You can read here a rant from Mises about Keynesian economics, which was originally published in Plain Talk (March, 1948).
Talking of Keynesian policies in America in 1948, we have this priceless prediction:
“The Keynesian recipe to make wage rates soar no longer works. Credit expansion, on an unprecedented scale engineered by the New Deal, for a short time delayed the consequences of inappropriate labor policies. During this interval the Administration and the union bosses could boast of the “social gains” they had secured for the “common man.” But now the inevitable consequences of the increase in the quantity of money and deposits has become visible; prices are rising higher and higher. What is going on today in the United States is the final failure of Keynesianism.”America in 1948 was, according to Mises, undergoing the “final failure of Keynesianism.” This, on the eve of an era of astonishing prosperity, real GDP growth, and real wage growth that we now call the Golden Age of Capitalism (1945–1973), in which Keynesian policies of aggregate demand management were used not only in America, but also in virtually every other country to deliver high employment and strong economic growth.
We can gauge the success of economic policy in these years by average OECD real per capita GDP growth rate estimates:
1700–1820 – 0.2%Of all the periods, the era 1950–1973 – the era of classic Keynesianism – is the hands down winner.
1820–1913 – 1.2%
1919–1940 – 1.9%
1950–1973 – 4.9%
1973–1990 – 2.5%
(Davidson 1999: 22).
There was no “final failure” of Keynesianism in 1948 in America, and no “failure” at all. Keynesian fiscal policies are alive and well today, and for how Keynesianism was used in the Bretton Woods era in the US see my post here:
“Keynesianism in America in the 1940s and 1950s,” January 22, 2011.One wonders whether the readers of Mises.org appreciate the sheer embarrassing stupidity of this failed prediction of Mises.
BIBLIOGRAPHY
Davidson, P. 1999. “Global Employment and Open Economy Macroeconomics,” in J. Deprez and J. T. Harvey (eds), Foundations of International Economics: Post Keynesian Perspectives, Routledge, London and New York. 9–34.
Mises, L. von. “Stones into Bread: The Keynesian Miracle,” Mises Daily, July 14, 2005 (originally printed in Plain Talk, March 1948), http://mises.org/daily/1840
Your 1945-1973 period had the advantage of being the period when in essence the 1920s ended and the 1970s began. Compare music and film in 1945 with 1973 or household furnishings and fashion. It was a revolutionary period of incredible change. Of course, GDP would reflect that. Everything since has been mostly a consolidation of those massive changes. Cultural stagnation and decline to my eyes. Further, there was still a semblance of a gold standard back when which limited funny money dilution and there was much less consumer debt and welfare payments. And it all led to the economic stagnation of the 1970s.
ReplyDeleteI would agree that individual Austrian predictions often fail to account for how long real trends tend to take.
With all due respect, I think using those statistics is a little inappropriate.
ReplyDeleteFirstly, the first proto wave of globalization didn't really occur until 1870. Before that Great Britain and the United States were really the only two major players who were industrializing in the 1700s and first half of the 1800s (even then, mostly Great Britain). So most of the other nations brought down the average rate of growth because their governments hadn't allowed capitalism and also brought down the growth rates of the U.S and Britain due to the loss in free trade and capital formation that would have occurred if they had been vibrant free market economies.
Even during the first wave of globalization, 1870-1914, many countries were still protectionist in trade and restrictive of allowing growth in market economies. So the same effect as above still occurred, although to a lesser extent. The much lower living standards in certain European countries (Scandinavia, Southern Europe, Eastern Europe) at the time caused massive wage migration to wealthier countries with more opportunity (NA/SA). This first occurred now because many immigration restrictions were lifted and workers could move freely from one country to the next. As a result of massive immigration from poorer countries (because those countries were not as wealthy and as market oriented), Real GDP per capita grew slower in developed countries like the U.S because population was greatly increasing due to the influx of workers from noncapitalist countries
(Also, what GDP data do they use for those countries? Its hard to make accurate comparisons of post WWII data that has plenty of sources and those of the pre WWI era)
In the Post WWII era, growth exceptionally high and vigorous for Europe because it had to rebuild itself after the devastating effects of War. Save for the United States, most developed countries in the world had to rebuild their infrastructure and utilize a large backlog of existing technologies and resources. So combined with trade reductions (relative to the calamitous 30s), and high savings rates, growth was exceptionally vigorous in Europe. They grew faster than the U.S because the U.S didn’t have to rebuild its infrastructure and was already highly developed. Most of Europe, and any other parts of the World, were not nearly as developed and either had to rebuild or start out fresh. As they became more developed and couldn’t utilize existing technology from the U.S (they would have to innovate), growth slowed down. Many countries were allowed to grow because globalization was starting to occur on a wide scale, whereas before it hadn’t been.
Finally, part of the increase in growth rates in the GDP figures is due to government spending (whatever the amount, it is certainly bigger than what occurred during the 1700s/1800s). Unlike private spending, which is measured by how much other people pay for firm’s products, government spending is measured by how much the government spends. Private firms also survive based on profit and loss, which sends a signal to businesses about whether they are productively satisfying consumers and allocating resources. Government does not have such market tools and does not earn its revenue from selling products. Because it does not run on profit and loss, government spending is unproductive and one cannot use the total amount of government spending as a measure of productive contribution. Government spending is instead a burden on the economy, and a discount must be placed on it in order to compensate for this.
"Save for the United States, most developed countries in the world had to rebuild their infrastructure "
ReplyDeleteThat is false. Canada, Australia, and New Zealand never suffered serious damage.
"Because it does not run on profit and loss, government spending is unproductive and one cannot use the total amount of government spending as a measure of productive contribution. Government spending is instead a burden on the economy, and a discount must be placed on it in order to compensate for this."
ReplyDeleteFalse. Government spending on public infrastructure, health care, law and order, disease prevention has clear eocnomic and social benefits.
In terms of superpower status, Europe was smashed, Japan was smashed, China was smashed, Russia was smashed. Thats alot of developed/big player countries that went kaput.
ReplyDeleteI'll need to look up some figures, but those countries were nearly the same size as the some of the countries above. Or even the U.S
Yes, and people would certainly spend money on them if government wasn't. But firms that provide those services will run on profit and loss and voluntary contribution, while government does not. Thats the key problem.
ReplyDeleteWhat does "another failed prediction by Mises" mean? Where's the other failed predictions?
ReplyDeleteThis, on the eve of an era of astonishing prosperity, real GDP growth, and real wage growth that we now call the Golden Age of Capitalism (1945–1973), in which Keynesian policies of aggregate demand management were used not only in America, but also in virtually every other country to deliver high employment and strong economic growth.
