Keynesian vs. Austrian economics made simple – Good analogy?

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Keynesian vs. Austrian economics made simple – Good analogy?

If you have been confused about the differences between the Keynesian and Austrian schools of economics, may I humbly propose an analogy that may help your understanding.  If you don’t think this is accurate or helpful then please let me know.  I’m new to this myself.

Fire policy -- In the early 1900s the US Forest Service implemented a new policy to aggressively suppress all forest fires.  Citizens didn’t like to see trees burn and the lumber companies saw profits going up in smoke.  Over the years they obtained equipment,  trained men, and worked out elaborate plans.  With a lot of time and money they reduced fire damage considerably.

Over the years the forest management experts began to notice problems.  Without periodic small fires the undergrowth became thick.  It ignited easier, acted as additional fuel making the fire hotter, and sent it up into the crowns of the mature trees.  This spread the fire faster and farther, killing more of the forest.

With further study they found that in the pasts forest experienced periodic small fires which cleared the undergrowth and burned up the deadwood.  They usually did not reach the crowns and burned themselves out without doing great damage.  They triggered the tree seeds to sprout and start a healthy new generation.  The mature trees also grew better.  The old policy of trying to manage nature was counter productive.  The policy was changed to allow the natural cycle to return.

Keynesian school – All recessions are bad and must be suppressed by government actions.  This protects established businesses and jobs.  The methods are elaborate and costly, but a benefit to the public overall.

Austrian school – When markets stray too far from reality they must be purged by adversity.  This clears unneeded or failing enterprises so capital is not allocated wastefully, and new businesses can emerge.  Periodic small recessions are the price of a healthy economy.

Recent situation -- Unfortunately, after decades of total suppression many forests were overgrown tinder boxes.  At Yellowstone National park the “hands off” policy let a fire get completely out of control before they used aggressive suppression.  36% of the park burned and much of this area is still black 20 years later.  At Los Alamos a “controlled burn” to clear undergrowth ran away from them and destroyed 400 houses. 

Yellowstone – Bear Stearns, Lehman Brothers, current economic predicament.

Los Alamos – Recognizing the problem and the perils of trying to make up for past mistakes.

I have often found a good analogy helpful to understand or explain a concept.  It is easy to push one too far, but if used properly it can be a good tool.  Is this one accurate or helpful?  What do you think?

Sources

http://en.wikipedia.org/wiki/Cerro_Grande_Fire 

http://en.wikipedia.org/wiki/Yellowstone_fires_of_1988

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Re: Keynesian vs. Austrian economics made simple – Good ...

Travlin, 

I think your analogy is great. Especially helpful for newbies like me.  I am constantly struggling to calmly and politely educate friends and family--I am going to use this!!

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Re: Keynesian vs. Austrian economics made simple – Good ...

OK forgive my still struggling to understand here.  I get the flaw in the Keynesian school.  But, the Austrian school as it has been applied (supposedly) has been a version of pretending to let nature take its course while really interfering in extreme ways - I encourage laws that force people to let the forest burn except in areas that I lumber in which case I force the local farmers to pay for my fire suppression system.  Then when my land does catch fire I let it burn out all of your land,  tax you for the fire damage and take your land because you cannot manage it.

Mostly the reason it seems to me that the "schools" and ideologies don't seem to work is because of the number of people who tout one plan,  but then do something completey different!

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Re: Keynesian vs. Austrian economics made simple – Good ...

Land

You may well be right.  My understanding of the Austrian school is elementary.  I'm not saying the Austrian school is a good thing.  In practice people always find reasons to work things to their own advantage.  I was just trying to illustrate the difference in fundamental principles.  Do you think this analogy does that? 

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Re: Keynesian vs. Austrian economics made simple – Good ...

It does work in one sense,  but it makes it seem like the Austrian school is "right".    It is only my opinion,  but it is similar to the left-right political paradigm.  We need to get past 'schools' and parties and sound bites.  They are all man made inventions and we need something new.

