John, I have no idea what Gonzo and Trihs are talking about, but there is some level of aid to the lower economic levels that is beneficial for the economy as a whole, though not necessarily to any individual who is paying for it. I’m sure you agree that real economic improvement occurs when value is added to products and services, increasing the total value of the economy. All of the money delivered to those who have the least will be returned to the economy and increase demand. It is better than using legal shenanigans to transfer wealth to a few who do not increase the value of the economy, but only their share of it. Maintaining a level of demand across the broader part of the population is important for those who are actually increasing the value of the economy. I would prefer that we fund the hiring of people to work at productive jobs instead of just giving money to able people who don’t have any.
No, I’m pointing out that your argument is just a thinly veiled attempt to claim that the poor are worthless parasites.
Nonsense; you are claiming that it is bad for the economy for the poor to have money. Therefore, by that logic we should take more money away from people in order to boost the economy.
Well, I do agree with what you said in post #51. But the idea that you can, as a permanent economic policy, just give a bunch of people a bunch of money and that will automatically make the economy better is nonsense.
DT: I generally try not to respond to your posts, and the only reason I did so earlier was for the benefit of people reading this thread. I pointed out your error, and that’s as far as I’m going to take it. As for your imagining what I’m really trying to say about poor people… well, you’re just wrong.
Redistributing income is what the Repubs have done. They have knocked it way out of balance. The deleterious effects are very clear It should be rectified.
Putting money into the lower classes will help for social and political stability. It also is an economic engine. Money in the very top is not. How long do we have to do it before you rightys can see the damage the upward redistribution has done ? The cold fact is putting money at the top does not increase demand. Demand is what causes companies to hire.
While this thread has evolved into something that I can’t make any meaningful contributions to, I find it highly informative, and I’m very appreciative to everyone.
While there are obviously many things that people can’t agree upon… on what can we?
- Welfare should be a moral/ethical principle/decision put into place because of the moral/ethical values of society? It would seem most agree that the main purpose of welfare is not economic, but social.
2a) While clearly the economic benefits of welfare stir up quite a debate, we can agree that the money isn’t completely “lost”. Some of it returns in a postive way back into the economy. (I guess the debate is just how much of a positive effect it has…? Some clearly suggest that the net effect is actually negative.)
2b) In order to stimulate an economy, welfare isn’t the OPTIMAL solution. I get the sense that everyone agrees to this? Most would inject stimulating funds elsewhere - say to the industries/sectors that have the greatest potential for growth (ie not into the hands of the poor).
Industries have had huge tax cuts, they have gotten great property tax relief. How does that increase demand. What corporate boss is going to say, :we have a pile of money. We should hire a bunch of people and expand although we can’t sell what we will produce?
Giving more money to corporations like Governor Snyder and Walker did will not create jobs. Then the pricks want to raise tax on the poor to make up for the shortfall. It is borderline cruelty.
But if you give the money to an industry where there IS demand, then that industry will turn your subsidy into profit+taxes+jobs, no? If you give a company money, and they don’t invest that money, then you gave the money to the wrong company. I’m sure there are plenty of companies that would take the money, and hire new workers, or invest in machinery, etc, because their particular industry/market still has unmet demand. (Don’t ask me how to decide on who those companies are.)
Agreed
See point 1. Let’s not try to justify something that we do on social grounds by pretending that there is some net economic benefit.
No. I don’t want to “inject” stimulus anywhere. I want the market to determine what is productive and what is not. Take taxes out to support the government and whatever social safety net we as a society decide we need, but don’t pretend that we can manage economic development centrally.
Would this imply equal tax breaks for everyone? Both to individuals and companies?
It would all depend on which econ department I submitted it to. UM-St Louis, I doubt it would fly. UM-KC I would probably be offered a position. The profession is changing, and moving away from the neo-classical model, but that model has firmly entrenched itself in academia. There are various ideas on how to break that hold. PDF.
No that is how classroom exercises work. The application of science is based on multivariate analysis and tweaking all the variables in a system. If welfare was the only cause of inflation, it would the only variable worth looking at. But we know that it is not.
Plus economics is not a natural science on par with physics, but a sociological discipline. The best we can probably hope for is not a set of ‘laws’, but a description of various qualitative factors that are situation specific.
Efficiency may be a worthwhile goal for the production of a particular good with clear inputs and outputs. And prices will fall to the cost of production for commodities. Hermes scarves, not so much. And the economy as a whole has anything but clear inputs and outputs.
