Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
I think you're mixing apples and oranges here. Claiming that the market will move towards a full employment equilibrium in the long run if left alone (which Keynesians think, they just also think that in the long run we're all dead), is not the same thing as saying that you'll get there quicker (via expansion) if you launch an austerity program.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Nov 2nd, 2011 at 03:11:49 PM EST
[ Parent ]
Yes, its only in the majority of mainstream approaches that you'll get there faster by "removing government distortions" in the marketplace ~ in the mildly dissenting New Keynesian approach, its necessarily to push the economy back close enough to the long run growth track first.

That does not, of course, mean that all of the economists that ascribe to the majority of the mainstream approaches would support all of the austerity programs in every details ~ but certainly if the austerity programs were replaced by their preferred policy, it would still be an austerity policy stance, even if different in the details.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Nov 2nd, 2011 at 10:20:19 PM EST
[ Parent ]
Claiming that the market will move towards a full employment equilibrium in the long run if left alone (which Keynesians think

Ahem.

There is no good reason to think that "the market," if left to its own devices, will ever trend towards a full employment equilibrium - or indeed any general equilibrium at all.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 05:02:13 AM EST
[ Parent ]
Oh, it will.* Through grinding deflation and nominal wage cuts. Eventually. But why wait?

* Unless it gets stuck in a non-full employment equilibrium.


Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Nov 3rd, 2011 at 09:14:23 AM EST
[ Parent ]
With "the market" here, I'm refering to the labour market. If you let the deregulated financial markets keep imposing shocks on the labour market, you'll likely to be in a constant state of flux and uncertainty, which is not good for investment.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 3rd, 2011 at 09:16:18 AM EST
[ Parent ]
In other words, if you enforce clearing in the money and product markets, you get clearing in the labour market.

Yes, that's Walras' Postulate. It also works the other way around: If you enforce clearing in the labour and goods market through a determined full-employment policy, then you make financial market clearing easier (because then all you have to do is prevent large discontinuities, and Walras' Postulate will take care of the rest).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Nov 3rd, 2011 at 12:05:38 PM EST
[ Parent ]
I rather meant that if you keep whacking the economy with constant shocks and (more or less political) crises, there will be no business confidence. And if you refuse to contracyclically stimulate the economy in the short term, and instead want the market forces to resolve the problem via wage deflation, you need the good graces of the confidence fairy. And the fairy hates instability and unpredictability.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Nov 3rd, 2011 at 05:25:59 PM EST
[ Parent ]
Total collapse to subsistence level agriculture and foraging could be a new equilibrium at a much lower level of population.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Nov 3rd, 2011 at 01:32:02 PM EST
[ Parent ]

Display:

Occasional Series