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Re: Keynesian vs. Austrian economics made simple – Good ...

Here's my take in a most basic sense...

1.)  Austrian Economics - Actions of human behavior in changing conditions.  Hence...more dynamic and adaptive to external forces.   This makes modeling irrelevant since more a continuum versus yes/no.  Decentralization?

2.)  Keynesian Economics - Poorly defined role and benefits of government as a solution with arbitrary, incomplete, obtuse, unproven tenets.  Static and one dimensional to issues, forces and actions.  Simple cause...effect and solution.  Centralization?

Which of the two comes closer to the laws of nature?   Everyday life   As a scientist and everyday modeler for over 30 years, plus day to day life experiences...its number 1.  

Travlin: The next sentence by Lord Acton is also important.

Nichoman 

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Re: Keynesian vs. Austrian economics made simple – Good ...

land2341 wrote:

It does work in one sense,  but it makes it seem like the Austrian school is "right".    It is only my opinion,  but it is similar to the left-right political paradigm.  We need to get past 'schools' and parties and sound bites.  They are all man made inventions and we need something new.

Land

Good point.  It does imply the Austrian school is better.  That was not my intention, as I don't know that much about it yet.  This needs some thought.  I agree that both parties try to manipulate us to support them to the detriment of our country as a whole.  But lacking divine intervention, it is up to us to find better ways.

In Keynes defense, per Machinehead (post 3) http://www.peakprosperity.com/forum/rejecting-keynes-growth-ideas/40723, “deficit spending in recessions was supposed to be offset by fiscal surpluses during expansions.”  Looks like politicians mucked that up pretty thoroughly.

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Re: Keynesian vs. Austrian economics made simple – Good ...

Nichoman wrote:

Here's my take in a most basic sense...

1.)  Austrian Economics - Actions of human behavior in changing conditions.  Hence...more dynamic and adaptive to external forces.   This makes modeling irrelevant since more a continuum versus yes/no.  Decentralization?

2.)  Keynesian Economics - Poorly defined role and benefits of government as a solution with arbitrary, incomplete, obtuse, unproven tenets.  Static and one dimensional to issues, forces and actions.  Simple cause...effect and solution.  Centralization?

Which of the two comes closer to the laws of nature?   Everyday life   As a scientist and everyday modeler for over 30 years, plus day to day life experiences...its number 1.  

Travlin: The next sentence by Lord Acton is also important.

Nichoman 

Nichoman

Thanks for the further delineation of the two schools.  Seems the analogy is in line with your assesment.  I'm curious about what area of science you are in.

Regarding Acton did you mean, “History has proven that.”?  I dropped it for brevity.  If not, please enlighten us as I used a secondary source.  I also combined two quotes in my sig line.  Not technically kosher but this is not a scholarly publication. 

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Re: Keynesian vs. Austrian economics made simple – Good ...

Travlin...

I'm an Atmospheric Scientist.   Specific areas: Thermodynamics...Climate Change...electro-optics and electro-magnetism.

Referencing Lord Acton:  The next sentence in his Letter to Bishop Mandell Creighton, 1887...

“Power tends to corrupt and absolute power corrupt absolutely. Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority.”

Try Acton Institute link...

Nichoman

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Re: Keynesian vs. Austrian economics made simple – Good ...

Nichoman

Thanks for the info on you and Acton.  Your work sounds interesting.  I bet if some misguided soul accused you of being full of hot air you could whip up a thermodynamic equation on temperature differentials and prove him wrong. :)  I'll look into the  Acton site.  He had good insight into human behavior. 

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Re: Keynesian vs. Austrian economics made simple – Good ...

Keynesian and Austrian economic theories are brothers under the neoclassical belief system.  They have much more in common than differences as both are forms of feudalism.  Neither is a science, both ignore sovereign money and both totally miss the exponential growth of debt as explained in the Crash Course.  They both miss the fact that our current system cannot be sustained, it is inherently flawed as a mathematical certainty. 