The golden age of capitalism was the late 19th century, where the rate of real growth as measured by real GDP exceeded even the post WW2 period.
Keynesianism is not a long term sustainable system. To focus on only one time period, and ignore the time since the 1970s, when Keynesianism went into overdrive, is like saying taking "heroin has a golden age of a few hours", and then ignoring the time after.
Even if you define the post 1970s as non-Keynesian, then Mises was correct when he said Keynesianism would collapse. He was a long term thinker. Just because it collapsed 20 or so years later, doesn't mean his prediction was all that wrong.
If you want wrong, just look at the Keynesian predictions on what they said would happen if the government decreased spending and taxes after WW2 ended. They said another depression would happen. In 1946, spending and taxation fell, and the economy boomed.
Or how about the failed Keynesian predictions taking place right now and for the last half year? Virtually every Keynesian has been wrong about the economy. They are constantly proven wrong because they expect little to no growth, but don't understand that Bernanke's funny money is creating another false boom, which is causing the economy's statistics to be a mystery to them. Go on, just look at their predictions for the last half year. They have no clue what's going on. Austrians on the other hand, have predicted that Bernanke's funny money would engineer another false boom.
Keynesianism has made a resurgence because economists believe there is no other option after monetarism failed. You can dishonestly call the age of monetarism an age of free markets, but then real free market thinkers know the truth.
First of all, I am in general agreement about the positive trends reflected in postwar Keynesian policy regimes in the Western world. The statistics speak for themselves.
ReplyDeleteAll the same, I feel some reflection on the context is in order.
1) Given the frequency of international wars, civil wars, and general conflicts during the French Revolution, American Revolution, Napoleonic Wars, Crimean War, Prussian Wars, and so on - are we not seeing long periods during the 18th and 19th century in which wartime industrial production resulted in a negative civilian production along with recessions due to withdrawal of workers from wartime industries after wars. How does the relatively peaceful period of postwar America and Europe compare to any equally peaceful period in older times? At least for fair comparison.
2) During periods of imperialism, European powers bore expensive demands of holding on to their remote colonies. It was expensive to ship administrators, soldiers, lawyers, and teachers to the Third World, and it required infrastructure spending in regions where it was more difficult and more expensive to build functioning modern societies. Such colonisations were a large drain on European governmental treasuries, and hence were a negative product for domestic Europeans who paid more taxes to receive fewer domestic industrial privileges in return. 20th century post-imperialism would have relaxed this large burden on European economies. What about comparisons between non-imperial European economies then and non-imperial European economies afterwards?
Historical trends are a result of multiple factors, so I think there has to be some discounting for peacetime trends and decolonisation during the 20th century to analyse 20th century policy regimes.
"In terms of superpower status, Europe was smashed, Japan was smashed, China was smashed, Russia was smashed. "
ReplyDelete(1) The post war recontruction in these nations heavily affected by the war was over by 1952-1955. Yet their economic prosperity continued long after the recontruction ended.
(2) nations not damaged by the war also had unsurpassed real GDP growth, and real wage growth, productivity growth in these years.
(3) the "it-was-only-the-postwar-reconstruction!!" explantion is rubbish.
"The golden age of capitalism was the late 19th century, where the rate of real growth as measured by real GDP exceeded even the post WW2 period."
ReplyDeleteWhere is your data for that?
"If you want wrong, just look at the Keynesian predictions on what they said would happen if the government decreased spending and taxes after WW2 ended. They said another depression would happen. In 1946, spending and taxation fell, and the economy boomed."
ReplyDelete(1) And another techical depression did happen in 1945 hwere GDP fell by 12.5% between February and October:
“The decline in government spending at the end of World War II led to an enormous drop in gross domestic product making this technically a recession. This was the result of demobilization and the shift from a wartime to peacetime economy. The post-war years were unusual in a number of ways (unemployment was never high) and this era may be considered a ‘sui generis end-of-the-war recession’.”
http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
This was of ocurse an atypical downturn as the wartime command economy was dismantled, and resources were freed up for reconversion to a peacetime consumer economy.
(2) The question that Keynesians back then asked: would this conversion be followed by further long term depression or economic stagnation? Some got it wrong (e.g., Samuelson), others got it right (e.g., Keynes himself).
(3) In 1943 — the same year Samuelson got it wrong — Keynes was giving a lecture at the Federal Reserve and was asked by Abba Lerner about the possible economic problems of the post-war period:
“Keynes harshly rejected the risk of post-war stagnation, holding that because of Social security there would be a large reduction in private saving and so that would be no problem.”
D. C. Colander and H. Landreth (eds), The Coming of Keynesianism to America, E. Elgar, Cheltenham. 1996. p. 202.
http://socialdemocracy21stcentury.blogspot.com/2011/07/post-1945-boom-in-america.html
Your statement is dishonest rubbish.
What you would have said had you a shred of honesty was that Keynes was right in rejecting any post-war stagnation after conversion, and Samuelson was simply wrong.
"What does "another failed prediction by Mises" mean? Where's the other failed predictions"
ReplyDelete“In September 1931, Ursula Hicks (wife of John Hicks) was attending Mises’ seminar in Vienna when England suddenly announced it was going off the gold exchange standard. Mises predicted the British pound would be worthless within a week, which never happened. Thereafter, Mises always expressed deep skepticism about the ability of economists to forecast.” (Skousen 2009: 286, n. 2
Sensationally accurate prediction there by Mises. He was clearly a man of genius.
http://socialdemocracy21stcentury.blogspot.com/2011/06/keynes-on-end-of-gold-exchange-standard.html
"To focus on only one time period, and ignore the time since the 1970s, when Keynesianism went into overdrive"
ReplyDeleteYou are a (1) liar, (2) ignoramus, or (3) idiot.
Keynesian macroeconomic management was given up 1973-1979 as standard economic policy and in teh neoliberal era (1979-2008).
It was used sporadically in this era (e.g.,Reaganonomics afte 1982), not put into "overdrive".
Its serious resurgence has come 2008-2009/10, but even now is giving way to austerity in many nations.
Comments like these are why no one needs t0 take you seriously.
"Yes, and people would certainly spend money on them if government wasn't. But firms that provide those services will run on profit and loss and voluntary contribution, while government does not."
ReplyDeleteWhich requires that public works, health care spending etc. do provide utility or economic and social benefits, contrary to what was said previously.
You now just shifting the argument solely to "profit and loss".
A entity does not even need to runa profit to produce a thing that provides eocnomci and social value. Non-profit charities do this. In theory you might produce a commodity people desire sold at cost of production.
