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  #51  
Old 02-27-2019, 11:09 AM
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On 2/15/19 in the Andrew Yang thread

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Originally Posted by Chronos View Post
Ryan_Liam, he's a crackpot. If he weren't, he'd be running for the House instead of for the Presidency. The Presidency isn't an entry-level position.
On 2/26/19

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Originally Posted by Chronos View Post
That said, even if I were 100% gung-ho on UBI, I'd still support Sanders over Yang, because Sanders is actually running for President and Yang isn't. There's a chance that Sanders might decide to support UBI, and a larger chance that he'd take steps that move in that general direction, but there's no chance that Yang will run for President, at least this cycle, and no indications that he'll even start making moves in the direction of running for President.
The guy who is a crackpot for running for President is not making any moves in the direction of running for President 11 days later?

For anyone else, Andrew Yang has announced his candidacy for President in the 2020 race and is halfway to qualifying for the national Democratic debates.
  #52  
Old 02-27-2019, 11:17 AM
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If the disagreement is just over whether increasing spending is a good thing, then that's what you should have led with.
Did you read post #43? Did you notice the reference to saving and investment?
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Transferring wealth from the rich to the poor will increase total spending.
And will reduce investment by a corresponding amount. Therefore, the argument that UBI increases spending is either an assertion that spending is better than investment, or an argument against UBI. Which are you asserting?

Regards,
Shodan
  #53  
Old 02-27-2019, 11:25 AM
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In my understanding of economics, spending is generally better for the overall economy than investment (and spending generally leads to investment, while the reverse is less likely to be true), under the principle that businesses will have the motive to expand and hire more when they have more customers. But if businesses just have more money, without the expectation or fact of more customers, then they are less likely to expand and hire more.

Which makes sense common-sense-like, ISTM -- if I own a burger shop, and I'm about exactly meeting my customers' demand while making a decent profit, then I'm not likely to expand or further invest (i.e. hire more cooks and buy more grills) just because my taxes go down, because I have no expectation that the demand will be there to meet my increased supply. But if there are suddenly longer lines for my burgers, and I'm having trouble filling demand, then I'll be much more likely to hire more cooks and buy more grills to meet that increased demand... and having more customers gives me more money to spend on these things, just as having lower taxes would have.

Which makes me wonder why no one that I'm aware of has coined the term "demand side economics".

Last edited by iiandyiiii; 02-27-2019 at 11:26 AM.
  #54  
Old 02-27-2019, 11:27 AM
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The Job Creators are going to become sufficiently motivated any day now ...
  #55  
Old 02-27-2019, 12:32 PM
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Here's the problem: the population of people who can't work won't really be changed by policy. Either you are able to work or you aren't. But the population of people who won't work is very flexible.

There are a few people who could work but won't, and not much is going to change that. And there are a few people who get great satisfaction out of working and will do so regardless of whether they need the money.

But in between, lots of people won't work if they have enough money not to. A policy that gives a bunch of people who could work, who would do work useful work in the absence of that policy, an incentive not to do so is a really bad policy!
This is why I advocate for a UBI that is surviving with dignity, but not with comfort.

If you can sit in your tiny little room and stare at the walls, eat bland but nutritious and healthy food, and play or consume basic entertainment that is provided for free, and do nothing else, then sure, you aren't going to do much work, but you aren't going to cost much to keep alive either.

I think that most people would want to have at least some small luxuries and comforts, and be willing to work for them.
  #56  
Old 02-27-2019, 12:54 PM
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In my understanding of economics, spending is generally better for the overall economy than investment...
I think it is an over-simplification to say that spending is better for the economy, just as it is an over-simplification to say that investment is better.
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Which makes sense common-sense-like, ISTM -- if I own a burger shop, and I'm about exactly meeting my customers' demand while making a decent profit, then I'm not likely to expand or further invest (i.e. hire more cooks and buy more grills) just because my taxes go down, because I have no expectation that the demand will be there to meet my increased supply. But if there are suddenly longer lines for my burgers, and I'm having trouble filling demand, then I'll be much more likely to hire more cooks and buy more grills to meet that increased demand... and having more customers gives me more money to spend on these things, just as having lower taxes would have.
If you don't have the capital to invest, you can't serve more customers, so the increased demand doesn't help you.