Science, math and concerns for humanity left economics early in the 1900's as wealthy foundations heavily funded the big three neoclassical schools: Mises, Marx, and Keynes.

“Many readers may be surprised to learn the extent to which the Graduate Institute and then Mises himself in the years immediately after he came to United States were kept afloat financially through generous grants from the Rockefeller Foundation. In fact, for the first years of Mises’s life in the United States, before his appointment as a visiting professor in the Graduate School of Business Administration at New York University (NYU) in 1945, he was almost totally dependent on annual research grants from the Rockefeller Foundation.” – Richard M. Ebeling, The Life and Works of Ludwig von Mises

More information can be found direct from the source from Murray Rothbard’s biography of Ludwig von Mises and an article published at the Ludwig von Mises Institute.  The William Volker Fund and Rockefeller Foundation funded people like Ludwig von Mises, Henry Hazlitt, and Murray Rothbard to promote a gold standard so that the bankers could manipulate the supply of currency and easily cause cycles of inflation and deflation to bankrupt the people.

"Because of Mises, Marx, and Keynes, we’ve allowed ourselves to become ignorant and brainwashed masses, losing our understanding of economics, cheerleading the people who enslave us, and losing our understanding of the greats like Moses, Cicero, Jesus, George Washington, Thomas Jefferson, Thomas Paine, Abraham Lincoln, Henry George, Ghandi, and MLK, who worked to free us from the tyrants, the ruling elite, the aristocrats, the slave owners, the monarchs, the robber barons, the monopoly men, the banking elite, and the corporate elite."

It is very easy to debunk the big three neoclassical schools by asking yourself an easy question...if the people and property of the United States solely backs up our money; why do we as a nation borrow it from private banks that create it for free?

Nichoman, I'm a big fan of Lord Acton as he understood what we are confronted with today when he said "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."

Larry

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Re: Keynesian vs. Austrian economics made simple – Good ...

[quote=DrKrbyLuv]

<snip>

Science, math and concerns for humanity left economics early in the 1900's as wealthy foundations heavily funded the big three neoclassical schools: Mises, Marx, and Keynes.

<snip>.

<snip>.

Nichoman, I'm a big fan of Lord Acton as he understood what we are confronted with today when he said "The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."

Larry

[/quote]

Agreed.  Economics is not a science in multiple ways.  

The most overarching..."Conservation of Mass/Energy".   Will leave it at that.

Then...lack of following the essence of science:  

1. observation >>> 2. data >>> 3. analysis >>> 4. findings >>> 5. conclusions >>> 6. verification.   Then proceed back to step 1.   

The most profound agreement have always had with CM is facts versus opinion.   Long have held opinion(s) are irrelevant.  Facts/Data along with proven principles and processes are the keys (this may loosely fall into CM's Beliefs).

Does economics, the so-called "expert"s and most schools do this?   BTW...have rejected being called an expert for over 20 years (opinion and unscientific).  At least Austrian references human behavior.  My take of economics is more akin to "Efficacy Economics" or most bang for the buck.

Mathmatics.  Is incomplete...much less misapplied or not applied at all (as is most obvious in economics)   Example:  By definition...Energy described in a Hamiltonian framework is inconsistent with its properties.  Then we can delve into Quantum aspects and so on.   That's where I research things like String Theory and Einsteins other theory...often called "Plank-Bose-Einstein Theory of Heat Capacity" as new frontiers.   Seen too many results that we've confirmed that can't explain adequately.   Then consider infamous "Two-Slit Experiment". 

Lord Acton...was wise in many ways.   Wish more would study him.   His relationship with Gladstone still looking into...then trying to frame in context of the times of mid/late 1800 England, most notably they were still accessing lots of (plentiful) natural resources and a still evolving society.        

Nichoman

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Re: Keynesian vs. Austrian economics made simple – Good ...

