Keynesian/Malthusian Economics?

[Hermes]

Could anyone tell me the basic tenets of these? I see them referenced quite a bit here (derided is a more accurate term), and I've come across them in some of my reading, but I can't quite seem to grasp what they actually attempt to say. Malthusian thought seems to be an economic justification for the necessity of the poor, but I might be misreading it entirely.

I could probably look it up but I (hopefully for good reason!) trust you guys to give a more nuanced, intelligent view than might be found on, say, Wikipedia.

Sorry for the stupid question!

[Lynx]

Why on Earth would you join the two?
Keynesianism is a school of economics, once mainstream, now derided by the mainstream. It stresses government intervention and the importance of stimulating aggregate demand during economic downturns.

Malthusians are a breed of doomsayers whose predictions have repeatedly failed to come true. They are not economists.

[Hermes]

Why on Earth would you join the two?
Keynesianism is a school of economics, once mainstream, now derided by the mainstream. It stresses government intervention and the importance of stimulating aggregate demand during economic downturns.

Malthusians are a breed of doomsayers whose predictions have repeatedly failed to come true. They are not economists.

Ah, thanks! Again, my knowledge of them is pretty much nil. So it stressed government intervention in an attempt to overcome, or limit, the damages of the crises in capitalism?

Why is it derided now, and what was it replaced by?

[Workers-Control-Over-Prod]

the first thing that comes to mind when combining the two is Imperialist genocide. Keynesian economics is state subsidized capitalism and Malthus was a bourgeois who believed that a large portion of the "over"population will have to die. This is in fact bullshit, when one increases the living standard and human rights of people the reproduction rate levels off to what we see in Japan, Germany and most advanced capitalist countries. In fact, 20% of the world's population consume 80% of the world's resources, so population is not an issue but rather the economic system.

[Lynx]

Ah, thanks! Again, my knowledge of them is pretty much nil. So it stressed government intervention in an attempt to overcome, or limit, the damages of the crises in capitalism?
Yes, it would support spending on infrastructure, job creation, and allow deficits to rise.

Why is it derided now, and what was it replaced by?
It is derided by mainstream economists, who mistakenly believe in economic models that bear no relation to reality. They are known as neo-liberals or supply-siders. Keynesianism has been replaced by deregulation and austerity. The emphasis is on controlling inflation, deregulating markets, and dismantling the social safety net. They are obsessed with budget deficits and debt.

[JPSartre12]

Keynesianism is a school of economics, once mainstream, now derided by the mainstream. It stresses government intervention and the importance of stimulating aggregate demand during economic downturns.

This is correct, more or less. Keynesian economists cite the fact that something along the lines of 70% of all purchasing in the American economy is done by middle class consumers, and the remaining 30% is done mostly by the government and the corporations.

When there are recessions and depressions and the discretionary income for middle class consumers plumets, they loose their power to influence the markets. Keynesianism is based on an idea of "circulating money" - the economy does better when money, capital, etc are being transferred around and being used by different groups, people, etc. Because consumers suddenly have less purchasing power, and family and banks suddenly go into hoarding mode and don't spend money for fear of the volatile market, that circulation slows down.

The government is the second largest economic influence after consumers in the U.S., so it the burden falls on it to try to "prime the pump", as Keynesians put it, by direct economic stimulus to get money circulating again. The idea is that the stimulus gives the economy a jump-start and gets money flowing, moving around, being spent, etc. This is often done through deficit and fiat spending, though.

[Prof. Oblivion]

Keynesianism is a school of economics, once mainstream, now derided by the mainstream.

This is untrue. There is a significant Keynesian/neo-Keynesian section of economists.


Ah, thanks! Again, my knowledge of them is pretty much nil. So it stressed government intervention in an attempt to overcome, or limit, the damages of the crises in capitalism?

Why is it derided now, and what was it replaced by?In a nutshell, Keynes concluded that governments can lessen the extent of crises by "leveling" out the economy generally. His argument was to slow growth in times of economic expansion and to encourage growth in times of economic contraction. The former would require a contractionary fiscal policy, the latter an expansionary one, with the goal of either decreasing or increasing aggregate demand.

Keynes was remarkably correct in quite a few areas. His most significant contribution to post-war economics, IMO, is his anticipation of fiat currency and governmental monetary policy. While money backed by gold is tied directly to gold itself, fiat currency is floating. It is tied directly to GDP, though not in a literal sense as monetarists contend. This allows for government to enact monetary policy to intervene in the economy and accord for economic expansion that would be impossible using commodity-backed money. The collapse of Bretton Woods and the development of a fiat currency was simply necessary for capitalism to continue.

The way that the system is set up, this allowed governments to run national deficits to promote economic expansion. For example, the US government finances spending through the issuance of securities. These securities are paid as they mature, including interest, for the most part through the issuance of additional securities. Investors seek these securities for their reliability. It sounds unsustainable, but the reason that this is different than the view put forward by libertarians (and understood by many people) of government finances being similar to individual finances, is that the US national debt is backed by GDP. The issuance of securities is essentially an advance on future economic expansion through GDP and expanding aggregate demand. This is also why "printing money" can't cause inflation to any significant extent.

