Keynesian Economics

[LBJ Revivalist]

Can someone tell me in layman's terms the basic tenets of Keynesian economics?

Also, what are some opinions here on the use of Keynesian economics in the US? It seems the use of Keynesian economics coincided with the largest period of growth in US' history (1945-1973), also known as the "Golden Age of Capitalism."

[k-onmmunist]

Wracking up huge amounts of debt, the myth of 'full employment', controlling the free market with the false pretensions of 'protecting workers' and nationalising key industries.

[Beet]

1. The job market does not always guarantee full employment because of social factors. Therefore, the government should step in and make employment.

2. It is possible to have a general glut where there is capacity for production, but not enough people who can afford the output. The government can step in and create demand (same as point #1, really)

3. When money is spent, there is a multiplier effect. If I spend $10, the person who I pay $10 to will save part of it (say $2), and spend $8. The person that person says to will save $2 and pay $6. And so on and so on. So an initial spending of $10 will have more than $10 worth of effect on production.

4. Government stimulus should be counter cyclical. When the economy is growing, the government should be fiscally conservative, but when there is a slack labor market, the government should run deficits.

[opebo]

Its basically Capitalism without the crazed blind faith.

[LBJ Revivalist]

1. The job market does not always guarantee full employment because of social factors. Therefore, the government should step in and make employment.

2. It is possible to have a general glut where there is capacity for production, but not enough people who can afford the output. The government can step in and create demand (same as point #1, really)

3. When money is spent, there is a multiplier effect. If I spend $10, the person who I pay $10 to will save part of it (say $2), and spend $8. The person that person says to will save $2 and pay $6. And so on and so on. So an initial spending of $10 will have more than $10 worth of effect on production.

4. Government stimulus should be counter cyclical. When the economy is growing, the government should be fiscally conservative, but when there is a slack labor market, the government should run deficits.

That sounds pretty smart.

[phk]

Basically, that the government can serve as a rectifier.

[Deldem]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

[A18]

A resurrection of ancient fallacies that the classical economists had destroyed.

[TeePee4Prez]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

[RI]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

There is no reason why Keynesianism should lead to stagflation. Keynesian economics works solely from the demand side, while stagflation is caused by a decrease in short-run aggregate supply from cost-push inflation.

[k-onmmunist]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

There is no reason why Keynesianism should lead to stagflation. Keynesian economics works solely from the demand side, while stagflation is caused by a decrease in short-run aggregate supply from cost-push inflation.

There is no reason why laissez-faire has to crash, as long as it is left apart from government completely.

[RI]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

There is no reason why Keynesianism should lead to stagflation. Keynesian economics works solely from the demand side, while stagflation is caused by a decrease in short-run aggregate supply from cost-push inflation.

There is no reason why laissez-faire has to crash, as long as it is left apart from government completely.

There is a difference, though. Laissez-faire can be done in by excessive greed, or by people behaving in ways that are not really in their best interest, as witnessed by the subprime crisis. Flyers made an assertion that Keynesianism leads to stagflation, which should be impossible definitionally due to the way that each works.

[jokerman]

It also makes the common-sense observation that Say's Law, one of the pillars of classical economics, is false.  Say's Law states essentially that all supply inevitably creates its own demand.  Obviously the Great Depression demonstrated the contrary.

[TeePee4Prez]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

There is no reason why Keynesianism should lead to stagflation. Keynesian economics works solely from the demand side, while stagflation is caused by a decrease in short-run aggregate supply from cost-push inflation.

There is no reason why laissez-faire has to crash, as long as it is left apart from government completely.

There is a difference, though. Laissez-faire can be done in by excessive greed, or by people behaving in ways that are not really in their best interest, as witnessed by the subprime crisis. Flyers made an assertion that Keynesianism leads to stagflation, which should be impossible definitionally due to the way that each works.

I was just saying excessive Keynesianism can cause issues like they did in the 1970s with inflation.  Excesses either way causes problems, that's why I'm an economic centrist.  I'm strongly in favor

[Obnoxiously Slutty Girly Girl]

Basically, that the government can serve as a rectifier.

This is it in a nutshell.

Basically, it's infinitely better than the supply-side basis that we gravitated towards in the 1980s.

Agreed, but too much Keynesianism has led to stagflation.  There needs to be a balance.  Sure laissez-faire can lead to growth, but it can also crash in a very ugly manner.

There is no reason why Keynesianism should lead to stagflation. Keynesian economics works solely from the demand side, while stagflation is caused by a decrease in short-run aggregate supply from cost-push inflation.

There is no reason why laissez-faire has to crash, as long as it is left apart from government completely.

There is a difference, though. Laissez-faire can be done in by excessive greed, or by people behaving in ways that are not really in their best interest, as witnessed by the subprime crisis. Flyers made an assertion that Keynesianism leads to stagflation, which should be impossible definitionally due to the way that each works.

The subcrime crisis had nothing to do with laissez-faire. Keynesian-style interventionism is the culprit as usual.

[Obnoxiously Slutty Girly Girl]

It also makes the common-sense observation that Say's Law, one of the pillars of classical economics, is false.  Say's Law states essentially that all supply inevitably creates its own demand.  Obviously the Great Depression demonstrated the contrary.

Do explain, joker.