[AR] Re: OT economy booster

  • From: Ian Woollard <ian.woollard@xxxxxxxxx>
  • To: arocket@xxxxxxxxxxxxx
  • Date: Wed, 30 Dec 2015 18:38:52 +0000

I would question the economics of Von Mises. It's not that he doesn't have
some insights into economies, but you can't usually make quantitative
predictions from his economics; and if you can't do that, then it's non
scientific.

The actual multipliers, for different types of spending by government (or
private spending) have to be measure in the real world:

https://en.wikipedia.org/wiki/Fiscal_multiplier#Estimated_values

Mostly the multipliers are found to be greater than one; the money spent
gets respent multiple times through the economy.

On 30 December 2015 at 17:38, Edward Wright <edward.v.wright@xxxxxxxxx>
wrote:


All borrowed money spent stimulates the economy in the short run.

That is a common fallacy which economists discredited long ago.


Sort of, but they undiscredited it again, when they were better able to
measure things; the latest research shows multipliers are currently between
1 and 2, but sometimes lower or higher.


You overlook the fact that money has to come from somewhere. If you borrow
it, someone else can't. That may stimulate you, but at a cost to someone
else. There's no net stimulus unless you are more productive than that
someone else.


No, not at all. There's still stimulus, it may be less than someone else's
would have been. And note there's a huge difference between short-run and
long-run stimulus; war is a long-run loss, but other spending can be
long-run positive. The US government built Hoover dam for example, which is
a long-run win.


Read Von Mises.

Apollo can be considered as a war on the moon- it stimulated the
economy; there were spin-offs as well, but the main direct outcome from
that was a bunch of mostly useless junk lying underwater.

Building useless junk and sinking it underwater does not make you richer.
You can prove that experimentally, on a personal level. Just wreck your
car, then drive it into the river. Does that stimulate your household
economy?


Well, it's not, economically speaking, recommended, but it literally can do
that, if you work harder to earn more to buy the stuff to replace the car
you lost then your household economy has increased.


Building useless junk makes you poorer because you waste resources that
could have been used for building something useful.


But if you buy the stuff to make the useless junk, you've usually increase
the economy around you- at least in the short term. But if the people just
stick the money under the mattress, then there's no multiplier; so it
depends on what people do around you, but in many cases they don't do that.


Any time anyone is borrowing money to do something, that stimulates the
economy, the money goes into wages, and that goes into spending on goods,
and that ripples out through the economy and the economy increases;

That is called the "Keynesian multiplier effect." Economists discredited
decades ago. Again, read Von Mises.

If the same dollar bill passes through the hands of 7 people, that is $7
worth of "economic activity" according to Keynes. That's where the "every
dollar spent on NASA returns $7" bit comes from. But that is not a real
economic return, it's just a bookkeeping trick. If you and I trade the same
dollar back and forth 7 times, but never produce anything of value, we've
generated $7 worth of acitivity according to Keynes. But, in fact, we've
produced nothing.

What you're arguing for is the economic equivalent of a perpetual-motion
machine.


No, *absolutely* not, it's ONLY about increasing demand in a situation
where there is low demand relative to economic capacity. If you keep on
spending the multiplier will then go towards zero.

--
-Ian Woollard

Sent from my Turing machine

Other related posts:

  1. Home
  2. arocket
  3. Archive
  4. 12-2015