I'd say confiscating private property (gold) by edict constitutes government intervention.    Executive Order 6102 and Gold Reserve Act are not theories.  The US Treasury  holds title to all gold held by the federal reserve, not some bank.

US Bonds paid in US Dollars which were convertible to gold, as well as bank notes and federal reserve notes.   The tie to gold put a check on government borrowing,and spending (FDRs New Deal programs) but it also left banks vulnerable to bank runs.     Removing gold from circulating as money was the final solution. 

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Because of Mises, Marx, and Keynes

Larry, excellent post!

As much as the big three names mentioned have been talked about in the present era. I think most miss the fact that that economic thought and social engineering are fingers of the same glove.

Misess' book Socialism: An Economic and Sociological Analysis not only delves into how truly free markets are surperior than those of socialism. It even delves into marriage and free sex in how it relates to the aformentioned style policies.

I am a high school drop-out, completely void of any formal education. But in recent years have spent my time reading various opinions and ideals from the French Revolution to present day. And it's amazing to me how little we as a nation (US) have learned from then to now.

Imagine if Andrew Mellon were the Secretary of Treasury now instead of Geitner? You have to ask yourself, would the current economic situation be nearly as stagnant?

With the economy in it's current conditions, I find these discussions of Keynes vs. Hayek and the like very infomitive and interesting.

Uncle Ben Parker - "With great power comes great responsiblity"


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Keynesian vs Austrian Economics Rap

You may have seen this but if not it's pretty good.

http://www.youtube.com/watch?feature=player_embedded&v=d0nERTFo-Sk

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Here is the follow up

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fantastic

Love it

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it's not an either/or proposition

This is where I keep getting hung up.  Systems are not static.  All systems,  of mechanics, mathematics, politics and thought are ever in motion.  And because all systems are created and applied by human they are inherently flawed.  

Economic systems are among the worst because they ALL are social engineering masquerading as science all the while disregarding the most basic ingredient of social engineering - humans.  Behavioral economics is taking a great step in that direction and helping,  but when will people see?  

You support Keynes when Mises is out of control and Mises when Keynes gets out of control.  They will ALL get out of control and push too far.  Neither one of them are "correct" or "true" or even better or worse.  Deviance defines the norms by forcing us to set them not by being allowed to become them.

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wonderful analogy

I don't get much into the finer details of "Austrian school" stuff.

This is because I think humans are all a pack of tribal, religious, ignorant creatures and as soon as they say "This school of thought is so much more truer than all the others" is as soon as they go astray.

That being said...

Your analogy IS PERFECT.

It's perfect for our monetary system -- our banking system. Not necessarily our schools of economic thought.

We used to have bank panics and bank collapses all the time.

Bank collapses are the forest fires.

The Panic of 1907 (http://en.wikipedia.org/wiki/Panic_of_1907) was the largest panic ever (to that date), and it took the biggest thin-air money creditor of the day (J.P. Morgan) to bail out the banks with thin-air money and restore confidence in the illusion of the money system .

But when the lender of last resort has already bailed out everything to the last degree sensible, then we inevitably get bank panics and collapses anew -- and this time on a much bigger scale. A forest fire to end all forest fires.

After the Panic of 1907, we got the Federal Reserve System. This lender of last resort has been extraordinarily conservative and cautious and judicious over its time -- yet, yes -- of course! -- over the last century, the Fed has fed its "cronies" and its "masters" all the wonderful, documentable benefits that we rail against today -- yes of course it has given insiders unfair advantages -- but it has also given the masses a banking and monetary system that is unprecedentedly stable in the bigger picture of banking through history -- we still use the same Federal Reserve Note currency as instituted in 1913 and we use it world wide -- and this is truly unprecedented in history.

Whether the Fed is a key player in a great conspiracy or not (an issue I have not really brought up and will not go into now), we must admit that it is our forest fire preventer. Tens of thousands of banks have collapsed since the inception of the Fed, yes -- but we have not had a systemic banking collapse since the day it was created -- as the whole banking system was facing systemic collapse in 1907.