In your hypothetical burger shop, I the owner am making a profit. I was going to spend some of the profit to live on, and invest some in expanding my business. Now the government takes away some of it. I still have to live, so I am not going to reduce the amount I live on. I just have less to expand the business, so I am less likely to expand, and therefore increased customers (assume everybody wants to spend their UBI in my restaurant) don't help me as much.

So I go to borrow the money to expand from someone else. Guess what - everybody is in the same boat, and there is less money to invest.

People invest when they expect to make money. But you have to have money to make money. That's why "UBI will increase spending" misses the point - it has to equally reduce investment.

Is investment always better than spending? Of course not. But you not only need more customers, you need to be able to serve those customers. And to serve more customers, you need to be able to invest. Maybe you turned away a dozen customers because you don't have seats for them. You don't make a lot off customers like that.

Regards,
Shodan
  #57  
Old 02-27-2019, 01:40 PM
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Originally Posted by Shodan View Post
I think it is an over-simplification to say that spending is better for the economy, just as it is an over-simplification to say that investment is better. If you don't have the capital to invest, you can't serve more customers, so the increased demand doesn't help you.

In your hypothetical burger shop, I the owner am making a profit. I was going to spend some of the profit to live on, and invest some in expanding my business.
But why are you planning to expand your business? ISTM that the only reason you'd do this is if there were more demand for your burgers -- i.e. more spending. Without more spending, there will be no investment.

IOW, I'm saying the spending has to come first -- spending can lead to investment by itself, but investment can't lead to spending by itself, all else being equal. With more demand, even if you can't borrow the money right now, you can change your strategy and save a bit more knowing that the demand will be there when you eventually save enough to by another grill and hire another cook.

But if there's money for investment, but no expectation of additional demand (i.e. more spending), you have no reason at all to invest.
  #58  
Old 02-27-2019, 01:55 PM
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Investing might be better for the individual, but spending is better for the economy as a whole.
  #59  
Old 02-27-2019, 02:06 PM
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Investing might be better for the individual, but spending is better for the economy as a whole.
Which economist has said spending is better for the economy?
  #60  
Old 02-27-2019, 02:08 PM
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Another way to think about it -- I can think of tons and tons of examples of slow economies in which there was plenty of money available to invest, but relatively little spending going on -- such as the recent slow economies in the US. 10 years ago, there were plenty of rich people with money they could have invested, but because there was a lot less spending going on, they held onto it (speaking generally).

On the other hand, I can't think of a single slow economy in which there was tons of spending going on, but little investment... can anyone else? If this is rare or unheard of, then that would seem to indicate to me that government policy should probably always favor spending, since historically the problem is always on the lack of spending activity, rather than the lack of investment activity side.

Last edited by iiandyiiii; 02-27-2019 at 02:09 PM.
  #61  
Old 02-27-2019, 02:08 PM
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Fella name o' Keynes. He's been proven right by experience, don'tcha know. This Laffer fella, not so much.
  #62  
Old 02-27-2019, 02:47 PM
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Fella name o' Keynes. He's been proven right by experience, don'tcha know. This Laffer fella, not so much.
Keynes never said anything approaching a blanket statement as silly as “spending is better for the economy than investment”. Cite please.

Last edited by WillFarnaby; 02-27-2019 at 02:48 PM.
  #63  
Old 02-27-2019, 02:51 PM
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Originally Posted by iiandyiiii View Post
Another way to think about it -- I can think of tons and tons of examples of slow economies in which there was plenty of money available to invest, but relatively little spending going on -- such as the recent slow economies in the US. 10 years ago, there were plenty of rich people with money they could have invested, but because there was a lot less spending going on, they held onto it (speaking generally).

On the other hand, I can't think of a single slow economy in which there was tons of spending going on, but little investment... can anyone else? If this is rare or unheard of, then that would seem to indicate to me that government policy should probably always favor spending, since historically the problem is always on the lack of spending activity, rather than the lack of investment activity side.
I’m just wondering if there is a real deal economist out there saying stuff like this.
  #64  
Old 02-27-2019, 02:58 PM
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On the other hand, I can't think of a single slow economy in which there was tons of spending going on, but little investment... can anyone else?
Did you ever hear about Weimar Germany? How about Greece, or Venezuela? Venezuela especially - lots of spending, based on the idea that the oil revenues would continue forever. Investing in diversifying their industries, not so much.

