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Spreading Hayek, Spurning Keynes

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Re: Spreading Hayek, Spurning Keynes

#31

Post by jbooth »

hga wrote: post #3

"What I'm really worried about is an endless cycle of deficits, debt, and debasement of currency," Mr. Boettke says. "What we've done is engage in a set of policies that's turned a market correction into an economy-wide crisis." Which is what a lot of people believed made the 1930s depression Great: first Hoover (an engineer) and then FDR engaged in massive and unprecedented intervention in the economy (pre-Keynes-ia…

Except Hoover didn't engage in either a massive or unprecedented spending. All his public pronouncements and actions show that he was concerned with keeping the budget close to balanced over stimulus, whereas FDR was the opposite.

EDIT: Here you go: http://www.usgovernmentspending.com/year1929_0.html#usgs302

Total federal spending went from 3.8 to 4.3 billion under Hoover over the 4 years from 1929,1930,1931,1932. Hopped to 5.1 billion in FDR's first budget. 15% is "increased spending", 3% is really not, in the context of rolling over a large institution, it's basically holding even or cutting a little.

Far lower rate of increase under Hoover than under, say, Reagan. Hoover also lobbied for a big tax increase in 1931 to "balance the budget", and typically in economic contractions the states and municipalities cut spending, because they have to run balanced budgets by law most of the time.

Also, the recent stimulus bill was over 1/3 tax cuts -- so it's not really like like they're spending more than the Iraq war. More fun with statistics.

Re: Spreading Hayek, Spurning Keynes

#32

Post by protomyth »

billybob wrote: post #17

Here are my observations as a layman: 1) The economy is really, really complex, to the point that people who study professionally are about as good at predictions as a dartboard. 2) Therefore, monkeying with it means pulling levers on a machine you don't understand. 3) While pulling those levers (via stimulus, bailouts, etc) may or may not help, it DEFINITELY costs lots of money. My conclusion: as much as possible, l…

Generally markets work much better when the "referee" part is a known quantity. We are currently seeing a lot of problems based on the lack of knowledge about healthcare rulings and further government intervention. It is almost like everyone is holding their breaths.

Re: Spreading Hayek, Spurning Keynes

#33

Post by hga »

jbooth wrote: post #31
hga wrote: post #3

"What I'm really worried about is an endless cycle of deficits, debt, and debasement of currency," Mr. Boettke says. "What we've done is engage in a set of policies that's turned a market correction into an economy-wide crisis." Which is what a lot of people believed made the 1930s depression Great: first Hoover (an engineer) and then FDR engaged in massive and unprecedented intervention in the economy (pre-Keynes-ia…

Except Hoover didn't engage in either a massive or unprecedented spending. All his public pronouncements and actions show that he was concerned with keeping the budget close to balanced over stimulus, whereas FDR was the opposite. EDIT: Here you go: http://www.usgovernmentspending.com/year1929_0.html#usgs302 Total federal spending went from 3.8 to 4.3 billion under Hoover over the 4 years from 1929,1930,1931,1932. Ho…

"Except Hoover didn't engage in either a massive or unprecedented spending"

Then I guess it's fortunate I said "massive and unprecedented intervention in the economy".

As for "tax cuts", in Washington that's scored as spending, e.g. you can't in theory cut a tax (rate, of course D.C. ignores dynamic scoring) without making up for it elsewhere. When you apply the "money is fungible" rule and you're running an annual deficit, it comes out the same, either requires the same amount of money to be borrowed to cover it.

Your last (now edited out) point is a bit off since the fight over interpretation of the Great Depression has been going on from the very beginning and looks to be without end. There was certainly a CW, after all the (political) victors write the history, but that doesn't mean it's The Truth.

I don't remember your including Reagan's budgeting in your first draft, so I'll just point out that he was fighting and winning an existential war, something that didn't burden Hoover.

Re: Spreading Hayek, Spurning Keynes

#34

Post by jbooth »

hga wrote: post #33
jbooth wrote: post #31

Earlier quoted context omitted.

Except Hoover didn't engage in either a massive or unprecedented spending. All his public pronouncements and actions show that he was concerned with keeping the budget close to balanced over stimulus, whereas FDR was the opposite. EDIT: Here you go: http://www.usgovernmentspending.com/year1929_0.html#usgs302 Total federal spending went from 3.8 to 4.3 billion under Hoover over the 4 years from 1929,1930,1931,1932. Ho…

" Except Hoover didn't engage in either a massive or unprecedented spending " Then I guess it's fortunate I said "massive and unprecedented intervention in the economy". As for "tax cuts", in Washington that's scored as spending, e.g. you can't in theory cut a tax (rate, of course D.C. ignores dynamic scoring) without making up for it elsewhere. When you apply the "money is fungible" rule and you're running an annual…

Even on intervention, what'd he do, he held the federal budget pretty stable, he did the Smoot Hawley tarriffs which were large but I wouldn't call them "massive" or "unprecedented"..

