tag:blogger.com,1999:blog-6245381193993153721.post1916055999961939295..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Hayek’s Trade Cycle Theory, Equilibrium, Knowledge and ExpectationsLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6245381193993153721.post-86163649653612847982012-01-04T11:17:27.473-08:002012-01-04T11:17:27.473-08:00That is a pretty feeble comment, even from you.
(...That is a pretty feeble comment, even from you.<br /><br />(1) no flexibility of prices is required for government stimulus to work.<br /><br />(2) nor is perfect information required, since no one claims that government stimulus will result in a general equilibrium state.<br /><br />(3) <i>and in reality the government's ex ante expectations can be severely disappointed ex post</i><br /><br />They might or might not be - owing to deleveraging, savings, consumption patterns and so on. That is a matter for the empirical investigation when stimulus is done - there is any amount of evidence stimulus works: take South Korea, Norway, Sweden, Germany, Australia, New Zealand etc, over the 2008-2009 period.<br /><br />(4) uncertainty applies to non ergodic stochastic systems: a government intervention to stabilize AD can in fact overcome uncertainty experienced by private sector agents (consumers and capitalists).Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-40867128854259093452012-01-04T11:08:22.010-08:002012-01-04T11:08:22.010-08:00The statist’s assumptions go much further than the...The statist’s assumptions go much further than the idea of a starting equilibrium of government "stimulus". They also assume:<br /><br />(1) The flexibility of prices and perfect or near perfect adjustments in prices in response to government stimulus; and<br /><br />(2) frictionless "stimulus", and perfect price/market information on the part of government agents.<br /><br />None of these assumptions can be taken seriously: prices are not perfectly flexible, and in reality the government's ex ante expectations can be severely disappointed ex post, and Knightian uncertainty causes subjective expectations.<br /><br />Thus, the free market is justified in correcting government failure, and thus the free market process should apply to government when government fails.Christofnoreply@blogger.com