Another video is out that's going to confuse people about what is and isn't a "fallacy".
So it's interesting, the new Econstories video only attributes underconsumptionism to Malthus (which is fine I suppose - he talked a lot about the consumption of the rich... there's nothing about his discussion of general gluts that precludes an investment focus, but he talks about consumption more than Keynes does, for example). Papola repeatedly insists to me that Keynesians worry about consumption but this video seems to ease off of that when it actually comes time for Keynes himself to sing.
But it seems to me they're still wrong. Output does depend on consumption spending as much as it depends on investment spending. As Gene Callahan covered recently, what Keynesians say of course is that when we look at the business cycle it seems to be about investment fluctuations associated with expectations and the impact of liquidity preference on the interest rate. But there's nothing wrong with saying that a fall in consumption will reduce output or a rise in consumption will improve output. We just usually think that if investment took the hit, investment is probably what needs to be corrected.
Calling the Malthus/Say dispute in favor of Say sets the science back at least 100 years. As Brad DeLong points out, even Say recognized that eventually.
Output is determined by both supply and demand factors. Long run growth is essentially a supply side-story, but fluctuations in output are essentially demand side stories. I know Papola thinks he's helping to educate the public, but he's doing quite the opposite. He's spreading fallacies under the guise of correcting them. And we really don't need a public that thinks demand isn't the primary driver of unemployment right now.
And what's amazing is that Papola always comes to me with NGDP stuff! Many Austrians do, of course. But when Ryan Murphy, for example, advocates market monetarist type stuff he recognizes it's a demand-side argument (I think he does at least!).
We also have - once again - the fairly substantial mistake of saying that Keynesians think saving is bad when it's actually the discoordination of savings and investment (and the re-equilibration of the two at a lower output level) that's the problem. Jack up savings. That's fine. The question is where is investment at, and is it commensurate with whatever level of savings we have? If it's not, output will shift to make up the difference and that, kiddies, is what we call the business cycle.
These videos have consistently been confused and misleading. Artistic license is one thing. I enjoy watching them and I'm not concerned about minor problems in order to make it rhyme, etc. What's a problem is when you make mistakes and then jump on the mistaken version that you've provided and tell students and non-economists that that's a fallacy. Even where the exposition is accurate (as in the Malthus/Say disagreement), Papola is on the wrong side.
Also - I've always been told that people thought Hayek's English was hard to understand. I personally thought he sang beautifully - I'm not sure what you guys are talking about.
For the Fourth of July
3 hours ago