For a good explanation of the limits of Keynesianism I would recommend Paul Mattick's Marx and Keynes.

[cyu]

It's ironic that many "conservatives" claim to be against Keynesian economics, then turn around and implement his policies by using military spending to create jobs.

I'm no Keynesian though - at least in the sense that I don't believe a horse is the best way to get to Boston, nor do I believe Keynesianism is the best way to run an economy =]

[Prof. Oblivion]

It's ironic that many "conservatives" claim to be against Keynesian economics, then turn around and implement his policies by using military spending to create jobs.

Keynesianism isn't government spending, so this statement is not true. Keynesianism is an anti-cyclical policy that utilizes government spending to dampen the boom-bust cycle.

[Kotze]

His argument was to slow growth in times of economic expansion and to encourage growth in times of economic contractionThat's how Keynes is presented in mainstream media and school, but where did he every say anything like that? I do not mean the part with encouraging growth, but having a symmetric counterpart with discouraging too much growth to prevent the economy from "overheating". Using that term in the context of the economy is never explained, because it doesn't make any sense.


The preceding analysis may appear to be in conformity with the view of those who hold that over-investment is the characteristic of the boom, that the avoidance of this over-investment is the only possible remedy for the ensuing slump, and that, whilst for the reasons given above the slump cannot be prevented by a low rate of interest, nevertheless the boom can be avoided by a high rate of interest. There is, indeed, force in the argument that a high rate of interest is much more effective against a boom than a low rate of interest against a slump.

To infer these conclusions from the above would, however, misinterpret my analysis; and would, according to my way of thinking, involve serious error. For the term over-investment is ambiguous. It may refer to investments which are destined to disappoint the expectations which prompted them or for which there is no use in conditions of severe unemployment, or it may indicate a state of affairs where every kind of capital-goods is so abundant that there is no new investment which is expected, even in conditions of full employment, to earn in the course of its life more than its replacement cost. It is only the latter state of affairs which is one of over-investment, strictly speaking, in the sense that any further investment would be a sheer waste of resources. [Footnote: On certain assumptions, however, as to the distribution of the propensity to consume through time, investment which yielded a negative return might be advantageous in the sense that, for the community as a whole, it would maximise satisfaction.] Moreover, even if over-investment in this sense was a normal characteristic of the boom, the remedy would not lie in clapping on a high rate of interest which would probably deter some useful investments and might further diminish the propensity to consume, but in taking drastic steps, by redistributing incomes or otherwise, to stimulate the propensity to consume.

According to my analysis, however, it is only in the former sense that the boom can be said to be characterised by over-investment. The situation, which I am indicating as typical, is not one in which capital is so abundant that the community as a whole has no reasonable use for any more, but where investment is being made in conditions which are unstable and cannot endure, because it is prompted by expectations which are destined to disappointment.

It may, of course, be the case — indeed it is likely to be — that the illusions of the boom cause particular types of capital-assets to be produced in such excessive abundance that some part of the output is, on any criterion, a waste of resources; — which sometimes happens, we may add, even when there is no boom. It leads, that is to say, to misdirected investment. But over and above this it is an essential characteristic of the boom that investments which will in fact yield, say, 2 per cent. in conditions of full employment are made in the expectation of a yield of, say, 6 per cent., and are valued accordingly. When the disillusion comes, this expectation is replaced by a contrary “error of pessimism”, with the result that the investments, which would in fact yield 2 per cent. in conditions of full employment, are expected to yield less than nothing; and the resulting collapse of new investment then leads to a state of unemployment in which the investments, which would have yielded 2 per cent. in conditions of full employment, in fact yield less than nothing. We reach a condition where there is a shortage of houses, but where nevertheless no one can afford to live in the houses that there are.

Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! [Footnote: See below (p. 327) for some arguments which can be urged on the other side. For, if we are precluded from making large changes in our present methods, I should agree that to raise the rate of interest during a boom may be, in conceivable circumstances, the lesser evil.] For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.
(...)
It would be absurd to assert of the United States in 1929 the existence of over-investment in the strict sense.
(...)
In fact, the rate of interest was high enough to deter new investment except in those particular directions which were under the influence of speculative excitement and, therefore, in special danger of being over-exploited; and a rate of interest, high enough to overcome the speculative excitement, would have checked, at the same time, every kind of reasonable new investment. Thus an increase in the rate of interest, as a remedy for the state of affairs arising out of a prolonged period of abnormally heavy new investment, belongs to the species of remedy which cures the disease by killing the patient.

-The General Theory of Employment, Interest and Money (chapter 22) (http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch22.htm), emphasis mine, italics not.

[Lynx]

This is untrue. There is a significant Keynesian/neo-Keynesian section of economists.
What is significant is the extent to which their policy prescriptions are being ignored. They may as well be labelled heterodox until the current madness ends in collapse.

[Bakunin Knight]

The OP was on the right track in that both Keynes and Malthus argued that over-production (or over-saving) and the lack of effective demand were the cause of economic crises.