Why am I a Keynesian?

 
More Than Mortal
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This is the way the world ends. Not with a bang but a whimper.
Not me, but a recent blog post by Paul Krugman:

Quote
Noah Smith sort-of approvingly quotes Russ Roberts, who views all macroeconomic positions as stalking horses for political goals, and declares in particular that

Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government.

OK, I’m not going to clutch my pearls and ask for the smelling salts. Politics can shape our views, in ways we may not recognize. But I’m aware of that risk, and make a regular practice of asking myself whether I’m letting that kind of bias slip in. In fact, I lean against studies that seem too much in tune with my political preferences. For example, I’ve been aggressively skeptical of studies that seem to show a negative relationship between inequality and growth, precisely because that result is so convenient for my political tribe (which doesn’t mean that it’s wrong.)

So, am I a Keynesian because I want bigger government? If I were, shouldn’t I be advocating permanent expansion rather than temporary measures? Shouldn’t I be for stimulus all the time, not only when we’re at the zero lower bound? When I do call for bigger government — universal health care, higher Social Security benefits — shouldn’t I be pushing these things as job-creation measures? (I don’t think I ever have). I think if you look at the record, I’ve always argued for temporary fiscal expansion, and only when monetary policy is constrained. Meanwhile, my advocacy of an expanded welfare state has always been made on its own grounds, not in terms of alleged business cycle benefits.

In other words, I’ve been making policy arguments the way one would if one sincerely believed that fiscal policy helps fight unemployment under certain conditions, and not at all in the way one would if trying to use the slump as an excuse for permanently bigger government.

But in that case, why am I a Keynesian? Maybe because of convincing evidence?

First of all, the case for viewing most recessions — and the Great Recession in particular — as failures of aggregate demand is overwhelming.

Now, this could be a case for using monetary rather than fiscal policy — and that actually is the policy I advocate in response to garden-variety slumps. But when the slump pushes rates down to zero, and that’s still not enough, any simple model I can think of says that fiscal expansion can be a useful supplement, while fiscal austerity makes a bad situation worse.

And while it’s true that there was limited direct evidence on the effects of fiscal policy 6 or 7 years ago, there’s now a lot, and it’s very supportive of a Keynesian view.

The point is that while it’s definitely OK to scrutinize economists’ motives — to ask whether they’re responding to logic and evidence, or just talking their political book — assertions that it’s all politics deserve the same scrutiny. Is my behavior consistent with claims that my views are purely a reflection of my political preference? And if it isn’t — which I don’t think it is — what’s driving such claims? Might it be … politics, deployed on behalf of economic doctrines that have lost the substantive debate?

One of his more laudable posts, although I disagree with a few things here or there.


 
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This is not the greatest sig in the world, no. This is just a tribute.
You know... I don't even know what laudable means.


 
 
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Last Edit: June 06, 2015, 06:03:02 PM by Flee


 
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Maybe I'm mistaken, but the idea rooted behind Keynesianism is that money, and therefore value, can be created from nothing. This way, infinite wealth for x number of people is theoretically possible. Yet I still think this ongoing growth of the modern day fiat money system is unsustainable in some way.


 
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This is the way the world ends. Not with a bang but a whimper.
Austrian master race
Good God, no.

Get out.