Saturday, September 12, 2009

Quote of the Day II

If you believe the Keynesian argument for stimulus, you should think Bernie Madoff is a hero. He took money from people who were saving it, and gave it to people who most assuredly were going to spend it. Each dollar so transferred, in Krugman’s world, generates an additional dollar and a half of national income. The analogy is even closer. Madoff didn’t just take money from his savers, he essentially borrowed it from them, giving them phony accounts with promises of great profits to come. This looks a lot like government debt.

If you believe the Keynesian argument for stimulus, you don’t care how the money is spent. All this puffery about “infrastructure,” monitoring, wise investment, jobs “created” and so on is pointless. Keynes thought the government should pay people to dig ditches and fill them up.

If you believe in Keynesian stimulus, you don’t even care if the government spending money is stolen. Actually, that would be better. Thieves have notoriously high propensities to consume.


~
John Cochrane

12 Comments:

At 9/12/2009 11:01 PM, Blogger Michael said...

The Keynesian argument is why liberalism falls apart. The US is in two countries, spending a fortune to blow things up. If spending and wealth destruction worked, Bush would have been the lefts hero.

Note: War used to be about taking resources from another area not feel good politics.

 
At 9/12/2009 11:32 PM, Anonymous Norman said...

Part 1 of the Keynesian plan is well quoted: When demand slackens the government should step in and spend.

But Lord Keynes had a Part 2 which is all but forgotten: When consumer spending kicks in the government should run a surplus and sop up all of the 'extra' spending.

Maybe Krugman didn't read the whole theory. But he evidently does believe in alchemy, spend a dollar and get a dollar fifty worth of GDP.

Why didn't we think of that before? Its so easy.

 
At 9/13/2009 12:37 AM, Anonymous Benny The Libertarian said...

Okay, let's balance the federal budget. We can do that by bring tax rates back to pre-Bush levels, and cutting military spending to 3 percent of GDP.
Eliminating all rural subsidies would save about $100 billion more annually. It would also, over thenext 10 years, radically reduce our rural population.
You see, our rural population relies on subsidized roads, electricity, water, even post service. Remeber RFD? Phones too. Medical services.
Add to that, farm subsidies, which should be totally eliminated.
It's true, rural areas would empty out, and urban areas would no longer be taxed to provide comforts to rural folks.
Everyone on board? What happened?

 
At 9/13/2009 7:03 AM, Blogger bob wright said...

If you wants a fabulous read about the alchemists, pick up
Extraordinary Popular Delusions and The Madness of Crowds.

Alchemy. I'm all for it personally.

If anyone wants to send me $1,000, I'll turn it into $1,500 of spending for you.

 
At 9/13/2009 7:19 AM, Anonymous Anonymous said...

Benny, I'm on board with the things you're right about but not the things you're wrong about.

Farm subsidies - get rid of them.

Military spending - There is nothing magical about 3 percent other than it seems like a number pulled out of thin air. However, I belive there is room for a reduction in military spending.

Rural populations are not subsidized to the degree you believe. I have friends who live in rural San Diego County. They must maintain the dirt road and a 22' bridge to their neighbors property line at their own expense. The neighbors are similarly obligated up to the paved road built by the State of California, which would exist whether or not they lived there. The government does not pay for phone lines or electricity connections to these homes.

Despite paying the same property tax rates as most people living in incorporated areas of San Diego County, there are no schools out where my friends live. So they are actually subsidizing the "urban" dwellers in that regard.

I have some news for you. Urban dwellers are the beneficiaries of subsidized postal service as well.

 
At 9/13/2009 8:49 AM, Blogger bob wright said...

anon 7:19am: "I believe there is room for a reduction in military spending"

Military spending: one of the few things the federal government should actually be spending money on.

If anything, eliminate the departments of education, agriculture and the FCC, and transfer their budgets to the defense department.

 
At 9/13/2009 11:04 AM, Anonymous Anonymous said...

Right on, Bob!!!

 
At 9/13/2009 3:26 PM, Blogger 1 said...

It always amazes me how many supposed, 'home grown citizens' don't know and don't care about Article One, Section Eight of the US Constitution...

 
At 9/13/2009 7:55 PM, Anonymous CompEng said...

Isn't that the case for corporate welfare? Or much of the finance industry in general that generated so much irrational exuberance?

But he's right: thievery by those such as Bernie Madoff will work just as well as government spending in counteracting irrational saving. But not quite as well as the pronouncements of Alan Greenspan did.

 
At 9/13/2009 11:24 PM, Anonymous Anonymous said...

How far with de-regulation do you go abolish the FCC and go to chaos on the airwaves where no cell phone works and broadcasting fails as it did in the early 1920s before regulation?
Actually opinion sharing is much more de-regulated than in the 1950s due to technology, i.e. cable/satellite tv is not content regulated, just pricing regulation. The net has some regulation and in other countries the goal is a lot.
For example assume the fairness doctrine came back. If so buy sirus/xm stock because the radios would sell like hotcakes, since there is no content regulation on them.So the content would be on Sirius/XM and on the net. So the only looser would be the broadcast industry.

 
At 9/14/2009 10:32 AM, Anonymous Anonymous said...

1:

Or the Ninth and Tenth Amendments.

We live in a country needing bloody retribution when our most sacred founding principles are treated first as a petty inconvenience (by FDR) and later as non-existent (by Johnson, Nixon, Carter, Clinton, Bush and Obama).

 
At 9/14/2009 10:39 AM, Anonymous Anonymous said...

Benny, are you so impressed by the sound of your own voice that you continually repeat the same thing?

Half of it we all agree with. Half of it is nonsense which as one reader pointed out is pulled directly from you anus with neither thought nor care.

Why don't you just copy these comments of yours into Notepad and then copy and paste it into the blog whenever the voices in your head tell you to post again. It will save you a bad case of carpal tunnel syndrome.

 

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