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Tuesday, July 6, 2010

Economic Pie - Now With Smaller Slices!

folkbum's rambles and rants
Demand siders did not believe that $150 billion in annual stimulus from the government could offset the contractionary impact of a reduction in annual spending by the private scctor of $1.2 trillion.
Oh, there's more--including a clear explanation of why your pants-wetting fears of additional deficit spending are unfounded paranoia and a robust defense of the kind of real stimulus measures some of us demanded, and did not get, last year.
Folkbum jumps into the stimulus debate with this post linking an article excoriating NY Times columnist David Brooks, hardly an act of daring for left of center pundits.

Let me just say for my part, when I oppose additional stimulus spending, I'm able to do so without soiling myself, much to the delight of my wife, since she takes care of the laundry in our house.  My opposition also isn't a refutation of Lord Keynes' General Theory It's an empirical argument.  The government  has shown itself time and again to be quite inept at carrying out fiscal stimulus programs.

Let me also say that the government has proven capable of writing checks, and that I am not opposed to an extension of unemployment benefits during a prolonged period of high unemployment.

And as far as those "real stimulus measures" folkbum demanded, well here is the earth-shattering idea in the article he links:
Suppose the government gave a tax credit that allowed firms to shorten their workweek while keeping pay nearly the same. Would this take a long time to get out the door? This policy of work sharing has prevented the unemployment rate from rising at all in Germany during this downturn and allowed the Netherlands to keep its unemployment rate close to 4.0 percent. Is it arrogant to suggest that this sort of approach could pay dividends in the U.S.?
Got that?  Instead of expanding the economic pie, we'll just cut all of the pieces smaller so that more people can have one.  While I think this is a great strategy for feeding my six children dessert, I'd be ashamed for this to be my economic legacy to them.

6 comments:

D said...

Yes, work-sharing! Producing less is the way to prosperity!
While I agree that the empirical evidence is in favor of the anti-stimulus position, empirical evidence is not the correct epistemological mode of dealing with economics.

Economics concerns human action a priori, similar to mathematics. Using empirical evidence, we can say that WWII cut unemployment.

Yes, in fact when you draft 11 million men and force countless others into government funded armament industries, you have 'reduced unemployment.' This is obviously not true, as economic law shows us.

Jeremy R. Shown said...

I want to be explicit. I am not making an economic argument. I am making a normative argument about what we ought to be doing.

J. Strupp said...

The idea of "kurzarbeit" is to retain a skilled/trained labor force so that production can ramp up quickly following a downturn. Better to pay someone for something rather than nothing as well. Kurzarbeit has also been pretty effective in maintaining consumer confidence during a slump.

That's not to say that this program would be effective (or desirable) here in the states. It does have it's advantages though.

J. Strupp said...

"Yes, in fact when you draft 11 million men and force countless others into government funded armament industries, you have 'reduced unemployment.' This is obviously not true, as economic law shows us."

Except you do, in fact, have reduced unemployment.

D said...

J Strupp,

Employment, in economic terms, means being employed in a productive capacity.

By that logic, we can cure all unemployment by banning trucks and have the unemployed carry cargo on their backs.

Or, better yet, we can cure all unemployment by hiring all the unemployed to dig holes and fill them back up.

J. Strupp said...

"Employment, in economic terms, means being employed in a productive capacity."


"productive" is a relative term. Relative, when you take into account the millions of Americans sitting idle along with a good portion of this country's production capacity.

And yes, we could hire Americans to dig holes and fill them back up again. Obviously, we should (and will) find better ways to utilize our idle workforce but this follows my logic.