Lord Keynes,
ReplyDeleteMany of the countries that had exceptional growth rates (Germany, Austria) grew because their economies were so ravaged by the war and they had large amounts of idle resources that could be utilized for private use (idle due to war), and they could finally utilize the large technological backlogs since the 1920s. The countries in Europe that grew the fastest were the ones who had the most catching up to due. There is a reason why the U.S and Britain grew the slowest (Britain had other reasons as well). They were already at very high levels of GDP, whereas the other countries were at lower levels.
Think of China since the 1980s. Its growth rates have been exceptionally vigorous (much in part due to their high savings rate) but because they were vastly behind due to the repressive communist regimes. Part of the reason they have been able to grow vigorously is because they are able to import technologies from the Western World, shift a large portion of their labor force from agriculture, and start to utilize their untapped (since the 80s) amounts of resources they have been misallocated since the communist regime (this is not to say all growth in China is real or their economy is 100% healthy, but you get the point). Much like the countries in Europe post World War II!
Again, I have never denied that countries not affected by war destruction did not experience vigorous growth. They were able to do this because other countries that did experience growth were finally opening up trade and embracing capitalism, and all parties were able to sustainably benefit. All of the countries in the world grew exceptionally vigorous in the 50s and 60s because it was the first two decades in a while of free trade, encouragement of private enterprise (no depression,trade blockades, world wars, etc). Unlike in the 1800s, where only a few countries were industrialized and embraced market economies, causing the average growth rate to be lower (and the growth rates of the capitalist economies) .
No, I have not shifted the argument. It has always been a case of “Profit/Loss and Voluntary” versus “Taxation and NonVoluntary”. Profits send entrepreneurs a signal that their factors are underpriced and undercapitalized in relation to their true DMVPs, and they are shifting factors of production from industries where they have lower DMVPs (their costs before) to new lines of production where they have higher ones. Consumers are willing to spend more money in this line of production relative to the old one, and thus entrepreneurs are better allocating scarce resources to better satisfy the desires of consumers. Other entrepreneurs will enter in, bidding up the cost of the factors and lowering selling prices from the increased supply. Ceteris paribus, factors will be bid up to their DMVPs and the profits eliminated. Losses occur when entrepreneurs are taking resources that have higher DMVPs (higher costs) and putting them in lines of production that have lower DMVPs. Consumers are willing to spend less in the new line than the old line. Entrepreneurs have a very crucial signal that tells them if they are appropriately using resources. Government does not have that. They can’t know if they are allocating resources efficiently as what would have occurred without taxation because they do not run on profit and loss and voluntary contributions.
ReplyDeleteNon for profit organizations still have to run the market test. Non for profit just means they reinvest all of their earnings back into the company and don’t take any profits or extra income (I’ve worked at a YMCA). Producers that deliberately keep a line of production running even though it is earning monetary losses earns “psychic income” from it and acts as a consumer in the marketplace. Non for profits still must satisfy the demands of consumers in order to continue operations.
"Unlike in the 1800s, where only a few countries were industrialized and embraced market economies, causing the average growth rate to be lower"
ReplyDeleteThis is utterly absurd. The 1800s were the most laissez faire of any modern period. Particularly, the period c. 1848-1870s stands out. Trade and capital movement were far more free in these years. Governments were small. Regulation were minimal.
"All of the countries in the world grew exceptionally vigorous in the 50s and 60s because it was the first two decades in a while of free trade, encouragement of private enterprise"
The period 1945-1970s was marked by
- widespread capital controls
- extensive business and financial regulation
- high progressive tax rates
- nationalised industry
- many nations with protectionism, even though free trade was advancing
- highly interventionist monetary and fiscal policies
Far from being the laissez faire system you imagine, it was the most interventionist of any modern period.
"Government does not have that. They can’t know if they are allocating resources efficiently as what would have occurred without taxation because they do not run on profit and loss and voluntary contributions. "
ReplyDeleteThat is why the government limits itself to providing public goods.
I repeat: public works, health care spending, eductaion, public R&D, etc. do provide utility or economic and social benefits, contrary to what was said previously.
Lord Keynes : I wonder why are you wasting your time on this 'crank' school of thought & its pseudo-scientists.
ReplyDeleteStill, keep exposing them!
"This is utterly absurd. The 1800s were the most laissez faire of any modern period. Particularly, the period c. 1848-1870s stands out. Trade and capital movement were far more free in these years. Governments were small. Regulation were minimal."
ReplyDeleteFor some countries! Only a small portion of the world compared to the 1950s was globalizing.
For some protectionist measures of countries, see
"The European Grain Invasion, 1870-1913" (O'Rourke)
"Globalization, Labor Markets and Policy Backlash in the Past" (Williamson)
They talk about the protectionist measures some countries utilized and the immigration flows I was talking about earlier.
"The period 1945-1970s was marked by
- widespread capital controls
- extensive business and financial regulation
- high progressive tax rates
- nationalised industry
- many nations with protectionism, even though free trade was advancing
- highly interventionist monetary and fiscal policies
Far from being the laissez faire system you imagine, it was the most interventionist of any modern period. "
I never said it was a laissez faire system. All I said was that it was the first period where all countries were embracing globalization and free trade on a wide scale. Think of relative terms, in the 20s, 30s, and 40s most of the countries experienced poor growth, suffered from extreme government intervention (Fascism, etc), war destruction, etc. In the 50s and 60s, while some measures might be high by todays standards, they were certainly lower than what was before!
In Germany, marginal tax rates were 80% in 1948. By 1955, they were 55 percent.
In the U.S, the Kennedy administration enacted massive tax cuts.
After World War II, the Truman administration cut government spending by 2/3s and rescinded many new deal regulations.
The 1950s and 60s were very prosperous because they were relatively more free market than before, had high savings rates, utilized large technological backlogs, had to rebuild war economies, and the first wave of true worldwide globalization and market reform
"Your 1945-1973 period had the advantage of being the period when in essence the 1920s ended and the 1970s began. Compare music and film in 1945 with 1973 or household furnishings and fashion. It was a revolutionary period of incredible change. Of course, GDP would reflect that."
ReplyDeleteThe high and unprecedented real GDP growth and prosperity was due to ... it being a revolutionary period of incredible change in music and film??
Let us draw a discreet veil over this, and all move on, shall we.
"That is why the government limits itself to providing public goods.
ReplyDeleteI repeat: public works, health care spending, eductaion, public R&D, etc. do provide utility or economic and social benefits, contrary to what was said previously. "
"Public Goods" can also be provided by the marketplace. You are missing the point about profits and losses.