Yes, the Fed can choose which banks die, and which banks get hosed-down with a spigot of thin-air money (http://i.imgur.com/vjM4o.jpg) -- but, at the end of the day, we have seen our economy and our military grow to epic proportions without very many monetary stumbling blocks along the way, and this has been of tremendous benefit to us.

The Great Depression was very hard for the common man in America, but after the European powers knocked themselves out of dominance in World War II, it was smooth sailing for the Western-most baby nation to become THE super-power of the globe. Some people will think I have glossed over the period of 1913-1945 entirely too quickly here -- they are 100% correct -- but do you really want me to pontificate over the entirety of our monetary history and substantiate myself in full? Of course not.

We never did solve the implicit and fundamental problem of fiat credit money (U.S. dollars are Federal Reserve Notes are credit money -- http://en.wikipedia.org/wiki/Credit_money). (The fundamental problem is the "P < P+I problem" -- "principal loaned is less than owed principal plus interest" -- that money comes from debt and there is never enough money around to pay down the debt, and we must constantly issue new debt if we wish to pay down old debt.)

We kicked that can down the road, ad finitum (ad finitum). When Nixon was President, a conscious commitment to go "full-credit" was made -- and during the Reagan years, we started going certifiably exponential on the national debt -- with the complicity of the Federal Reserve. I do not think that Nixon or Reagan had any say in these matters.

And we have really run this route to the end of the road by now, haven't we? By now, we are invading more and more fruitless countries, at more and more expensive costs, in order to keep our system going for a little bit more and more longer, aren't we?

And now we come back to the analogy. The inescapable fire. The big one. This monetary system has kept all the forest fires under its control that it could -- but now it can't control any more. Like J. P. Morgan in  1907 -- the last man behind the last curtain -- exposed and naked, we cannot much longer continue to declare thin-air money into existence and expect it to douse the fires.

So your analogy is wonderful. And it need not necessarily be applied to the church of Austrian economics.

It's just an analogy the money system. It's a lot harder to deny the fundamentals of our money system than it is to deny the fundamentals of our economic system.

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Good thread

Hey, Matt Prather:

Your argument is compelling.  Can you forsee how this all ends?

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Yellowstone Park fire

You claim -  36% of the park burned and much of this area is still black 20 years later.- You will hoce ave to show me this area - al the areas I have seen are thriving - If you are seeing black - it is more than lilely a more recent fire (Lodgepole pine loves fires)

Nice try though

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these four diagrams sum up

these four diagrams sum up the differences between marx, keynes, mises, and george well...

http://www.henrygeorge.org/isms.htm

the only flaw to the diagram is that it doesn't make the distinction that the "interest" on debt-based and commodity-based legal tender is not the same as interest on capital. speculation on commodities and hard currency is considered economic rent. interest-bearing and commodity-based legal tender is fraud.

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EconomicSystems

Every person famillar with control systems knows that a system will be unstable when it has positive feedback and can be stablized only with negative feedback of the proper amount and at the proper time. This is an obvious fact in economic systems too and will at some point in time be "discovered". Economic growth is enhanced by positive feedback and it also causes the eventual downturn. It is a simple technical fact well proven and analyzed for many years in the physical world and it obviously is true for economic systems too. The real challenge in economics is to institute proper and morally acceptable negative feedback.  The Keynesian notion of government spending to fix an economic downturn is an example of a negative feedback to stablize the system. When money flow in the market slows down government induced money flow starts in the opposite direction and brings about stablization as negative feedback.  The beauity of understanding how a system is stablized is that it works both ways. You then understand how to make it grow too. The truly hard part is timing (bandwidth in the physical world) and the moral part. For example paying laid off workers more than they earned when working would be a beautiful negative feedback and would also obviously tend to stablize a falling consumer driven economy but it would be morally unacceptable. The Keynesian approach should be acceptable to anyone who understands what money is as opposed to just understanding what you can do with it. Another negative feedback effectively used in the USA for a long period of stability after WWII is a very high marginal tax rate. It should also be morally acceptable as well.  For those who understand the physical model of a feedback system the "market" the economists talk about is the feed forward element. The government must supply many of the feedback mechnisms such as taxes, money creation, unemployment benifits, etc.  If this way of thinking about the economic system were applied we could have some real progress and start talking about reality rather than the ideaological notions of Keynesian, Austrian or Marxian views.