And the ‘magic’ of financial accounting is based on value judgments as well. Social accounting is just the recognition that more factors than pure finance play a role in the cost of goods, and that we can develop ways to incorporate those costs and determine what the real cost of a good is. If that leads to a more ‘communistic’ society, well, welcome to the real world, where the community does care about the total effects of production on the community. Private enterprise loves to act like all of its effects are completely private as well and only among voluntary players. That is living in a fantasy land.
While increased purchasing power per nominal dollar is nice, most people also want more of those dollars, not the majority of those dollars going to those that already have a surplus. Mass production relies on mass demand. If only those at the top have sufficient real disposable income, that is not enough to to support that production.
And yet, conservatives do not seem to have a problem with government controlled income inequality. The government plays a role no matter what, even if that role is to sit on the sidelines. The whole point of democratic government is that we want government to not sit there, but to create an arena where the entire demos can benefit, not just the plutocrats.
Of course the founding fathers did create a plutocracy (exactly who could vote in 1781?), but most of us have recognized that their vision was rather limited.
No change is necessary beyond educating mainstream economists and their followers on the what human behaviour really is, and not what out-dated and discredited philosophers hypothesized it was. 50+ years of research into real decision-making models and human and organizational behavior, and econ textbooks still use the bogus ideal of the ‘maximizing rational agent with perfect information’*. Of course that is the linchpin for the whole text. Throw that out, and the rest becomes close to useless.
Which, of course, is what heterodox economics are trying to do. The new text will likely not resemble a physics text which describes a ‘perfect’ model and its applications, but more of a cookbook with recipes that depend on what ‘ingredients’ are available.
And some of those recipes state how improvement in welfare can lead to beneficial economic and social gains.
AP
*At least one bank sees the problem with ‘homo economicus’ and is trying to develop a more realistic decision-making model.PDF.
[QUOTE=John Mace]
I’m at a bit of a loss as to how to respond to this, and I think the reason is that I don’t know what your goal is. Are you saying that these policies will be a “good economic strategy” as the OP is asking, or are you saying it will be good social policy? IOW, if we institute your policies, will GDP go up or down? If it goes down, then it’s not good economic policy. Whether or not it’s good social policy, that is another question entirely.
[/QUOTE]
I think I stated my aim clear enough: The purpose of economics is enable the production of sufficient resources and ensure their equitable distribution to allow as many as possible the opportunity to pursue a higher quality of life according to their personal utility. If that entails not reaching the highest GDP possible, so be it, but the GDP by itself is a poor indicator of the quality of the underlying economic system. It is a measure of income only. It provides no clue of what the balance sheet looks like and how that income is distributed (nor does GDP per capita - that only shows what a Gini of 0 would look like,) nor who controls the assets that generate that income. Stating that the GDP rising is good economic policy in and of itself is the kind of simplistic thinking that the neo-classical school and the Econ 101 textbooks generate. (Not accusing you of that, but stating the general case.) Economies are complex systems whose state cannot be defined by any one variable, including welfare levels.
A major mistake of the neo-classical school is trying to separate economics from society or politics. I found their assumptions for doing to so to be wanting, and never accepted them, and chose to study economists that do not make that distinction. It is a social goal which is accomplished through economic means. One of many tools a society uses to create the society it wants.
Most money recirculates through the economy and is never lost. And each circulation is the multiplier effect. The debate is over which groups have a greater effect - top down spending or bottom up spending. I am with the latter school, especially with foreign trade. Trade is beneficial, but only in tandem with a strong local economy. As much money spent locally before it goes abroad is usually better.
I agree with this. I would rather see drastically lower barriers of entry for small or micro businesses so that laborers or welfare recipients could earn higher income themselves, and I do support Keynesian stimulus and government collaboration with commercial firms. The trick is which sector that stimulus goes to and how open and transparent that collaboration is. (The SBA is a good example of decent practices.) The other trick is what form those commercial firms take - banker-controlled corporations: evil; worker-owned cooperatives, partnerships or mom & pops - not evil.
Not necessarily. What I’d prefer to see is the elimination of tax loopholes and getting away from using the tax system to as a form of social policy. Tax income, period, if that’s what we’re going to tax. No deductions. Tax capital gains by compensating for inflation, but that’s it.
I’m a strong believer that the primary, secondary, and tertiary purpose of the tax code should be to raise revenue, not to force behaviors on people. Set it as equitably as possible, and make sure as many people as possible have skin in the game.
AP: Thanks for clarifying. I disagree with your policy proposals, but that’s a debate for another thread.