"All I said was that it was the first period where all countries were embracing globalization and free trade on a wide scale"
ReplyDeleteThat is pure, unadulterated rubbish.
There was a widespread movement to free trade in the 1850s and 1860s, long before this period.
Also, you say:
"all countries were embracing globalization and free trade on a wide scale"
All countries?? Really?? The whole Soviet/communist bloc was increasingly cut off from the capitalist world in these years, isolated by trade sanctions/embargoes and self-imposed economic nationalism.
"After World War II, the Truman administration cut government spending by 2/3s and rescinded many new deal regulations. "
ReplyDeleteOf course they cut spending: the bloody war ended.
Government spending in both absolute terms and as a percentage of GDP remained at a very high level relative to before 1930, and surged again from 1948 to 1953 (fell slightly from 1953–1954 as the Korean war ended), but remained between about 25% and 30% of GDP throughout the classic era of Keynesian economics (1945–1973), as can be seen here:
US Government Spending as Percent of GDP: 1903–2010.
http://www.usgovernmentspending.com/us_20th_century_chart.html
Yet the economy continued to boom despite the historically unprecedented levels of government spending in absolute terms and as a percentage of GDP.
"The 1950s and 60s were very prosperous because they were relatively more free market than before, had high savings rates, utilized large technological backlogs, had to rebuild war economies, and the first wave of true worldwide globalization and market reform "
ReplyDeleteThe "first wave of true worldwide globalization" idea is utter rubbish.
(1) trade and capital liberalisation occurred in the 19th century on a far more extensive basis.
(2) 1945-1970s had severe capital controls and tariffs in many nations. Yes, trade liberalisation proceeded a great deal, but, to take one important example, the newly industrializing economies in East Asia like Japan, South Korea, and Taiwan did so behind a wall of protectionism that lasted right up to the 1980s/1990s.
“That is pure, unadulterated rubbish.
ReplyDeleteThere was a widespread movement to free trade in the 1850s and 1860s, long before this period.”
Did you look at my papers I posted? Very little convergence before 1870. Also, widespread movement to free trade in the 1850s and 60s? What about the U.S during the Civil War?”
“Also, you say:
"all countries were embracing globalization and free trade on a wide scale"
All countries?? Really?? The whole Soviet/communist bloc was increasingly cut off from the capitalist world in these years, isolated by trade sanctions/embargoes and self-imposed economic nationalism.”
Oh please, Lord Keynes. You know what I’m “bloody” talking about. Stop the childish games.
"After World War II, the Truman administration cut government spending by 2/3s and rescinded many new deal regulations. "
“Of course they cut spending: the bloody war ended.
Government spending in both absolute terms and as a percentage of GDP remained at a very high level relative to before 1930, and surged again from 1948 to 1953 (fell slightly from 1953–1954 as the Korean war ended), but remained between about 25% and 30% of GDP throughout the classic era of Keynesian economics (1945–1973), as can be seen here:
US Government Spending as Percent of GDP: 1903–2010.
http://www.usgovernmentspending.com/us_20th_century_chart.html
Yet the economy continued to boom despite the historically unprecedented levels of government spending in absolute terms and as a percentage of GDP.”
Yes, but compared to the 30s and 40s? Very high. And taxes, regulations, and spending were relatively less. The lessening of restrictions in western countries acted as a massive stimulus. That’s the point I’m trying to make. Government spending as a percentage of GDP remained relatively constant (as you point out) over the 20 years, while it started to balloon afterwards. The figures would be even higher for the 90s and 00s if inflation was calculated like it used to be.
“"The 1950s and 60s were very prosperous because they were relatively more free market than before, had high savings rates, utilized large technological backlogs, had to rebuild war economies, and the first wave of true worldwide globalization and market reform "
The "first wave of true worldwide globalization" idea is utter rubbish.
(1) trade and capital liberalisation occurred in the 19th century on a far more extensive basis.”
Did you look at all my papers? There is a reason why there was mass immigration from poor parts of Europe and China to North America and South America.
And thanks for refuting all of my points.
“(2) 1945-1970s had severe capital controls and tariffs in many nations. Yes, trade liberalisation proceeded a great deal, but, to take one important example, the newly industrializing economies in East Asia like Japan, South Korea, and Taiwan did so behind a wall of protectionism that lasted right up to the 1980s/1990s.”
Yes, but they were trading with the rest of the world. Using your argument you might as well take out the U.S during the 1800s because they grew under high protective tariffs.
Lord Keynes, its hard for me to try and remain cordial having a discussion when you simply dismiss my ideas with quick snipes calling them "rubbish". I understand some posters here might irk you, but just because some people act poorly doesn't mean everyone should get the rod.
You cite 2 articles here:
ReplyDeleteKevin H. O'Rourke, "The European Grain Invasion, 1870-1913," Journal of Economic History 57.4 (1997): 775-801.
Jeffrey G. Williamson, "Globalization, Labor Markets and Policy Backlash in the Past," Journal of Economic Perspectives 12.4 (1998): 51-72.
They describe the well known turn to some protectionist measures from the 1870s in some nations. The "protectionism" of the 1870s-1890s still occurred in a context of a highly laissez faire world, with virtually unrestricted capital movements.
Moroever, as I said above, the move to freer trade had occurred earlier in the 1850s and 1860s in many nations.
"Very little convergence before 1870. Also, widespread movement to free trade in the 1850s and 60s? "
ReplyDeleteYes, there was, especially in Europe:
Bairoch, P. 1993. Economics and World History: Myths and Paradoxes, University of Chicago Press, Chicago. pp.22-24.
"Yes, but compared to the 30s and 40s? Very high.
ReplyDeleteWhat was very high? Government spending as a % of GDP?
And taxes, regulations, and spending were relatively less. The lessening of restrictions in western countries acted as a massive stimulus. That’s the point I’m trying to make.
Less than what? The period before the 1930s?
(1) you repeat nonsensical statements about the converison of wartime economy to peacetime economy in many nations.
In the US, the boom that followed the cutting of military spending on a massive scale and allowing the economy to return to its normal state, as pent up demand for housing and consumer goods was let loose, is entirely consistent with Keyensian economics:
http://socialdemocracy21stcentury.blogspot.com/2011/07/post-1945-boom-in-america.html
I have had this debate with libertarians before and your argumenst don't even rise to the level of drivel.
"Yes, but they were trading with the rest of the world. "
ReplyDeleteWell, duh.
(1) Keynesians don't advocate autarchy.
(2) Of course international trade and export led growth is beneficial.