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Good thoughts

Charles

Welcome to the forums.  You presented a lot of good thoughts.  I hope you will post regularly.  I can see a case for government stimulas during downturns.  The big problem is the overwhelming temptation to continue it to "manage" economic growth and the prospects for re-election.  I think your control engineering perspective would greatly improve economics as a discipline.

Travlin 

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Hmmm

The "georgian" model is still solidly left, because it gives all true ownership of land to the state.  This would be a totally unacceptable solution to Judeo-Christian and Muslim societies, for reasons which are unimportant for this discussion.

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Hi Charles, welcome to

Hi Charles, welcome to CM.com.

Charles3000 wrote:

The real challenge in economics is to institute proper and morally acceptable negative feedback.  

There is already a feed-back loop - make stupid decisions, go broke.   No need for government to intervene at all.

Charles3000 wrote:

The Keynesian notion of government spending to fix an economic downturn is an example of a negative feedback to stablize the system.

This assumes that the Keynesian policies weren't responsible for the downturn in the first place.  We can see many of the Keynesian influences in blowing up bubbles and the downturn is the correction from previous poor decisions.   Anytime you have government forcing changes in the market that it would not normally take on it's own, it's unsustainable.  Eventually when the interferrence is removed the system will revert back to natural choices by consumers.  The interferrence in the market to produce a desirable result is a temporary illusion.

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rhare wrote: There is

rhare wrote:

There is already a feed-back loop - make stupid decisions, go broke.   No need for government to intervene at all.

This is not a feedback loop, it is a cause and effect solution on an individual transaction scale.

The concern is not that individual businesses should make a poor decision and go bankrupt- of course they should be accountable. The issue is when an entire economy is subjected to control fraud in which the cumulative effect is to place non participants- people who are not involved in profit taking-  at risk of losing private property and individual rights- so that others may take a profit.

rhare wrote:

This assumes that the Keynesian policies weren't responsible for the downturn in the first place.  We can see many of the Keynesian influences in blowing up bubbles and the downturn is the correction from previous poor decisions.   Anytime you have government forcing changes in the market that it would not normally take on it's own, it's unsustainable.  Eventually when the interferrence is removed the system will revert back to natural choices by consumers.  The interferrence in the market to produce a desirable result is a temporary illusion.

Kensysian policies have their place in modern political economy. It is a series of conceptual approaches that has (and has demonstrated) that they can and often are effective at rectifying certain conditions. But not all. In the same vein, Austrian principles have made meaningful contributions to the understanding of instabilities inherent to capitalism, and some proponents (such as Schumpeter) have made contributions towards understanding these business cycles, as well as the principle of creative destruction.

However, these (Austrian) ideas are severely limited, and are unsuitable for large scale control fraud, that occurs- organically- in any late stage capitalist economy.

The take away is that capitalism is intrinsically unstable. It operates in boom or bust cycles, and as the magnitude of these cycles increases, the repercussions change - becoming much more severe, and the most effective type of corrective action changes as well. When these cycles get too large, as they are now, they cannot be left to the theories of “creative destruction” as means of self correction.

Suggesting that problems of this scale are caused solely by government intervention shows a lack of understanding for the intrinsic (and entirely factual) instabilities of capitalism, and the effects these instabilities have on the non participant- who, last time I checked, had rights too.

