WMN: t3_3dvguq_t1_ct9e08x

[TITLE]

CMV: Keynesian economics is a thin cover for class warfare

[pjabrony]

This stemmed from a discussion I had on another sub about the Greek economic crisis, and what people are saying should have been done in terms of policy by the EU and the Greek government, which dovetails with what I heard should have been done by the US government in 2008-2010 in the worst part of the Great Recession. My understanding of Keynesian theory as applied to this kind of economic situation is that it prescribes the government to spend money by using public debt, getting that money to the worker and the spending class. This money, once spent, will require producers to produce more, meaning they need to hire more people, which will give those people more money to spend, creating a virtuous circle of economic growth. Once recession is over and growth is good, the theory then says that the government should raise revenue out of the booming economy by taxing the producers, the saving class, and the wealthy so as to pay down the debt that it acquired in the previous step. From that, I conclude that Keynesianism is always either for the working class, the spending class, and the generally poor; and/or against the capitalist, the saving class, and the generally rich. The activities of the former group are economically good and should be encouraged; the activities of the latter group are economically bad (albeit necessary) and should be discouraged, minimized to only what’s absolutely needed to support the activities of the former group. At this point, I see five possibilities: 1. Keynesian economics is pure class warfare. Keynes and his followers believe that the working class deserves more and the capitalist class deserves less, and developed a theory to fit that opinion. 2. Keynesian economics is *co-opted* by people with an agenda of pure class warfare. It’s perfectly valid under the theory to create the virtuous circle through government spending on Rolls-Royces and summer homes for the rich, and perfectly possible to pay down government debt by heavy taxes on working-class activities like buying groceries and holding personal debt. *How* we spend and tax isn’t the issue, just that we do. 3. I have an incomplete understanding of Keynesian theory. There can arise economic situations where alternative actions are recommended. For instance, once the economy is growing and the debt is paid, does Keynesianism say to reduce both taxes and spending so as to “shake up the system” and achieve new growth? Or any other situation where good economic policy is to increase inequality and use the natural human jealousy, envy, and fear to spur people to produce more? 4. I have an inaccurate understanding of Keynesian theory in general. 5. My understanding is accurate, but my logic is faulty. Right now my view is hovering between One and Two, but I’d really like to understand this theory better. _____ > *Hello, users of CMV! This is a footnote from your moderators. We'd just like to remind you of a couple of things. Firstly, please remember to* ***[read through our rules](http://www.reddit.com/r/changemyview/wiki/rules)***. *If you see a comment that has broken one, it is more effective to report it than downvote it. Speaking of which,* ***[downvotes don't change views](http://www.reddit.com/r/changemyview/wiki/guidelines#wiki_upvoting.2Fdownvoting)****! If you are thinking about submitting a CMV yourself, please have a look through our* ***[popular topics wiki](http://www.reddit.com/r/changemyview/wiki/populartopics)*** *first. Any questions or concerns? Feel free to* ***[message us](http://www.reddit.com/message/compose?to=/r/changemyview)***. *Happy CMVing!*

[looklistencreate]

Is number two just saying that people who want a certain policy will pick a theory that suggests that policy? Many Keynesians probably are there because they just want more public spending as part of an agenda. I don't think anyone would deny that. Nobody seriously believes that all Keynesian proponents are well-educated in economics and have chosen this theory based on growth data from the past hundred years.

[nutelle]

[STA-CITE]> I don't think anyone would deny that. [END-CITE]I would deny that. [STA-CITE]>Nobody seriously believes that all Keynesian proponents are well-educated in economics and have chosen this theory based on growth data from the past hundred years. [END-CITE]I don't think all supply-side proponents, or all monetarist proponents, or all Austrian proponents, are well-educated in economics either. Look. New Keynesianism is virtually established as fact in modern economics. The debate is no longer about whether or not New Keynesianism is accurate. It is. The debate is about whether it is sufficient to describe the world. That remains an open question, and the answer is probably 'no', which is why New Keynesian thought is being added to and modified all the time.

[looklistencreate]

[STA-CITE]>I would deny that. [END-CITE]You deny that there are many Keynesians who didn't pick their economic theory based on a full understanding of economics but rather policies they want implemented over a separate political agenda? Seems a bit naïve. [STA-CITE]>I don't think all supply-side proponents, or all monetarist proponents, or all Austrian proponents, are well-educated in economics either. [END-CITE]That's my point. Saying that it's been "co-opted by people with an agenda of pure class warfare" is the same as saying that it aligns with those people's interests. You're going to co-opt whatever ideology says you should do what you want to do. It only takes a few prominent class war proponents to put it in the public sphere, at which point it's officially co-opted. It's not hard to do, and it happens to every major economics movement. His point 2 isn't saying anything all that surprising or new, is what I'm saying.

[nutelle]

[STA-CITE]> Many Keynesians probably are there because they just want more public spending as part of an agenda. I don't think anyone would deny that. [END-CITE]That's what you said. I would deny that. Where is your evidence for this? Please, show me one source.

[looklistencreate]

What? There's always an alternative agenda for every major movement. Everyone's going to use the first theory that says they're right to try to prove what they already supported. With something as major as Keynesian economics it's definitely happened. You'd have to go out of your way to prove that *everyone* citing Keynesian theory got there through proper economics and aren't just choosing a theory they agreed with. The opposite claim is ridiculous.

