..I'm getting that:
1. We need monetary policy to ensure that Say's Law holds. He specifically cites Lars Christensen and Brad DeLong on this. In other words, Malthus was right about the prospect of it not holding, and Say was wrong.
2. Recessions are demand problems - in other words Keynes was right.
His concern is that Keynesians try to convince the public of an underconsumptionist story.
My question to John: is this more or less an accurate rendition?
My question to readers: does anyone get either of these points from any video that John has ever made?
If the answer from John is "yes" and the answer from you all is "no" then I renew my request that John's next video be about the need for more demand-side stimulus. It would do a tremendous amount of good, I think. I'd like to see people second the motion in the comments.
I would be tickled if Russ Roberts was still on board for that project.
Sunday, December 9, 2012
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I think I see where the misunderstanding happens.
ReplyDeleteIt is assumed in John's video that these four economists' arguments are about how individuals *ought to* behave. But this is an incorrect reading. Malthus, Keynes, and Hayek are not telling people how to act. Rather, they are making propositions about how people will tend to act, and then saying, given that, X is the optimal policy. (Say is also basically making a proposition about how people behave). These economists don't see themselves as sitting in judgment of individuals' virtue in their consumption habits. But I think many Austrians do see that as the job of economists -- to scold those who are wicked, and heap praise on those who are righteous. Since the rest of us associate Keynes, Malthus, et al with policy recommendations, we assume John is attacking those. He angrily says he's not.
So really the issue is that this "buy toys" Keynes is a straw man. And the "you must spend" Malthus is a straw man. Malthus's argument assumed that landlords would spend all income, while capitalists might not invest it all, so public policy ought to augment landlord incomes at the expense of capitalist incomes. Keynes made similar assumptions about ordinary peoples' consumption. But it's not like either one encouraged people to consume more, to go into debt to consume, or to buy toys they didn't want or need.
Just to put it a bit differently: Malthus's assumption that landlords consume 100 percent of their income was the same assumption that Adam Smith made. And John would certainly wouldn't construe that as Adam Smith saying "spend, spend, spend."
DeleteI think this is right. John is moralizing about consumption. Should the family not buy their kids toys because if they put the money in the stock market some company might invest it? Why won't the company invest out of retained earnings? Because they feel cheated because the family isn't investing or producing enough?
DeleteHe assumes away consumption as a given, but why wouldn't competition normally drive investment?
If he thinks the market won't invest enough, why not have the government invest more?
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DeleteI'm curious as to why Milton Friedman doesn't come up in the videos.
ReplyDelete