tag:blogger.com,1999:blog-6245381193993153721.post2017299254091231817..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Ricardian Equivalence is a MythLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-6245381193993153721.post-5002491668420604612011-09-08T06:50:47.744-07:002011-09-08T06:50:47.744-07:00I read the comments over at the ThinkMarkets artic...I read the comments over at the ThinkMarkets article, and I am a little confused; is Barro (and by extension O'Driscoll) saying that Keynesian policy recommendations (vis-a-vis government stimulus) boil down to "make tax-assessed transfer payments"?<br /><br />If that's accurate, then I've got to say: I am not a professional economist, and even I see a problem with that. Why don't they?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-49159938349245316802011-09-06T02:56:02.451-07:002011-09-06T02:56:02.451-07:00Say changed his mind in the panic of 1829. Here he...Say changed his mind in the panic of 1829. Here he is in 1832:<br /><br />'Business assets could not be sold at any price. As every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared among merchants and among bankers, who having placed more bills in circulation than their personal wealth could cover, could no longer find guarantees to cover their issues beyond the undertakings of individuals, many of whom had themselves become bankrupt...'<br /><br />http://delong.typepad.com/sdj/2011/04/hoisted-from-the-archives-macroeconomics-is-not-hard.htmlCahalnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-53942147332914188882011-09-06T02:44:27.080-07:002011-09-06T02:44:27.080-07:00http://delong.typepad.com/sdj/2010/06/is-macroecon...http://delong.typepad.com/sdj/2010/06/is-macroeconomics-hard.html<br /><br />DeLong wrote, "Yet Say changed his mind. By 1829, in his analysis of the British financial panic and recession of 1825-6, Jean-Baptiste Say was writing that there could indeed be such a thing as a general glut of commodities after all: "every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared..."<br /><br />The general glut, Say wrote in 1829, had been triggered by a panicked financial flight to quality which had led the Bank of England to shrink its liabilities:<br /><br />The Bank [of England], legally obliged to redeem its banknotes in specie... [t]o limit its losses... forced the return of its banknotes, and ceased to put new notes into circulation. It was then obliged to cease to discount commercial bills. Provincial banks were in consequence obliged to follow the same course, and commerce found itself deprived at a stroke of the advances on which it had counted, be it to create new businesses, or to give a lease of life to the old. As the bills that businessmen had discounted came to maturity, they were obliged to meet them, and finding no more advances from the bankers, each was forced to use up all the resources at his disposal. They sold goods for half what they had cost. Business assets could not be sold at any price. As every type of merchandise had sunk below its costs of production, a multitude of workers were without work. Many bankruptcies were declared among merchants and among bankers, who having placed more bills in circulation than their personal wealth could cover, could no longer find guarantees to cover their issues beyond the undertakings of individuals, many of whom had themselves become bankrupt..."Prateek Sanjaynoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-28011565790501782011-09-05T16:55:47.286-07:002011-09-05T16:55:47.286-07:00Cahal, could you, or LK, explain what you mean whe...Cahal, could you, or LK, explain what you mean when you say, "Say didn't believe Say's Law..." <br /><br />That would be interesting if true.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-35432659933342248902011-09-05T13:22:45.638-07:002011-09-05T13:22:45.638-07:00Probably worth quoting Ricardo himself on Ricardia...Probably worth quoting Ricardo himself on Ricardian Equivalence:<br /><br />'But the people who paid the taxes never so estimate them, and therefore do not manage their private affairs accordingly. We are too apt to think that the war is burdensome only in proportion to what we are at the moment called to pay for it in taxes, without reflecting on the probable duration of such taxes. It would be difficult to convince a man possessed of £20,000, or any other sum, that a perpetual payment of £50 per annum was equally burdensome with a single tax of £1000.'<br /><br />So Ricardo didn't believe Ricardian Equivalence and Say didn't believe Say's Law, yet we have people who believe both claiming they have the answers to our economic woes, and, worse still, being listened to.<br /><br />Sad.Cahalnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-28994966735564773092011-09-05T13:11:43.329-07:002011-09-05T13:11:43.329-07:00Also, even assuming rational expectations, taxes d...Also, even assuming rational expectations, taxes do not necessarily have to be raised to pay back debt in the future.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-79463383128457333472011-09-05T13:07:17.987-07:002011-09-05T13:07:17.987-07:00Even assuming rational expectations, couldn't ...Even assuming rational expectations, couldn't Ricardian equivalence also be wrong because it can be rational to invest rather than save that money in order to give a higher rate of return?Anonymousnoreply@blogger.com