But, we know from simple experiments that price increases lead to inflation, particularly to low-profit, low-value, commodity items. Anyway, 1) to tweak other variables at the same time wouldn’t make for a very good experiment (though, true, the type of experiments needed to be run would be very detrimental to an economy), even with the most advanced mathematical/statistical models; 2) do you want to really distort the market to favor low-value, commodity items? Think of the opportunity cost.
While I’m not going to debate if econ is a science, again ad nauseum, if this is your view of econ, then you should stick with policy analysis , political science, and moral argumentation. Don’t try to justify your reason with econ and try to call it objective.
You’re confusing commodity with value. People who make such arguments are appealing to emotion, often with jealousy as a basis. (Though, I will acknowledge that your posts do try to be objective).
If you were right, we would already be there. Financial accounting at least tries to be objective, and has inputs, self-governing bodies, as well as legislated rules and laws. Social accounting is none of these, and trends towards the ideal of making tree-huggers happy.
In other words, people are jealous.
Mass production requires demand, period. Do you care to identify mass demand, preferably that isn’t the same as regular old demand? Real income or not, people need things. That alone is sufficient to fuel demand.
While I agree with you here, and largely with John Mace that government should collect money in the most objective way to fund the most limited of services. Welfare should be straight income distribution. But, even delivering a model on somewhat seemingly simple objectives is fraught with problems. To account for the problems and to make the whole thing easy, will create winners and losers, tax loopholes and subsidization. The idea is to keep that to a minimum.
First, it’s late and I’m note opening any links. Second, and more importantly, if you think you know better than 140 or so odd years of economic knowledge, then it’s going to be very hard to take you seriously.
I will just address these two points since I need to run myself.
Social accounting has everyone of those. And the field is currently working to integrate social accounting with traditional accounting.
Please do not broadcast your ignorance. It does not help your arguments.
If you think that economics has been static for the last 140 odd years, and is not constantly being updated by new researchers or that the neo-classical model is not on the way out the door, I see no reason to take you seriously. You remind of the worst Newtonian physicists who refused to accept Einstein’s theories or quantum mechanics.
Thus I don’t see the need in addressing any other parts of your post.
While I certainly agree that it would be better to get people now on welfare into jobs where they would be productive, let’s consider the economic impact or eliminating welfare. Assuming that many welfare recipients would still not be able to get jobs, which in today’s economy seems very reasonable, and assuming that they won’t conveniently die, they would have to make their living through crime or begging. As San Francisco has found out, having an area overrun with beggars is not good for the economy. Clearly them getting $1,000 through crime is less economically efficient than getting $1,000 from the government.
We have friends who live in Venezuela, who have to hire someone to watch their apartment if they are going to be gone overnight - otherwise they will surely be robbed. Is that the kind of society you want? More to the point, is that economically efficient?
Welfare isn’t the best thing for the economy, but in the real world it is better than not having it.
I think you lost a little context by just quoting that post, but please note that I already said I agreed with post #51, above.
But in post #68 you seemed to be objecting to an economic justification of welfare, I understand your agreement with the social benefits.
No, I was arguing about the point that if you give the poor money, it will go back into the economy and make the economy better. That’s different than saying we’re paying then off so they don’t turn into thugs, or that we think it’s the right thing to do because we don’t want to live in a society where people are dying in the streets.
Since 1920 there has usually been more economic growth under Democrat presidents than Republican presidents.
http://www.singularity.com/charts/page99.html
From the administration of Lyndon Johnson to that of George W. Bush there has always been more job creation per year under Democrat presidents.
http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/
This is because during the 1920s and again since 1980 Republican economic policies have emphasized reducing the top tax rate, while Democrat policies have had the direct effect of benefiting those who are not rich. Rich people will not hire people unless people are buying. Otherwise they will put their tax savings in the bank, or splurge on luxury purchases.
Nevertheless, it is better to reduce economic inequality by raising the minimum wage, strengthening labor unions, and if necessary through government work projects than by making welfare benefits more generous and easier to qualify for. This is because welfare breeds idleness, and many welfare recipients use their leisure to supplement their welfare checks with the gains of criminal activities. There is much wisdom in the folk saying, “The Devil finds work for idle hands.”
Right. Like with the increases in Journals of Accounting and Finance calling for even more subjective views in a system struggling to keep objective order. Or, how about the increase in seminars continuing education credits in accounting? Right, none of these is happening. Social accounting is just a feel-good system so that corporations can appear to have morals.
Tell me when the institutions in the state of Kansas or Missouri receive any more accolades in for their work in economics. Leading economic thought is goes to using advanced statistical models to prove well-known established principles. As you said, text books haven’t changed. If anything, they may start presenting marginal points of view from statistical outliers. But, hey, dare to dream.