dell (sorry these are all tech companies but that's my wheelhouse). These weren't startups that came from venture capital, these were startups that came out of garages and college dorm rooms.

So from this is the REAL supply side really about fostering innovation and entrepreneurship? In more socialist countries (Norway for example) the view is create an environment where the person is not afraid to fail, because a net will catch you if you fall, and the result is that they have entrepreneurship by innovation and real risk instead of what we have here - entrepreneurship by necessity - a person can't find a job so he starts a lawn mowing company or a roofing company or hell another travel site company. Perhaps there is some efficiency gains as a better business consumes it's competition, but there is no innovation.
 
Lutherf said:
If you really want to learn this stuff be prepared to do a whole lot of reading. I'd recommend the following for a start -
Adam Smith - Wealth of Nations
John Maynard Keynes - The General Theory of Employment, Interest and Money
Milton Friedman - Free to Choose
Thomas Sowell - Basic Economics: A citizens guide to the Economy
Jean-Jacques Rousseau - The Social Contract....
John Stuart Mill - Principles of Political Economy
Peter Schiff - How an Economy Grows and why it Crashes


Smith, Keynes, Mill and Rousseau are deeply intellectual reads and even though they are, in my opinion, the most important they also may well not be the best place to start. Sowell would probably be the one I would start with.
Click to expand...

That's a fabulous reading list, except possibly for the last one (and I say that because of the author, not the content - which I have not read and thus cannot fairly evaluate).
 
Xerographica said:
...
When a corporation misallocates a huge amount of resources...how do we know that it did so? The shareholders respond accordingly. When the government misallocates a huge amount of resources...how do we know that it did so? We don't. ...
Click to expand...

That's not really true. Obama lost my vote mostly because of his failed green energy policy, thus I, as a "shareholder" in the US government, and also as a consumer of our governments products, responded accordingly and failed to vote for him. I seriously doubt that we are going to see our government giving green energy so much funding in the future.
 
imagep said:
That's a fabulous reading list, except possibly for the last one (and I say that because of the author, not the content - which I have not read and thus cannot fairly evaluate).
Click to expand...

The last was added because it's an easy read for someone just getting into the discussion of Keynesians v Austrians but Schiff is also one heck of a smart guy when it comes to money.
 
Lutherf said:
The last was added because it's an easy read for someone just getting into the discussion of Keynesians v Austrians but Schiff is also one heck of a smart guy when it comes to money.
Click to expand...

The jury will have a verdict concerning his economic knowledge within 47 more days, as he predicted that we are going to have a total economic collapse and hyper inflation during 2012. If that happens, I guess I will have to read his book(s), otherwise, he will remain on my list of whackos.
 
imagep said:
I dunno so much about that, according to him within 47 more days we are going to be seeing a total economic collapse and hyper inflation.
Click to expand...
How on earth would we have inflation through spending cuts and tax increases?
 
imagep said:
That's not really true. Obama lost my vote mostly because of his failed green energy policy, thus I, as a "shareholder" in the US government, and also as a consumer of our governments products, responded accordingly and failed to vote for him. I seriously doubt that we are going to see our government giving green energy so much funding in the future.
Click to expand...

Not sure if I've mentioned it before...but actions speak louder than words. The next time you go grocery shopping...hand the cashier guy a piece of paper that says, "I vote for these items". If that doesn't work then tell him, "I really want these items." If that doesn't work then say, "I really really want these items". If that still doesn't work...then try putting your money where your mouth is.

In order for economics to work you absolutely have to give up something of value. Economics is trade, it's exchange, it's sacrifice. The goal is to determine how society's limited resources should be used. And we can't determine that if you aren't given the opportunity to decide for yourself whether having your cake is more important than eating it. Why do you have to make these hard decisions? Why do your priorities matter? Because there's no such thing as a free lunch.

The amount of money that our government spends on green energy should not be determined by your vote. Why? Because it didn't cost you anything to vote. I'm not saying that it should cost something to vote...I'm saying that if we want to answer economic questions such as funding for green energy...then we should use economics to do so.

If you want to hammer a nail...then what do you use? I'll give you a hint...not a screwdriver. If we want to answer economic questions then we shouldn't use politics. If we use politics then we're going to come up with the wrong answer. If we come up with the wrong answer to economic questions...then what happens? Economic problems.

How much money should our government spend on green energy? That's a good question. It's an economic question which is why we can learn the answer by allowing taxpayers to put their taxes where their mouths are.
 
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