What's the huge intervention? I see perhaps slightly more active than the typical President but, considering the massive and unprecedented circumstances, I don't see a whole ton of activity.

Regarding the never-ending debate on the topic of Hoover vs FDR, sure, although I'd say the victory was well-earned, and that documented statistics on government spending are a pretty solid fact.

Re: Spreading Hayek, Spurning Keynes

#35

Post by thedaveoflife »

billybob wrote: post #17

Here are my observations as a layman: 1) The economy is really, really complex, to the point that people who study professionally are about as good at predictions as a dartboard. 2) Therefore, monkeying with it means pulling levers on a machine you don't understand. 3) While pulling those levers (via stimulus, bailouts, etc) may or may not help, it DEFINITELY costs lots of money. My conclusion: as much as possible, l…

The one problem with this logic is that occasionally leaving it alone, as you put it, can be more costly than taking action. Often when we see the problems that emerge when the government takes action, i.e. with bailouts, we ignore the problems that were prevented.

Re: Spreading Hayek, Spurning Keynes

#36

Post by CWuestefeld »

billybob wrote: post #17

Here are my observations as a layman: 1) The economy is really, really complex, to the point that people who study professionally are about as good at predictions as a dartboard. 2) Therefore, monkeying with it means pulling levers on a machine you don't understand. 3) While pulling those levers (via stimulus, bailouts, etc) may or may not help, it DEFINITELY costs lots of money. My conclusion: as much as possible, l…

Actually, what you're writing about -- the very fact that the economy is so complex that nobody can fathom it -- is pretty much what one of the Austrian gods, Friedrich Hayek, wrote, and he earned a Nobel Prize (partly) for this.

Yes, it's quite impossible for any one entity to understand all that's going on: every project and its priority; every input to those projects, and how readily other inputs can be substituted (aluminum instead of steel? we could do it, but...), and so on.

The only way to work this stuff out is to let the market handle it. And this is exactly what is being done when you see prices fluctuate in response to supply and demand, etc. This allows people to indicate directly just how important each choice is to them.

Re: Spreading Hayek, Spurning Keynes

#37

Post by hga »

jbooth wrote: post #34
hga wrote: post #33

Earlier quoted context omitted.

" Except Hoover didn't engage in either a massive or unprecedented spending " Then I guess it's fortunate I said "massive and unprecedented intervention in the economy". As for "tax cuts", in Washington that's scored as spending, e.g. you can't in theory cut a tax (rate, of course D.C. ignores dynamic scoring) without making up for it elsewhere. When you apply the "money is fungible" rule and you're running an annual…

Even on intervention, what'd he do, he held the federal budget pretty stable, he did the Smoot Hawley tarriffs which were large but I wouldn't call them "massive" or "unprecedented".. What's the huge intervention? I see perhaps slightly more active than the typical President but, considering the massive and unprecedented circumstances, I don't see a whole ton of activity. Regarding the never-ending debate on the topi…

The two big ones I'm somewhat familiar with are:

"Jawboning": convincing companies to not decrease wages in the face of deflation, so they just went bankrupt instead. (http://en.wikipedia.org/wiki/Herbert_Hoover#Great_Depression, first paragraph.)

And then there's the http://en.wikipedia.org/wiki/Reconstruction_Finance_Corporat...

There's lots more although many not as consequential and unprecedented (i.e. excluding Smoot-Hawley and the massive tax rate increase), as a quick read of the first link will indicate.

Re: Spreading Hayek, Spurning Keynes

#38

Post by ataggart »

billybob wrote: post #17

Here are my observations as a layman: 1) The economy is really, really complex, to the point that people who study professionally are about as good at predictions as a dartboard. 2) Therefore, monkeying with it means pulling levers on a machine you don't understand. 3) While pulling those levers (via stimulus, bailouts, etc) may or may not help, it DEFINITELY costs lots of money. My conclusion: as much as possible, l…

As Hayek noted in The Fatal Conceit, "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."

Re: Spreading Hayek, Spurning Keynes

#40

Post by hga »

thedaveoflife wrote: post #35
billybob wrote: post #17

Here are my observations as a layman: 1) The economy is really, really complex, to the point that people who study professionally are about as good at predictions as a dartboard. 2) Therefore, monkeying with it means pulling levers on a machine you don't understand. 3) While pulling those levers (via stimulus, bailouts, etc) may or may not help, it DEFINITELY costs lots of money. My conclusion: as much as possible, l…

The one problem with this logic is that occasionally leaving it alone, as you put it, can be more costly than taking action. Often when we see the problems that emerge when the government takes action, i.e. with bailouts, we ignore the problems that were prevented.

Agreed: TARP and the related interventions of that period were designed to prevent a cascading failure of the world's financial system, which we know is very bad: http://en.wikipedia.org/wiki/Creditanstalt.
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