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The Hangover Theory

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Re: The Hangover Theory

#11

Post by corentin »

d13hard wrote: post #2

probably the first time i vigorously disagree with krugman....and oddly he appears to be in stark contrast to some of his own writings. austrian economics has probably become too dogmatic for some, but i do think there is validity in the notion that recessions realign capital flows in more constructive directions. look at what we are trying to do now - fight excess debt brought on by overconsumption with more debt to…

> austrian economics has probably become too dogmatic for some

Milton Friedman once said "there is no Austrian economics - only good economics, and bad economics".

The question is not whether the theories of the austrian school are too dogmatic or not; the question is whether they are right or not.

Re: The Hangover Theory

#12

Post by robak »

Definition of an idiot by Einstein: someone who does the same thing over and over again and expects to see different results.

Keynsists, monetarists, lessons from the Great Depression, downfall and destruction of USSR economy - all for nothing. We will print, print, print and again try to see if socialism experiments will succeed. Bernanke, Obama, IMF, economists - they are all idiots. They think that socialism and money printing and more debt will work this time...

And God forbid to listen to Austrians - they are not professors, so they are clueless.

Austrian School of Economics is THE ONLY SCHOOL that foresaw this crisis comming. For years Peter Schiff, Jim Rogers, Marc Faber (all Austrian) were telling over and over again that there is a bubble in housing that will end up with financial meltdown. Now, the foresee total USD currency collapse and hiper-inflation in US.

But they can't be right. They are not socialist, not keynsist and are not professors... and all these mainstream professors and bankers and politicians didn't even freakin' know what hit them. Actually, they still don't. They're so busy making situation worse by destroying US currency that... well, what can I tell: IDIOTS.

Re: The Hangover Theory

#13

Post by gabrielroth »

wolfmanstout wrote: post #5

Notice that Krugman provides very little hard evidence to completely discard the entire school of thought of the Austrian economists. He even sneers at them using blatant straw-man attacks: "some people probably are attracted to Austrianism because they imagine that it devalues the intellectual pretensions of economics professors." Regardless of whether all the Austrian school's claims turn out to be correct or not,…

The substance of his criticism of the Austrian school is in his fifth paragraph. It's not "sneering" or a straw-man attack; it asks a question that (Krugman claims) the Austrian economists' theories can't answer. If you want to defend them, try addressing that question rather than making irrelevant claims for Hayek's brilliance.

Re: The Hangover Theory

#14

Post by mighty »

dmix wrote: post #3

"The Great Depression happened largely because policy-makers imagined that austerity was the way to fight a recession." I have heard the opposite in many "Austrian"-tilted debates, how accurate is that? From checking Wikipedia, Roosevelt did try to stimulate the economy with government investment near the end. It also says that "Keynesian economists assumed poor people would spend new incomes; however, they saved muc…

http://www.nytimes.com/2008/11/10/opinion/10krugman.html

Re: The Hangover Theory

#15

Post by trevelyan »

mynameishere wrote: post #6

for the hangover theory is disastrously wrongheaded. Recessions are not necessary consequences of booms. They can and should be fought, not with austerity but with liberality—with policies that encourage people to spend more, not less Ten years later, well. We are coming out of a situation where 40,000/year salaries could get you a mortgage on a 400,000 dollar house. There are 101 reasons why that situation emerged,…

Read Keynes.

Re: The Hangover Theory

#16

Post by davetufts »

I personally consider most of what Krugman writes to be utterly non-sensical. Unfortunately the policies of the Clinton, Bush, and Obama administrations agree with Krugman's Keynesian view.

This article has been rebutted for the past 10 years by people a lot smarter than me. My favorite rebuttal is David Gordon's 1999 article on Mises.org: http://mises.org/misesreview_detail.aspx?control=53

Other notable rebuttals:

* http://mises.org/story/105 - by Gene Epstein, the original author that Krugman references in Hangover Theory's first sentence

* http://mises.org/story/103

* http://mises.org/story/630

Re: The Hangover Theory

#17

Post by dmix »

mighty wrote: post #14
dmix wrote: post #3

"The Great Depression happened largely because policy-makers imagined that austerity was the way to fight a recession." I have heard the opposite in many "Austrian"-tilted debates, how accurate is that? From checking Wikipedia, Roosevelt did try to stimulate the economy with government investment near the end. It also says that "Keynesian economists assumed poor people would spend new incomes; however, they saved muc…

http://www.nytimes.com/2008/11/10/opinion/10krugman.html

Thanks, that answered my question on Krugman's perspective on Roosevelt's policies.

The current stimulus seems to be inline with Krugman's recommendation. I'm more on the "Austrian" side but it will be an interesting experiment to see if the Keynesian approach can be effective on such a wide scale.

Re: The Hangover Theory

#18

Post by davetufts »

dmix wrote: post #3

"The Great Depression happened largely because policy-makers imagined that austerity was the way to fight a recession." I have heard the opposite in many "Austrian"-tilted debates, how accurate is that? From checking Wikipedia, Roosevelt did try to stimulate the economy with government investment near the end. It also says that "Keynesian economists assumed poor people would spend new incomes; however, they saved muc…

Saying that Roosevelt tried to "stimulate the economy with government investment near the end" of the Depression is a little misleading.

So is Krugman's statement about Hayek arguing, "in the depths of the Depression", against credit expansion.

This makes it sound like we were in the middle of the depression -- without any government intervention yet -- and suddenly the State decides to expanding credit. This is far from the truth. By the middle of the depression, say 1936, the government had already been intervening and expanding credit for seven years. Though I'm sure Hayek and Mises spoke out against such intervention on day one, anyone with half a brain would speak out against a policy that hadn't been working for seven years.

Hoover, like Bush, implemented massive government interventions. Both Hoover and Bush somehow get labeled as Economic "do nothings", but check Hoover's record: after the crash in 1929 he implemented massive trade tariffs (Smoot-Hawely), signed a "Home Loan" act to encourage more houses and protect against foreclosure (sound familiar?), raised income tax, raised corporate taxes, signed the "Emergency Relief and Construction Act" to fund massive infrastructure projects (like the Hoover Dam), etc...

Then, after Hoover's interventions, FDR came along and continued intervening with even larger, New Deal, programs.

Krugman's point of view does seem to be that FDR's New Deal started too late, but he, and other Keynesians, never explain why Hoover's 3+ years of interventions just made things worse. I'm with the Austrians on this one - If the State stayed out of the economy, these depressions and down-turns would fix themselves MUCH quicker.

Re: The Hangover Theory

#19

Post by [deleted] »

trevelyan wrote: post #15
mynameishere wrote: post #6

for the hangover theory is disastrously wrongheaded. Recessions are not necessary consequences of booms. They can and should be fought, not with austerity but with liberality—with policies that encourage people to spend more, not less Ten years later, well. We are coming out of a situation where 40,000/year salaries could get you a mortgage on a 400,000 dollar house. There are 101 reasons why that situation emerged,…

Read Keynes.

[deleted]

Re: The Hangover Theory

#20

Post by nazgulnarsil »

SirWart wrote: post #4

There are two ideas of the Austrians and the Keynesians that both seem true that I have a hard time reconciling. The Keynesian idea that depressions are caused by everyone cutting back at the same time, and results in a downward positive feedback loop that can be combated by government spending makes sense. But at the same time, Krugman asserts that there is no reason unemployment should rise because of a previous mi…

and years of negative savings encouraged by a highly inflationary policy have nothing to do it? this "cutting back" is consumption returning to sane levels.
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