(3) the international trade aspect was no doubt one aspect of the post war boom.
(4) (3) is in no way incompatible with the view that interventions involving Keynesian monetary and fiscal policies were a major factor in the post war boom too.
"Government spending as a percentage of GDP remained relatively constant (as you point out) over the 20 years, while it started to balloon afterwards. The figures would be even higher for the 90s and 00s if inflation was calculated like it used to be. "
ReplyDeleteThe major sources of the increases in government spending as % of GDP are:
(1) increased social and health spending to do with aging populations;
(2) the fact that by abandoning high employment MORE unemployed people - especially long term unemployed - have required increased support from the state by social security payments, driving up costs of these programs, precisely beacause there has been such higher levels of unemployment.
What the data is telling you is that the Keynesian era of high employment drove down social security/social spending costs, because many more people had employment and government social expenditures did not need to be so high.
The other factor is merely social demographics.
"> Yet the economy continued to boom
ReplyDelete> despite the historically unprecedented
> levels of government spending in absolute
> terms and as a percentage of GDP.”
Yes, but compared to the 30s and 40s?
(1) Yes, compared to the 1930s, government spending in absolute terms and as a percentage of GDP was much higher.
http://www.usgovernmentspending.com/us_20th_century_chart.html
(2) lower than the war, but the war years are not relevant, for resaons I have explained at @December 3, 2011 11:00 AM above.
Oh, and by the way:
ReplyDeleteIn the U.S, the Kennedy administration enacted massive tax cuts.
Cutting taxes while maintaining/increasing government spending is called fiscal stimulus/expanionary fiscal policy. In every year from 1961-1964, federal outlays increased, and in fact by 17% from 1961-63. The effect of Johnson's Revenue Act of 1964 (Pub.L. 88-272), and the federal budget spending increases in that fiscal year, were Keynesian fiscal stimulus. The Kennedy/Johnson tax cuts were classic Keynesian stimulus.
And the recession of 1960-1961 ended through classical automatic fiscal stablisers and increased spending.
For the Kennedy administration's Keynesian policies in 1961-1962, see
ReplyDeletehttp://books.google.com.au/books?id=GZmr_I34aKIC&pg=PA173&dq=kennedy+recession+1960-1961+keynesian+stimulus&hl=en&ei=v3naTu-vL-epiAeMg5H5DQ&sa=X&oi=book_result&ct=result&resnum=2&ved=0CDUQ6AEwAQ#v=onepage&q=kennedy%20recession%201960-1961%20keynesian%20stimulus&f=false
“You cite 2 articles here:
ReplyDeleteKevin H. O'Rourke, "The European Grain Invasion, 1870-1913," Journal of Economic History 57.4 (1997): 775-801.
Jeffrey G. Williamson, "Globalization, Labor Markets and Policy Backlash in the Past," Journal of Economic Perspectives 12.4 (1998): 51-72.
They describe the well known turn to some protectionist measures from the 1870s in some nations. The "protectionism" of the 1870s-1890s still occurred in a context of a highly laissez faire world, with virtually unrestricted capital movements.
Moroever, as I said above, the move to freer trade had occurred earlier in the 1850s and 1860s in many nations.
"Very little convergence before 1870. Also, widespread movement to free trade in the 1850s and 60s? "
Yes, there was, especially in Europe:
Bairoch, P. 1993. Economics and World History: Myths and Paradoxes, University of Chicago Press, Chicago. pp.22-24.””
1)Trade during this time period had several waves of protectionism going back and forth. Even your book describes this. Again, as I pointed out in my first reply to your discussion (which you didn’t really discuss), England and America were really the two countries from 1700 to 1850 who had embraced Industrialism. Germany started in the 1870s, but most of Europe was still very far behind because they had not embraced markets and free trade. That’s why large scale immigration occurred from all parts of Europe and Asia to North and South America (parts of South America were pretty wealthy at the time). A good amount of these countries had suffered drastically under WWI, had bad 20s, bad 30s, destroyed in the 40s, and after the war those countries were able to rapidly industrialize because they could utilize massive amounts of idle resources, backlogged technologies, industrialize to American mass production methods, and shift large portions of the labor force from agriculture to manufacturing. They also had high savings rates and extended periods of peacetime. Growth is obviously going to be higher in this period when large portions of the world are starting to globalize/industrialize and enjoy peaceful years of sustained growth for the first time. And the countries that experienced this type of growth were the ones who were put back in the first half of the twentieth century and earlier.
There is a reason why the U.S/Britain had growth rates much lower than Germany, Austria, France, Greece, Spain, Portugal etc. They were countries that suffered from a combination of poor growth in the 10s-40s, repressive governments, and wartime damage. This was their first serious push of industrialization, and it showed. The higher GDP per capita countries had before this period, the relatively slower growth rates they had. A similar comparison can be made with China since the late 70s.
Sources: The European Economy since 1945 and onward (Eichengreen)
ReplyDeleteTable 4.1Annual growth rate of output per worker and its determinants p.88
Figure 4.1 GDP per capita in 1950 p.91
“The 1950s is commonly seen as inaugurating an extraordinary quarter century of economic progress for Europe as a whole. It was possible for Europe to grow simply by repairing wartime damage and putting idle resources back to work. Output could be boosted by shifting labor from agriculture to industry, where its productivity was higher. Investment in the commercialization of American technology and the adoption of mass-production methods had an exceptional payoff. The impact of these favorable initial conditions was evident in the acceleration of growth virtually everywhere. Although the improvement in performance was not uniform, differences in response across European countries only underscore the importance of this same set of determinants, growth tending to be fastest where wartime disruptions were most extensive, where there was the most scope for shifting labor from agriculture and industry, and where there remained the largest gap in output and productivity relative to the technological leader.”
p.129
Figure 7.1 GDP Per Capita in 1960 p.203
“By the end of the 1960s, the special circumstances creating a social consensus that prioritized growth had receded…And by the end of the 1960s, the special conditions that had made ample supplies of labor available to the modern industrial sector—unemployed labor in European agriculture, the influx of refugees and repatriates from Europe’s East and from its oversales dependencies—were largely spent…sustaining growth increasingly required indigenous innovation, and it was not clear that the institutions developed to support technology transfer in the age of extensive growth….were well suited to the task. P.223
And Barry Eichengreen is hardly someone you can call an Austrian.
