What If Your Model Is Wrong?
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What If Your Model Is Wrong?
1–10 of 16 posts
Re: What If Your Model Is Wrong?
#2How is spending money you don't have helpful? How can this NOT cause harm?
Re: What If Your Model Is Wrong?
#3How is spending money you don't have helpful? How can this NOT cause harm?
that's so simplistic.
Back home, (ex-communist country), at the early 90s, the infrastructure was in pieces. I remember it took about 1.2 hrs, to travel 30 miles between the two biggest cities (one is a port, the other is the capital), of the country, on a two lane windy road. It was prone to accidents, traffic, frustration (every time when we wanted to go to the beach it was clogged).
The gov. had no money. It had to borrow some from FMN, and foreign dona tors, and build a highway, a modest 4 lane highway. That 70 minutes turned in to 25-mins. Transport became much much easier, faster, and traffic manageable. And shipments a lot easier.
The huge relief that came from the new road war worth the interest on that borrowed money, (money my government didn't have at the time), paid and more.
If you spending on things that have clear future net economic output, there is nothing wrong with borrowing from future income.
.. The problem is when the government borrows money (from future generations output), on dubious projects, or even worse, WARS.
Re: What If Your Model Is Wrong?
#4How is spending money you don't have helpful? How can this NOT cause harm?
By this logic, any loan anyone has ever taken has been a bad idea.
Re: What If Your Model Is Wrong?
#5Re: What If Your Model Is Wrong?
#6The problem I see with claiming that the model is wrong is that, well... the model isn't wrong. Sure, maybe one day our economic policies will shift away from capitalism, but we are a capitalistic nation (though with some unfortunate socialistic leanings IMHO). The reason why economists can apply practically the same methods to the 21st century as they did the 20th is that there is no real difference in the fundamentals of the economy have not changed. We still operate in a capitalistic society where supply and demand create (relatively) efficient generation of wealth. Sure, you can buy things on eBay and the like, and transactions on the stock market are now digital, but the market still fundamentally behaves in the same way.
Re: What If Your Model Is Wrong?
#7Re: What If Your Model Is Wrong?
#8How is spending money you don't have helpful? How can this NOT cause harm?
By this logic, any loan anyone has ever taken has been a bad idea.
The Author said "So Obama will spend upwards of a trillion dollars of stimulus in a combination of tax cuts, building roads, bridges, and hopefully public transportation. And it can't hurt and maybe it will help." I can think of plenty of ways this could hurt.
Obama could create new entitlements that burden America for generations. The money could be used to prop up failing businesses, creating a situation where success is determined by who has the best lobbyists.
Not every loan is a bad idea, but plenty of them are. There is no guarantee the effect of this loan will be positive.
Re: What If Your Model Is Wrong?
#9Earlier quoted context omitted.
The idea of a loan, is that you'll pay it back at some point.
Government debt is typically paid back at some point. What makes you think it won't be this time?
http://en.wikipedia.org/wiki/United_States_public_debt
Also, who are we taking a loan from? China already owns most of America; now the Federal Reserve is just printing more money to make it look like the government can spend the money - but the reality is, it is just a redistribution of wealth from those who hold cash (middle class, and rich people can invest in other assets) to whoever the government mandates "needs" it. (The way they define needs, is if you are so bad at running your business it is on the verge of bankruptcy, so you need a ton of cash to go have a relaxing vacation costing millions.)
Re: What If Your Model Is Wrong?
#10Earlier quoted context omitted.
By this logic, any loan anyone has ever taken has been a bad idea.
The Author said "So Obama will spend upwards of a trillion dollars of stimulus in a combination of tax cuts, building roads, bridges, and hopefully public transportation. And it can't hurt and maybe it will help." I can think of plenty of ways this could hurt. Obama could create new entitlements that burden America for generations. The money could be used to prop up failing businesses, creating a situation where succ…
And by setting a precedent for bailing out bad businesses not only are the people who have to pay for this hurt, but everyone in the future because businesses will be encouraged to be corrupt rather than produce goods.
This is like in the prisoners dilemma, but you force the American people to not rat anyone out - so the corrupt businessman can get all the benefits at the cost of the American people.