John seems confused so I want to clarify.
After quoting Keynes on the impact of various marginal propensities to consume (which is a different issue from the share of output consumed anyway), he writes: "This sounds EXACTLY like every fallacious repetition that policies which direct money to those who spend every nickel will be better for the economy."
No, the fallacy is saying that directing money to those who spend every nickel can't growth the economy. It can. I am not denying that. I am not saying that when some Keynesians say things like that they're wrong. It's not a fallacy at all. It's right. For one thing, you are simply raising consumption levels and if we're in a situation (like we are now) where that isn't crowding out others resources that won't substantially reduce consumption or investment anywhere else and it may even spur some investment if producers think it's likely to continue (say, through a permanent low income tax cut or credit). But aside from the simple point that consumption is increasing, you're going to have a lower marginal propensity to consume which is going to make any investment or government demand more effective.
There is nothing fallacious about this. The fact that John treats this as a fallacy is a problem.
So what about all my discussion of Keynesianism and the importance of thinking about investment? That point is simply that Keynes saw the problem of recessions as primarily emerging as a result of problems with investment, citing the instability of financial markets as a likely spark. This is an area where I actually noted that John did OK in the video, because he did not put the consumption talk in Keynes's mouth - he put it in Malthus's mouth (Malthus can be fairly described as an underconsumptionist - you can call it a fallacy I suppose, but I prefer to call it a good step towards the ultimate solution of a broader demand-side theory).
So there's nothing wrong about saying that giving people money to spend will improve growth at all. My response to people like that is (and has been) that it makes more sense to fix what's broken than try and work through something else that's not fundamentally broken. I do support consumption-oriented policies like extended unemployment insurance benefits, though. Why? Mostly humanitarian reasons, not because I think we should pull ourselves out of this through consumption expenditures.
Is that clear?
I really don't think the public is under the impression that weak consumption caused the recession. They know housing values fell. They know that was somehow related to the collapse of the financial system. They might not get farther than that but you don't see people talking in terms of secular stagnant consumption like they did in the Depression. That's a very good thing.
What is the message you get from these videos?
1. That Say's Law is the right way to think about the economy and Malthus's work on gluts is the wrong way.
2. That Hayek is the antidote to Keynes rather than an important complement to Keynes (this is the whole point of the videos - the point is not teach people about Hayek and Keynes it's to displace Keynes with Hayek).
3. That we don't need fiscal or monetary stimulus.
I'm sorry, but with those three major themes running through all of these videos, I can't honestly claim that people will be better educated about or have a better position on economics after watching them.
As I've said in the past - John ought to make a video about how we need NGDP targeting (he could even reintroduce Keynes with his line "get spending flowing" - that was one of Ryan Murphy's favorite parts of the last video).
Procrastinating on January 23, 2017
6 hours ago