And from your book:
ReplyDelete“In practical terms, trade policy in the various European states in the 1815-1825 period can be described as an ocean of protectionism surrounding a few liberal islands” p18
“At the same time that Britain was becoming aware of its industrial lead and drew the logical conclusions from this by adopting free trade policy, the rest of Europe was becoming conscious of its industrial backwardness and was seeking a way of catching up in a new form of mercantilism more defensive than offensive—in short, what was to be called protectionism” p.21
“tariff reductions were made b y the majority of large European States. They were not, however, very important until 1860, and only weakened slightly the throughly protectionist character of the tariff laws of the major powers of Continental Europe. To summarize, it can be said that only a few small Continental countries, representing 4% of Europe’s population adopted a truly liberal free trade policy…and even these maintained some degree of protectionism” p.22
And then the pages that I can view on google books talks about how the U.S was protectionist, and free trade liberalization occurred on the continent during 1860 to 1870 but protectionism returned afterwards.
I am not trying to argue the 1950s/60s was more laissez faire than the late 1800s. After WWII growth was so strong in many countries of the many reasons I have listed above in all my posts.
“What was very high? Government spending as a % of GDP?”
ReplyDeleteCompared to the 40s, as a percentage of GDP, yes.
“Less than what? The period before the 1930s?”
Than the 30s and 40s. If the U.S deregulated, cut tax burdens and government spending to levels below what we have now but less relative the the 1800s, we would still experience genuine market growth. The freeing up of resources and decrease in restrictions will always benefit the economy, even if its in relative terms compared to before.
“(1) you repeat nonsensical statements about the converison of wartime economy to peacetime economy in many nations.”
See above.
“In the US, the boom that followed the cutting of military spending on a massive scale and allowing the economy to return to its normal state, as pent up demand for housing and consumer goods was let loose, is entirely consistent with Keyensian economics:
ReplyDeletehttp://socialdemocracy21stcentury.blogspot.com/2011/07/post-1945-boom-in-america.html”
“I have had this debate with libertarians before and your argumenst don't even rise to the level of drivel.”
I will absolutely refuse to engage in any type of intellectual discussion with you and if continue talking to me like this. It is simply not professional and is especially amusing when you call my writing drivel yet have a typo in that same sentence.
And from Out of Work: Unemployment in the Twenty First Century
“As indicated above, the true postwar picture may have been even more robust than the very modest decline already indicated for 1946, to the extent that government-produced output had a value less than that indicated by government expenditures on that output. Taking this factor into account, it is easy to derive estimates that show no GNP decline in 1946 and a major upsurge by 1947. Rather than a postwar depression, we entered a boom.” (p.160)
“There are two empirical problems with the “pent-up demand” explanation of the postwar reconversion: timing and magnitude…Whatever the merits of the pent-up demand argument, there was only a modest increase in consumption during the critical period of demobilization and reconversion, to be sure in part because of capacity constraints on consumer goods industries. “ p.164
“As the nation moved from a radically expansionary to contractionary fiscal policy in less than a year, and as the extraordinary monetary expansion slowed markedly, did the nation witness what the Keynesian paradigm suggested would happen, and what virtually all economists predicted? “ (1945-1947)
“The Quarterly data suggest that actual consumption rose above “normal” or predicted levels only in the second quarter of 1947, nearly a year after demobilization was essentially completed, a year after real GNP had started to rise, and 19 months into a postwar labor-market experience in which the unemployment rate had never exceeded 4.2 percent.” (both quotes p.166-167)
“Perhaps the most massive move toward a contractionary (in a Keynesian perspective) fiscal policy in the nation’s history helped to create conditions in capital and money markets that assisted in the transition. The postwar era was a classic case of “reverse crowding-out” p.171
“Whereas the anticapitalist innovations of the New Deal probably caused what was in real terms a decline in per capita national wealth in the 1929-1945 era, the modest but real retreat from interventionism along with a fall in the adjusted real wage and the associated rise in returns to capital led to a significant growth in wealth in the demobilization period.” P.171
“In short, rather than pent-up demand preventing a depression, the evidence supports a distinctly non-Keynesian interpretation: a downward adjustment in labor supply and real wages, accompanies by a less stimulative (nondeficit) fiscal policy, served to stimulate investment and consumption.” P.171
And the real “kicker”
“the adoption of the pent-up demand line of defense meant a theoretical retreat for Keynesians. Previously, the view had been that increases in aggregate demand could lead to almost infinite increases in total output (implying a positively slowed aggregate supply curve at all price levels). Implicitly, Keynesians were accepting the view that consumption spending during World War II had been “crowded out” by increases government spending, and that reduced government spending after 1945 led to a reversal of this process. Of course, proponents of the Keynesian perspective never pointed out this theoretical weakness” p.174
“What the data is telling you is that the Keynesian era of high employment drove down social security/social spending costs, because many more people had employment and government social expenditures did not need to be so high.”
ReplyDeleteDespite the fact that Congress had been generously increasing SS benefits throughout the 50s and 60s, and the problem started to surface in the 70s with more retired people.
Oh, and by the way:
In the U.S, the Kennedy administration enacted massive tax cuts.
“Cutting taxes while maintaining/increasing government spending is called fiscal stimulus/expanionary fiscal policy. In every year from 1961-1964, federal outlays increased, and in fact by 17% from 1961-63. The effect of Johnson's Revenue Act of 1964 (Pub.L. 88-272), and the federal budget spending increases in that fiscal year, were Keynesian fiscal stimulus. The Kennedy/Johnson tax cuts were classic Keynesian stimulus.
And the recession of 1960-1961 ended through classical automatic fiscal stablisers and increased spending. “
“the actual revenue impact of the tax cut was relatively small, amounting to a 5.4 percent decrease in federal taxes as a percent of GNP between 1963 and 1965. Based on statistical estimates of consumption functions, the maximum stimulus to consumption occurred in 1965 and amounted to an additional $1.3 billion of consumption spending. By itself, this could hardly be the basis for a powerful economic recovery. That the tax cut had a powerful fiscal stimulus from the aggregate-demand side seems especially doubtful when the overall nature of the federal budget is considered. In 1963 the federal government ran a $4.8 billion deficit in its budget. In 1964 the deficit was only $1.1 billion higher and in 1965 it fell to $1.4 billion. “p.201-202
"Taking this factor into account, it is easy to derive estimates that show no GNP decline in 1946 and a major upsurge by 1947. Rather than a postwar depression, we entered a boom.”"
ReplyDelete(1) Red herring. I never denied above that the eocnomy was expanind in 1946 or 1947
"As the nation moved from a radically expansionary to contractionary fiscal policy in less than a year, and as the extraordinary monetary expansion slowed markedly, did the nation witness what the Keynesian paradigm suggested would happen, and what virtually all economists predicted"
The cuts in war spending allowed the economy to covert back to a peacetime economy producing consumer goods from wasteful military spending. I ahve already addressed the "despression" or "stagnation" predictions above: Keynes never made any such prediction.