As has been the case for nearly 300 years, capitalism needs, and will always need, corrective feedback loops initiated from someone other than the profit seekers.

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I think this is a great

I think this is a great analogy for pushing the idea of Austrian economics. Put simply when we run into a economic ressession, when the forest starts on fire, they believe in letting a couple bad companies that started the fire burn down all the rest of the companies with the idea that over time they will grow back stronger becasue the strongest survived. But do you really think that a 50 year old that is 10 years from retirement would be ok with the idea of getting fired, seeing his 401k drop to nothing all under the idea that in 10 years the economy will be stronger? Or an 70 year old living off his 401k seeing it drop to nothing thus dropping his to poverty standards. No I think this is a crazy idea. We are not an economy for the best and strongest, we are an economy for everyone. People need to make a living to survive, to be able to live comfortably and pay for nessecities today.

The analogy is great for pushing austrian economics, but the reality is not true. This is the problem with analogies, they can be used to correlate ideas even if they the correlation does not exsist. Economics is complicated. Using Keynes for one case may not work just as using austrian for another my not work. It is completely dependednt on the current economic situation we are in. It's about two things Supply and Demand. Austrian stands for Supply- the investors that supply goods and services, and Keynes for Demand- the consumers. Our government can implement policies to feed either one more when needed. If we have a problem with run away inflation, high interest rates thus making it harder for buiness to supply you can simply lower their taxes thus they will have more money to supply goods and services. When interst rates are low and buiness' are sitting on $4T in cash, having doubled in profits 2 times over the last 12-15 years while the average person's income and 401k is flat over that same time period you need to feed demand: i.e. government spends money, invest in eduation, infrastruture, lowers their taxes and increase taxes on wealthy and buiness to offset this inequality. Unfortunatly in Washington we have Keynes and Austrian's, Democrates and Republicans. Historically the largest economic growth has came under Keynes/Democrate. 1980 is the only case we can come up with where Austrian economics was needed. Unfortuantley we held on to that idea for 30+ years and are in the mess we are in today b/c of it.

Let me explain it this way. I played football in the NFL, and us players knew that the fans where the only reason we were paid the way we were paid. The fans had demand for our product, they bought our jersey's, paid to come to our games, and gave us the highest rating in T.V. Without their income and demand for our product we did not have a product or incomes ourselves. Their income became my income. This is how the economy works, if they don't spend on my product I don't have a job, same for anyone reading this. So, we have to have people spending money on things in order for a transfer of money to take place and create others incomes. So, if we are in an economic recession where people are making less money or being layed off whats the answer? Generally, unless we have runaway infaltion, we need people to spend money. And if the government spends money is their money not as good as anyone esles? Does it not stimulate the same as if I were to spend money. Especially if no one else is spending. Then yes this is a great tool that has worked for over 80 years. The great economy/American we have is b/c of this. To argue for letting recessions deepen is crazy. It's what Herbert Hover did and look at how that worked out for him.

ralfy's picture
ralfy
Status: Bronze Member (Offline)
Joined: Dec 31 2008
Posts: 60
They are two sides of the

They are two sides of the same coin in light of global capitalism.

yamfood's picture
yamfood
Status: Member (Offline)
Joined: Nov 19 2012
Posts: 1
This is a great analogy.  The

This is a great analogy.  The problem is that if we allow the government to implement Austrian school "policies" we will have even worse disasters like when the controlled burn destroyed those houses in the story. 

What we need to do is remove the government entirely from the economic sphere, but good luck doing that.  Solution?  Eliminate the goverrnment completely.  When we allow people to rule us like slaves then we will used like slaves.  But it is mental slavery.  If you see your chains you break them.

ralfy's picture
ralfy
Status: Bronze Member (Offline)
Joined: Dec 31 2008
Posts: 60
Done deal. How do you think

Done deal. How do you think unregulated derivatives rose to between $600 trillion to over $1.2 quadrillion worldwide?

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