AlexMerced
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- Nov 8, 2007
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Keynesians will often hide behind mathmatic reports by the likes of the CBO and Mark Zandi to claim that there government spending based stimulus procedures are more effective than more liberty based approaches. The only way to refute Keynesian mathmatics, is to understand the assumptions being made by those who conduct and prepare these reports and this is what I do in the video below. I dicuss many of the points listed below.
Assumptions that favor Keynesianism:
- If goverment spends money that's one extra movement of money which adds to GDP. SO if government pays you, and then you spend the after tax dollar amount of that money that adds over $1 to GDP even whether the economys better or not... this is the multiplier. (Example: Government spends one dollar to pay employee, Employ is left with 80 cents after taxes which he spends so in total to a keynesian this is a 1.8 multiplier) Bottom line to a Keynesian, money needs to spend for the sake of spending, because it'll create "circular flows of money".
- Tax cuts reduce income of government, so from an expenditures approach this reduces the amount of spending the government can do so thus reduces GDP. A person spends the after tax amount of that dollars saved from a tax cut, for example 80 cents, has only contributed is 80 cents to GDP in these models (somebody spent the extra 20 cents... oi) ... which is why tax cuts would have multiplier below 1. (see how bizzarre keynesians are)
- The richer the person is assumed to have the lower "Marginal Propensity to Spend" AKA their willingness to blow off the money on consumption and not save it, so any Keynesian model will automatically haircut any amount given to rich people, so it's already set up to favor giving money only to the not rich.
- Keynesian models ignore the value of savings
add these all up, and you can easily end up with a CBO report that claims extending unemployment insurance aka paying people to not work is stimulative and that cutting taxes on the most productive in society actually gets you only 80 cents on the dollar... silly Keynesians.
[video=youtube;1nWUVabjCo8]http://www.youtube.com/watch?v=1nWUVabjCo8[/video]
Assumptions that favor Keynesianism:
- If goverment spends money that's one extra movement of money which adds to GDP. SO if government pays you, and then you spend the after tax dollar amount of that money that adds over $1 to GDP even whether the economys better or not... this is the multiplier. (Example: Government spends one dollar to pay employee, Employ is left with 80 cents after taxes which he spends so in total to a keynesian this is a 1.8 multiplier) Bottom line to a Keynesian, money needs to spend for the sake of spending, because it'll create "circular flows of money".
- Tax cuts reduce income of government, so from an expenditures approach this reduces the amount of spending the government can do so thus reduces GDP. A person spends the after tax amount of that dollars saved from a tax cut, for example 80 cents, has only contributed is 80 cents to GDP in these models (somebody spent the extra 20 cents... oi) ... which is why tax cuts would have multiplier below 1. (see how bizzarre keynesians are)
- The richer the person is assumed to have the lower "Marginal Propensity to Spend" AKA their willingness to blow off the money on consumption and not save it, so any Keynesian model will automatically haircut any amount given to rich people, so it's already set up to favor giving money only to the not rich.
- Keynesian models ignore the value of savings
add these all up, and you can easily end up with a CBO report that claims extending unemployment insurance aka paying people to not work is stimulative and that cutting taxes on the most productive in society actually gets you only 80 cents on the dollar... silly Keynesians.
[video=youtube;1nWUVabjCo8]http://www.youtube.com/watch?v=1nWUVabjCo8[/video]