"Based on statistical estimates of consumption functions, the maximum stimulus to consumption occurred in 1965 and amounted to an additional $1.3 billion of consumption spending"
ReplyDelete(1) Jesus, it was acompanied by federal budget increases. Together these measures constitue fiscal stimulus.
(2) You have not disputed the Keynesian stimulis 1961-1962, which I assume you can;t refute.
Patch,
ReplyDelete> “Less than what? The period before the
>1930s?”
Than the 30s and 40s.
Compared to the 1930s, government spending after 1946 in absolute terms and as a percentage of GDP was much higher.
http://www.usgovernmentspending.com/us_20th_century_chart.html
Look at the chart.
You are a liar. Or a severely deluded.
"And Barry Eichengreen is hardly someone you can call an Austrian."
ReplyDeleteAnd Eichengreen's analysis of the factors that caused higher than averge European growth are not incompatible with Keynesian macro-management
Keynes, refer to my quote on the size of the federal deficits. Vedder and Galloway go into detail. I can post more quotes from them if you want.
ReplyDeleteThe point is that the boom from peacetime was not "pent up demand" in the Keynesian sense, but massive stimulus from government spending, regulations, and taxes. And most importantly, adjusted labor costs fell.
And, as above,
"“the adoption of the pent-up demand line of defense meant a theoretical retreat for Keynesians. Previously, the view had been that increases in aggregate demand could lead to almost infinite increases in total output (implying a positively slowed aggregate supply curve at all price levels). Implicitly, Keynesians were accepting the view that consumption spending during World War II had been “crowded out” by increases government spending, and that reduced government spending after 1945 led to a reversal of this process. Of course, proponents of the Keynesian perspective never pointed out this theoretical weakness” p.174 "
"
ReplyDeleteThan the 30s and 40s.
Compared to the 1930s, government spending after 1946 in absolute terms and as a percentage of GDP was much higher.
http://www.usgovernmentspending.com/us_20th_century_chart.html
Look at the chart.
You are a liar. Or a severely deluded. "
I was a little quick with my typing. The spending in the 30s is not technically correct. Although factoring out government spending in the Great Depression as productive to GDP would probably raise the federal spending as a percentage of GDP substantially (similiar to what I was saying in my first post)
"And Eichengreen's analysis of the factors that caused higher than averge European growth are not incompatible with Keynesian macro-management "
And he also agrees with my view...as evidence of my explanations and quotes.
Keynes, I enjoy your posts sometimes, but you can be very snippy and rude. Thats not the proper way to run a blog.
"I was a little quick with my typing. "
ReplyDeleteWhat does this mean?
Of course it is a veiled reference to the fcat that you are wrong.
And you don't even have the honesty to admit an error.
Instead we get this utter gibberish:
"The spending in the 30s is not technically correct. Although factoring out government spending in the Great Depression as productive to GDP would probably raise the federal spending as a percentage of GDP substantially"
"not technically correct"??
"Keynes, refer to my quote on the size of the federal deficits. Vedder and Galloway go into detail. I can post more quotes from them if you want. "
ReplyDeleteIn reference to what? The existence or size of a deficit in itself does not tell you whether fiscal stimuls is going on: for that you need to look at the overall effect of government spending and whether it adds to aggregate demand or not.
"That the tax cut had a powerful fiscal stimulus from the aggregate-demand side seems especially doubtful when the overall nature of the federal budget is considered. In 1963 the federal government ran a $4.8 billion deficit in its budget. In 1964 the deficit was only $1.1 billion higher and in 1965 it fell to $1.4 billion. “p.201-202 "
ReplyDelete(1) the Kennedy/Johnson tax cut and stimulus in 1964 was done when the economy was already boomng: the fall in the deficit in 1965 is precisely what you would expect!!
These statements demonstrate that your authors are, like you, grossly ignorant, even of basic Keynesian priciples. The size of the federal deficit in these years does not tell you by itself whether fiscal policy was stimulative. In gerneal, you need to look at
(1) discretionary spending increases and how this increases the deficit, as opposed to mere cyclical deficits
(2) effect of tax cuts
(3) to what extent federal stimulus was offset by state and local austerity (if any)
"What does this mean?
ReplyDeleteOf course it is a veiled reference to the fcat that you are wrong.
And you don't even have the honesty to admit an error."
With the statistics you presented, I was wrong. You are possibly the most immature blogger I have ever seen. You source with great expertise, but you sound like a child.
"Instead we get this utter gibberish:
"The spending in the 30s is not technically correct. Although factoring out government spending in the Great Depression as productive to GDP would probably raise the federal spending as a percentage of GDP substantially"
"not technically correct"?? "
With my logic, and my post above:
"Because it does not run on profit and loss, government spending is unproductive and one cannot use the total amount of government spending as a measure of productive contribution. Government spending is instead a burden on the economy, and a discount must be placed on it in order to compensate for this."
Government should not be counted as being productive to GDP since it does not run on profit and loss. A figure of GPP (Gross Private Product) should be used that accounts for government depredation on the economy. (Such as what Rothbard explained in MES and calculated a similar figure in AGD)
Taking Government spending/taxation (whichever is higher) out of GNP would give a more realistic estimate of private (productive) output. Then comparing government spending as a % of this would be higher for all periods. Then comparing the 50s and 60s (where much more of the GNP was private investment, compared to the 30s where government "contribution" was much more), I'm pretty sure that the ratios would be much closer or actually higher in the 30s.
“These statements demonstrate that your authors are, like you, grossly ignorant, even of basic Keynesian priciples. The size of the federal deficit in these years does not tell you by itself whether fiscal policy was stimulative. In gerneal, you need to look at
(1) discretionary spending increases and how this increases the deficit, as opposed to mere cyclical deficits
(2) effect of tax cuts
(3) to what extent federal stimulus was offset by state and local austerity (if any)”
From your article on 1937
1)“Catalán commits the red herring fallacy, and is laughably ignorant of basic Keynesian theory: to gauge the effects of fiscal policy in any particular year and to see whether it was expansionary or contractionary, one must look at
(1) the size of the deficit and whether there was increased spending done via deficits, not just the size of spending per se;””
Really? Something in this post tells me to look at the size of the deficit.