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Shodan
  #65  
Old 02-27-2019, 03:02 PM
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IOW, I'm saying the spending has to come first -- spending can lead to investment by itself, but investment can't lead to spending by itself, all else being equal. With more demand, even if you can't borrow the money right now, you can change your strategy and save a bit more knowing that the demand will be there when you eventually save enough to by another grill and hire another cook.
No. Say’s Law has not been overturned. Production precedes consumption.
  #66  
Old 02-27-2019, 03:02 PM
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Did you ever hear about Weimar Germany? How about Greece, or Venezuela? Venezuela especially - lots of spending, based on the idea that the oil revenues would continue forever. Investing in diversifying their industries, not so much.

Regards,
Shodan
IANAE, but it was my understanding that there wasn't actually that much consumer spending in those economies -- it was my understanding that people were really pinching pennies, because they knew times were tough, and they wanted to spend as little as possible beyond the necessities.
  #67  
Old 02-27-2019, 03:08 PM
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No. Say’s Law has not been overturned. Production precedes consumption.
From my reading, Wikipedia disagrees: https://en.wikipedia.org/wiki/Say%27s_law

Quote:
Today, most mainstream economists reject Say's law. Steven Kates, although a proponent of Say's Law, writes:

"Before the Keynesian Revolution, [the] denial of the validity of Say's Law placed an economist amongst the crackpots, people with no idea whatsoever about how an economy works. That the vast majority of the economics profession today would have been classified as crackpots in the 1930s and before is just how it is."

Keynesian economists, such as Paul Krugman, stress the role of money in negating Say's law: Money that is hoarded (held as cash or analogous financial instruments) is not spent on products. To increase monetary holdings, someone may sell products or labor without immediately spending the proceeds. This can be a general phenomenon: from time to time, in response to changing economic circumstances, households and businesses in aggregate seek to increase net savings and thus decrease net debt. To increase net savings requires earning more than is spent—contrary to Say's law, which postulates that supply (sales, earning income) equals demand (purchases, requiring spending). Keynesian economists argue that the failure of Say's law, through an increased demand for monetary holdings, can result in a general glut due to falling demand for goods and services.

Many economists today maintain that supply does not create its own demand, but instead, especially during recessions, demand creates its own supply. Paul Krugman writes:

"Not only doesn't supply create its own demand; experience since 2008 suggests, if anything, that the reverse is largely true -- specifically, that inadequate demand destroys supply. Economies with persistently weak demand seem to suffer large declines in potential as well as actual output."

Last edited by iiandyiiii; 02-27-2019 at 03:09 PM.
  #68  
Old 02-27-2019, 03:22 PM
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Originally Posted by iiandyiiii View Post
IANAE, but it was my understanding that there wasn't actually that much consumer spending in those economies -- it was my understanding that people were really pinching pennies, because they knew times were tough, and they wanted to spend as little as possible beyond the necessities.
Quite the contrary. In Germany they spent it as fast as they could, because inflation was so great the value of the money would decrease literally overnight.

In Greece, they spent the money they were supposed to use to revamp their economy on social programs instead, and in Venezuela, the government spent their oil revenues instead of investing in diversification of their economy. So all kinds of people spending all kinds of "free" money. With that much demand, their economies should have gone like gang-busters. Only they didn't.

Regards,
Shodan
  #69  
Old 02-27-2019, 03:22 PM
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From my reading, Wikipedia disagrees: https://en.wikipedia.org/wiki/Say%27s_law
So consumption can precede production? Of course I am talking about this much simpler interpretation of Say’s Law.

Keep in mind we aren’t talking about stimulus in downturns. The statement was that “spending is better for an economy than investment”.
  #70  
Old 02-27-2019, 04:42 PM
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Years back I asked a University of Chicago economist friend of mine this question, which does the economy want to encourage, spending or investment, given that one of more must mean less of the other.

His answer was that it was the wrong question.

We are (were even then) a globally intertwined set of economies. Not a static fixed pool. What mattered he said was how it impacted investment and spending from and to elsewhere. FWIW.
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Old 02-27-2019, 05:52 PM
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On the planet I come from, it's quite common for things to be sold before they're produced.
  #72  
Old 02-28-2019, 10:22 AM
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On the planet I come from, it's quite common for things to be sold before they're produced.
Vice versa is also common, as most new car buyers will know. Certainly Just In Time inventory is a thing, but so are end-of-model-year sales events.

Regards,
Shodan
  #73  
Old 03-01-2019, 01:32 PM
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On the planet I come from, it's quite common for things to be sold before they're produced.
That’s why I didn’t say production must precede sales.

Something that has been sold has not necessarily been consumed.
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