Re: Leftists knocking Friedman ?

On Feb 22, 11:12 am, stuff_st...@[EMAIL PROTECTED]
 wrote:
> On Fri, 22 Feb 2008 08:57:29 -0800 (PST), Lysander
>
> <lysan...@[EMAIL PROTECTED]
> wrote:
> >>  there are those who follow evil, they hate keynes, but they are a
> >> few.
>
> >You need medication. Keynes is a dis proven mess.
>
> LOL. And here comes one now. You and Friedman use more Keynes than you
> know. 90% of Keynes has become accepted common economic wisdom. GDP
> and consumer demand for starters.
>
You do not understand Keynes or you do not understand how modern
economics looks at aggregate demand. Keynes said in the aggregate
Quantity supplied would not equal quantity demanded. Keynes said lack
of investment would mean the economy would be out of equilibrium and
that would cause recessions. He also believed that short term wages
were sticky downward due to unions and each wage rate had its own
supply curve.

We reject that today. We follow Says law. It has been justified by the
theory of interest. As people consume less investment does not drop.
Savings increases which decreases the interest rate which makes up for
lower expectations. Modern AS-AD models and even the old IS-LM
framework say something much different. The Keynesian cross is dead.
Now AS-AD is seen as always in equilibrium. A recession does not occur
do to the economy being out of equilibrium. In contrast it is a
contraction of aggregate demand, not movement along the AD curve as
Keynes hypothesized, that causes the new equilibrium to be less than
full employment. Little of Keynes' General theory stands today and
even those who call themselves Keynesian have very different views
than Keynes. The only agreement is that demand and investment are
im****tant. However, desired investment changes are seen as ****fting
demand. NOT MOVING ALONG DEMAND SO THE ECONOMY IS NOT IN EQUILIBRIUM.

The New Keynesian are far from Keynesian and New Keynesian is a
misnomer at best. Keynes believed the macro behaved differently from
the micro. You could not build micro models to simulate macro
activity. The Keynesian philosophy was to show X affects Y in a way
and we do not care why. For example there is no explanation of how to
derive the MPC and MPS. They just are and can be estimated. New
Keynesians use micro models to determine what affects things like the
MPC and MPS. They base their theory on theories of how we consume.
This was nonsense to Keynes and you all you had to do was estimate a
MPC and realize it could change. There was no way to predict changes
in the base line of the model and therefore the 1970's were a huge
surprise that could not be explained.

Since 1970's economist have realized the Keynesian view of just
linking aggregate variables is unsatisfactory. The Post-Keynesians
disagree but mainstream economics rejects this view. We know builds
models based on the micro that can predict changes in consumption
which will affect things like investment. Keynes did not care why the
MPC existed or what determines. Freidman was one of the first to point
out the danger in this and work toward a theory that could better
explain consumption for the purpose of predicting the aggregate.
Freidman was far from the first to generate consumption theories but
to my knowledge, he was one of the first to apply the consumption
theories to the business cycle.

The philosophy is entirely different and the reasons why things happen
are entirely different than Keynes said they were. You would be hard
pressed to find an economist who blames a recession on animal spirits
today. Even one who calls himself a Keynesian. What is called
Keynesian today is only inspired by Keynes at best.

> Tell me you don't use either.


I just did. Keynes has not been taken seriously for decades. The
"Keynesian" theory is a set of patches placed on a ****p that has been
sinking since the 1930's. You can hardly see the ****p for the patches
today.