And from Vedder and Galloway
"Once more, the recovery seemed to be driven by labor-market adjustments, rather than by discretionary monetary or fiscal policy. On the fiscal-policy side, for example, Lewis estimates that discretionary budget expenditures totaled $800 million, between one- and two-tenths of one percent of Gross National Product (GNP)." p.196
2)I have looked at the effect of tax cuts. You dismiss what I wrote, however
3)Irrelevant for this period.
And since you seem so smug of yourself on recessions and Keynesian theory, I am wondering if you could answer this:
"“the adoption of the pent-up demand line of defense meant a theoretical retreat for Keynesians. Previously, the view had been that increases in aggregate demand could lead to almost infinite increases in total output (implying a positively slowed aggregate supply curve at all price levels). Implicitly, Keynesians were accepting the view that consumption spending during World War II had been “crowded out” by increases government spending, and that reduced government spending after 1945 led to a reversal of this process. Of course, proponents of the Keynesian perspective never pointed out this theoretical weakness” p.174 "
"“the adoption of the pent-up demand line of defense meant a theoretical retreat for Keynesians"
ReplyDeleteThere was no "theoretical retreat for Keynesians". This is just ridiculous.
"From your article on 1937"
Corect: neither increased spending per se nor deficits per se tell you whether fiscal policy is stimulative. You need to look at the factors I mentioned above. There is no contradiction.
""“the adoption of the pent-up demand line of defense meant a theoretical retreat for Keynesians"
ReplyDeleteThere was no "theoretical retreat for Keynesians". This is just ridiculous.
"From your article on 1937"
Corect: neither increased spending per se nor deficits per se tell you whether fiscal policy is stimulative. You need to look at the factors I mentioned above. There is no contradiction. "
You missed the point of both my quotes (especially the "pent-up demand" one)
It seems this discussion has run its course, especially with your creation of 3 more additional posts. There is nothing either of us can say to change the other person's arguments. The unbiased reader will have to analyze what both of us said and make up their minds.
I have confidence in the minds of unbiased readers :)
ReplyDeleteSincerely,
LK
"The golden age of capitalism was the late 19th century, where the rate of real growth as measured by real GDP exceeded even the post WW2 period."
ReplyDeleteWhere is your data for that?
"A Monetary History of the United States", Friedman and Schwartz, 1963.
From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2.
"David said...
ReplyDelete"The golden age of capitalism was the late 19th century, where the rate of real growth as measured by real GDP exceeded even the post WW2 period."
Where is your data for that?
"A Monetary History of the United States", Friedman and Schwartz, 1963.
From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2"
Thanks, David, I was unsure of whether or not it was sporting to bring what LK would consider to be a biased source, but since he brought one first, the statistics he used were from a post-keynesian book- I thought it would be appropriate. I tip my hat to you.
"An entity does not even need to runa profit to produce a thing that provides eocnomci and social value."
ReplyDeleteBingo!
I remember hearing Warren Buffet say one time that from an investors standpoint, the best thing that could have happened is for someone to shoot down the Wright brothers plane and burn the blueprints (something to that affect), because airlines have consistently lost money since their inception (as a whole), but could anyone seriously suggest that no economic value has been produced in the airplane and its commercial uses?
Nassim Taleb was quoted as saying as well that banking is a net loser of money over its history too. Its social value and economic benefit is much more questionable than airlines.
"A Monetary History of the United States", Friedman and Schwartz, 1963.
ReplyDeleteFrom 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2."
(1) Cite me the page number.
(2) If they are using the Kuznets-Kendrick series or Gallman-Kuznets-Kendrick series, then you are contemptibly igornant of the fact that this older data has been challeged by modern research in Balke and Gordon (1989) and Romer (1989).
(3) This is typical of libertarian cultists. Its just like the 1920-1921 "depression" idiocy (when modern research shows there was no "depression" at all); you don't look at modern research.
(4) Your claims are debunked here:
http://socialdemocracy21stcentury.blogspot.com/2011/12/us-real-gnp-estimates-18691879.html
(5) By Romer's (1989) estimates, average real GNP growth rate, 1870–1879 was just 2.06%.
Edward,
ReplyDelete"Thanks, David, I was unsure of whether or not it was sporting to bring what LK would consider to be a biased source, but since he brought one first, the statistics he used were from a post-keynesian book- I thought it would be appropriate."
Did you stop reading economic history in 1963?
http://socialdemocracy21stcentury.blogspot.com/2011/12/us-real-gnp-estimates-18691879.html
"From 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2"
ReplyDeleteYeah, I bet you just pulled this out of Rothbard, A History of Money and banking in the United States: The Colonial Era to world War II (2002), p. 154, blisfully unaware that these figures are no longer accepted by economic historians.
Score one up for the high standard of Austrian scholarship.
Yeah, I bet you just pulled this out of Rothbard, A History of Money and banking in the United States: The Colonial Era to world War II (2002), p. 154, blisfully unaware that these figures are no longer accepted by economic historians.
ReplyDeleteRomer and Balke do not represent "economic historians."
Score one up for the high standard of Austrian scholarship.
Romer and Balke do not represent the standard for economic scholarship.
"A Monetary History of the United States", Friedman and Schwartz, 1963.
ReplyDeleteFrom 1869 to 1879, the US economy grew at a rate of 6.8% for real GDP and 4.5% for real GDP per capita. That far exceeds the growth in real GDP post WW2."
(1) Cite me the page number.
Pg 39
(2) If they are using the Kuznets-Kendrick series or Gallman-Kuznets-Kendrick series, then you are contemptibly igornant of the fact that this older data has been challeged by modern research in Balke and Gordon (1989) and Romer (1989).
The fact that I referenced Friedman and Schwartz, that doesn't mean I am ignorant of every yahoo Keynesian who "challenges" the data.
Just because Romer and Balke challenged the data, that doesn't mean you can claim that they are right and Kuznets is wrong. You have to SHOW why Romer's and Balke's estimates are superior.
(3) This is typical of libertarian cultists. Its just like the 1920-1921 "depression" idiocy (when modern research shows there was no "depression" at all); you don't look at modern research.
This is typical of statist cultists. It's just like the 1920-1921 depression that neoclassical, monetarist, and Austrian economists all agree was a depression. It was just so short lived because the Fed and government did next to nothing.
(4) Your claims are debunked here:
That link doesn't DEBUNK anything. You haven't shown WHY Kuznetz' data should be rejected.
(5) By Romer's (1989) estimates, average real GNP growth rate, 1870–1879 was just 2.06%.
What is the basis for you claiming that Romer's estimates are superior?
"It's just like the 1920-1921 depression that neoclassical, monetarist, and Austrian economists all agree was a depression."
ReplyDeleteNo, they don't, idiot.