Docdave, Just like the alcoholic who, after achieving sobriety reverts to the same mindset/mental age when he first started using. Goverment drunk on itself.

Rob, it stems from a fundamental error in Keynes makes in his General Theory. Keynes screwed up the causation of production and consumption. Classical economists and later clear-thinkers saw that production necessarily precedes consumption and, moreover, consumption is the goal of production (not the other way around). Keynes believed exactly the opposite.

To make matters worse, Keynes also contradicted his own definition of savings in The General Theory. He began by defining Savings = Investment. Then he went on to claim that savings is not investment, because people can “hoard” money. Thus, he mistakenly called the increasing of a person’s demand for money (increasing cash holdings) “savings” and ignored that the implications of this effect, which is that prices would fall and total real income would remain the same. Instead, he said this “savings” is “leaked” out of the economy and we all become poorer (in defiance of the laws of physics btw). The moral of his story was (not surprisingly) “savings is bad”.

What I wonder is why anyone thinks it would be a good idea to stimulate consumption beyond demand.

Again, they labor under keynesian thought. They believe they can “increase aggregate demand” via stimulating consumption. While I believe this is possible – by encouraging capital consumption – it also obviously makes us poorer than we otherwise would be in the future. The “experts”, on the other hand, ignore the concept of capital consumption and instead believe that their plans will make society richer. To use an analogy, they believe that if you are in a bind, you should mortgage off the rest of your assets and go party with the resources you borrow – which would arguably make things feel a little better for the moment, but ignores the implications to your future.

If demand drops off for whatever reason (decreased financial resources in this instance) why create artificial demand with subsidy?

You’re right. If you get a bind where you are having trouble paying off your debt, households rationally (and prudently) cutback on their consumption in order to pay down their debt burden. But keynesians see this as “savings”, which “leaks” out of the economy (therefore “savings is bad”). They therefore advocate policies to go further into debt by consuming even more!

It is all a recipe for disaster. The only good news is that usually the government is so slow and incompetent at administering its chosen policies that economic recovery is possible in spite of the government’s efforts.

Also, once you see the gratuitous errors that it is based upon, the whole basis for a “stimulus” (i.e., government spending and redistribution of wealth to lower income consumers more likely to spend money on consumption) falls apart.

In fairness to Lord Keynes, however, much of what today is labeled Keynesian economics, even by those of us who know better, isn’t really a part of Keynes’ work, and is more a remnant (pun intended) of 1930s era liberal elitist sophistry.

The economic fallacies in Keynes’ work dates back even further than the 1930s. At any rate, you are correct that Hoover’s and FDR’s policies were essentially “Keynesian policies”… even though they were enacted before Keynes’ General Theory was published.

This fact gives credibility to the alternative explanation of the popularity of Keynes’ General Theory, which is that it was nothing more than a convenient academic justification for policies that the politicians already supported and were enacting anyway. In other words, politicians wanted activist government management of the economy and Keynes gave them an excuse to continue doing what they were already doing.

Bretn,

That was very nicely done! Kudos!!

I would only add that Keynes had a similar problem with his views on money, suggesting an inflexible implicit value, rather than the view that money is merely a medium of exchange and a measure of value, as detailed so succinctly by Milton Friedman.

In fairness to Lord Keynes, however, much of what today is labeled Keynesian economics, even by those of us who know better, isn’t really a part of Keynes’ work, and is more a remnant (pun intended) of 1930s era liberal elitist sophistry. Liberalism was more palatable when you had a Cambridge Don leading the parade. The fact that Keynes was at least bi-sexual only made him the more appealing to the Left.

Cutting taxes only helps those that still have their jobs but with greedy CEO’s cutting corners so they can afford that comode on legs and slashing jobs so they can continue to make millions there are quite a few people sans job at the moment. My state of michigan has a 10.8% unemployment rate, helping that 10% helps the economy as a whole. IT’s called a pour-up system as opposed to a trickle down sysgtem.

You see a trickle down system does exactly that it trickles down….slowly if at all. Where as if consumers have extra money to spend the money has to be used to pay employees to make the purchased items and pay the debts owed. It helps the cycle to start at the base and not at the tip of the financial pyramid.

Cutting taxes only helps those that still have their jobs

That’s not actually true.

Lower tax burden on businesses can mean lower prices and/or more investment in operations (thus more jobs).

Lower tax burden on individuals still making money means more money to spend. Which means more jobs.

Everything in the economy is connected. Your zero sum view of economics is rather ill-informed.

I blame the union-run public schools.

I wonder if it has to do with this notion of fixed values that proponents of Marxist theories seem to buy into. The idea that everything is always worth some value, and that value never changes, so consuming that value (no matter who consumes it and for what reason) will always add that value to the economy.

This is ridiculous because things only have value on an individual-by-individual basis. A designer wallet or purse may be worth thousands of dollars to some people in the world, but not to me. I would never pay that much money because to me they’re just purses and wallets regardless of who made them.

“Market value” is only an average of a given product/service’s value to a wide swath of individuals.

When the government subsidizes consumption it’s really just frivolous spending. It inflates value by creating artificial demand.