As I made clear in November 2011, it is evidence that the assumption has been falsified that James is requested to provide.
RL
----- Original Message -----
From: "[log in to unmask]" <[log in to unmask]>
To: [log in to unmask]
Sent: Tuesday, 19 November, 2013 5:47:10 AM
Subject: Re: [SHOE] Where are the ex-Austrians?
On 11/18/2013 1:27 AM, Robert Leeson wrote:
> "Keynes's multiplier argument is founded upon three fundamental assumptions that turn out to be false: (1) that savings are not spent but are a withdrawal from the expenditure stream ..."
>
> Since James also made this assertion in November 2011, perhaps he can now provide some evidence to support it.
>
> RL
It's incredible to me that someone writing on the History of Economic
Thought list wants "evidence" that Keynes considered saving not to be
spending by income earners but a withdrawal from the expenditure
stream! Incredible also because every introductory macroeconomics
students learns that meaning of saving. Anyhow, Robert can look up
Keynes's meaning of saving in the _Treatise_ (1930), volume 1, p. 172,
the _General Theory_ (1936), pp. 74 and 210; Keynes's _Economic Journal_
articles (December 1937) and (June 1938). (Joan Robinson, _EJ_, 1938
repeats Keynes's definition of saving to mean a withdrawal from the
expenditure stream.) Robert can also check these pieces of evidence, in
contrast with the classical explanation that savings are spent by
borrowers, that is, saving is not cash hoarding (Smith, Ricardo, and
J.S. Mill) in chapter 2 of _Keynes and the Classics Reconsidered_
(Kluwer, 1998), a volume to which he contributed a chapter (7).
James Ahiakpor
> ----- Original Message -----
> From: "James C.W. Ahiakpor" <[log in to unmask]>
> To: [log in to unmask]
> Sent: Monday, 18 November, 2013 5:27:45 AM
> Subject: Re: [SHOE] Where are the ex-Austrians?
>
> Steve Kates wrote:
>> I think there should be a Godwin's Law for Economics. Whoever brings
>> empirical results into a theoretical discussion automatically loses.
>>
>> It should not be thought that I stepped back very far when I agreed
>> that the failure of the stimulus is not obvious. It's obvious that
>> it's not obvious, since this will remain an open and never ending
>> debate for as long as economists exist.
>>
>> But so far as the economic policy side is concerned, there is no
>> waiting around for academic economists to decide which way is up. With
>> the sequestration in the US and other similar actions across the world
>> by those who are trying to manage their economies, this is a debate,
>> that for the time being anyway, is resolved. No country in the world,
>> with the possible exception of the US, would try to stimulate their
>> economies through additional levels of public spending. The recessions
>> are not over. Economic conditions are worse than in 2008. But
>> increases in public spending are off the table everywhere. If we can't
>> even agree on that, then what can anyone ever say that can be a
>> foundation for further discussion.
>>
>>
> I think for any law to be useful, there has to be a mechanism for its
> enforcement. That is why I despair at Steve's suggestion. Who will
> enforce Godwin's Law for Economics? I also think data or empirical
> results can be useful in a "theoretical" discussion. After all, aren't
> theories supposed to be evaluated with evidence to ascertain their
> reliability? I believe a more useful approach to dealing with
> "empirical results" used to affirm a certain belief system is rather to
> examine the nature of the data used to estimate the results as well as
> the methodology employed in constructing the functional form or
> estimating equation. On that basis, it is easy (for me, at least) to
> dismiss the meaningfulness of estimated government expenditure
> multipliers as a basis for belief in Keynesianism, particularly fiscal
> stimulus.
>
> Keynes's multiplier argument is founded upon three fundamental
> assumptions that turn out to be false: (1) that savings are not spent
> but are a withdrawal from the expenditure stream, (2) that government
> (and business) expenditures don't depend upon income or savings (even
> for a closed economy), and (3) that consumption spending takes a
> unidirectional form, like running a relay race -- A's consumption
> becomes B's income, then B's consumption becomes C's income, and so on.
> Now if one corrects assumption (1) to realize that savings fund business
> investments as well as government budget deficits, and (2) that
> government spending has to be financed by taxes (paid out of income) and
> there cannot be any measured consumption expenditures without any
> current production and sales--so-called "autonomous consumption" for the
> economy as a whole, then the expenditure multiplier has to be equal to
> infinity. But there is also nothing left to multiplier it by. That's
> why the government expenditure multiplier EFFECT is zero.
>
> No amount of fooling around with functional forms negates the above
> conclusion. There is thus no point, as far as I'm concerned, arguing
> with someone who insists on basing their belief in Keynesianism on
> estimated multipliers. I published the "mythology of the Keynesian
> multiplier" in the _American Journal of Economics and Sociology_ in 2001
> and I repeat the point in footnote 20, p. 87, of my modern Ricardian
> equivalence article in the _Journal of the History of Economic Thought_
> (March 2013). How else can I hope to persuade a non-repentant Keynesian
> (who also claims to be a historian of economic thought) of the folly of
> such belief? If one introduces central bank new money creation into the
> argument, then we would have an explosive multiplier effect on real
> income (output and employment) nowhere observed on earth! As Murray
> Rothbard once observed, regarding the silliness of the Keynesian
> multiplier argument, all government needs to do to create prosperity for
> ever is just to find just 1 dollar to spend.
>
> Indeed, I think such "studies" as publicized by Alesina without getting
> to the heart of the Keynesian mythology don't serve a very useful
> purpose. They are rather a distraction. Aggregate data are generated
> by a multitude of factors (or impulses, the favorite language of the
> econometric estimators). Without carefully identifying them and
> isolating their respective impacts on observed data, no estimation tells
> a useful story about the economy. This is what we learn from
> econometrics. And this is also why someone once wrote about the two
> things he wouldn't like to see in their preparation: sausages and
> econometric estimation, the latter because many unsavory things can be
> done to generate the end result!
>
> James Ahiakpor
>> On 17 November 2013 00:53, Alan G Isaac <[log in to unmask]
>> <mailto:[log in to unmask]>> wrote:
>>
>> On 11/16/2013 8:36 AM, Alan G Isaac quoted:
>>
>> "The range of the spending multiplier estimated using
>> these various approaches is from .4 to 1.5, with some
>> estimates even lower than .4 and some estimates larger
>> than 1.5. However, most fall in the .4 to 1.5 range."
>>
>>
>>
>> If I may offer just one more quote from some people who care about
>> the evidence.
>> Jordà, Òscar and Alan M. Taylor, 2013,
>> "The Time for Austerity: Estimating the Average Treatment Effect
>> of Fiscal Policy"
>> http://www.nber.org/papers/w19414
>>
>> "[W]e have a measure of the multiplier that
>> explicitly accounts for failures of identification
>> due to observable controls. Our estimates ...
>> suggest even larger impacts than the IMF study when
>> the state of the economy worsens. ... It appears
>> that Keynes was right after all."
>>
>> As Steve now allows, it is *not* obvious that the fiscal responses
>> to the Great Recession invalidate Keynesian claims about the
>> role of aggregate demand. Not in the least.
>>
>> Cheers,
>> Alan Isaac
>>
>>
>>
--
James C.W. Ahiakpor, Ph.D.
Professor
California State University, East Bay
Hayward, CA 94542
(510) 885-3137
(510) 885-7175 (Fax: Not Private)
|