[nutelle]

[STA-CITE]>You'd have to go out of your way to prove that everyone citing Keynesian theory got there through proper economics [END-CITE]No I wouldn't. You've (cleverly) constructed a straw man. Here's what you said: [STA-CITE]>Many Keynesians probably are there because they just want more public spending as part of an agenda [END-CITE]To disprove your statement, all I have to do is disprove that many Keynesians only subscribe to Keynesianism simply because they want more public spending. I don't have to prove that **all** do. Again, in your reply, you failed to address my original ask: [STA-CITE]>That's what you said. I would deny that. **Where is your evidence for this? Please, show me one source.** [END-CITE]I suspect you don't have a source, and just pulled a claim out of thin air that supports your preconceived notions about how people make decisions.

[looklistencreate]

[STA-CITE]>I don't have to prove that all do. [END-CITE]Yeah, I don't have to prove that **all** do either. But as long as there's a significant minority that does, my original claim is correct. So yes, you do have to prove that **all** Keynesian proponents got there the right way and don't just want more public spending, because if not then there are some people who *do* have that agenda, and if there is then my original statement is true. Disproving that many Keynesians are Keynesians because of this agenda is essentially the same thing proving that they all don't. If it's not all, there is a significant minority of Keynesians because of an agenda, otherwise known as "many." [STA-CITE]>I suspect you don't have a source, and just pulled a claim out of thin air that supports your preconceived notions about how people make decisions. [END-CITE]How the hell am I supposed to prove this? It's obvious, is what it is, to the point of not meaning much. My entire point here was that OP's point two was saying something so obviously true that it probably shouldn't be in a CMV post. It's not rocket science: for every popular theory that can be used to promote a political agenda, some people are believing it for the wrong reasons. Look, neither of us can prove why people believe what they believe. But refuting my claim is logically equivalent to saying "every proponent of Keynesian theory has no political agenda whatsoever motivating their decision to choose Keynesian economics." If that's not what you saw in my post, it's definitely what I intended to say.

[nutelle]

Again, you're very very cleverly constructing straw men arguments. [STA-CITE]>Yeah, I don't have to prove that all do either. But as long as there's a significant minority that does, my original claim is correct. [END-CITE]That's right. I never said that. You do have to prove that "many" Keynesians act as you claim they do. Does many = a significant minority? Nope. Here's what Miriam Webster defines "many" as. [STA-CITE]>Many- consisting of or amounting to a large but indefinite number [END-CITE]"Many" doesn't have to refer to a significant minority. It can refer to a small minority (provided that the number is numerically large enough) or it can refer to a majority. [STA-CITE]>So yes, you do have to prove that all Keynesian proponents got there the right way and don't just want more public spending, because if not then there are some people who do have that agenda, and if there is then my original statement is true [END-CITE]No. This is rather silly. I don't have to show anything of that sort, because I didn't say that "no one would deny that [my claim is true]" and I didn't make an affirmative claim in the first place. There's no reason to try to disprove your claim, because you haven't tried to prove your claim in the first place. [STA-CITE]>How the hell am I supposed to prove this? It's obvious, is what it is, to the point of not meaning much. [END-CITE][STA-CITE]>If that's not what you saw in my post, it's definitely what I intended to say. [END-CITE] Then that's what you should have said. What you actually said was quite different. You said that a numerically large number of Keynesian proponents only believe in the theory because it satisfies their agenda to increase public spending. Yet, you haven't provided a single piece of evidence to back that up. Here's an alternative theory for kicks, although I don't claim to support it. Proponents of New Keynesian economics are schooled in economic orthodoxy. Orthodox economics has New Keynesian assumptions at the base of many of its models. Proponents believe in New Keynesianism because it's true (meaning, accepted by the orthodox academic thought), not because it lies within their agenda. In fact, leftists have a variety of more appealing economic models, such as Marxism and the Labor Theory of Value. However, people don't refer to these models, not because they don't support their agenda (they do! and much better than Keynesianism) but because the LTOV is simply untrue.

[looklistencreate]

[STA-CITE]>"Many" doesn't have to refer to a significant minority. It can refer to a small minority (provided that the number is numerically large enough) or it can refer to a majority. [END-CITE]Doesn't this make it even easier to prove my original point? I thought you were only complaining because you thought I meant a majority, which I never did. [STA-CITE]>I don't have to show anything of that sort, because I didn't say that "no one would deny that [my claim is true]" and I didn't make an affirmative claim in the first place. [END-CITE]Just because it's phrased as an affirmative claim doesn't automatically put the burden of proof on me. As we've seen with our various definitions of "many", I've made it pretty hard to refute the fact that there are likely a large number of people who believe Keynesian theories because it fits their predetermined political agenda. To deny this claim would be to deny human nature itself. You use the theories that prove you right. If my statement is less probable than the alternative, that's evidence. I don't need a poll to prove what should be pretty clear given human nature and the number of Keynesians. [STA-CITE]>Then that's what you should have said. What you actually said was quite different. You said that a numerically large number of Keynesian proponents only believe in the theory because it satisfies their agenda to increase public spending. Yet, you haven't provided a single piece of evidence to back that up. [END-CITE]And, again, how the hell am I supposed to? You can't run psychological scans to determine motivations and nobody's going to admit to it. Your theory is just as baseless as mine, but at least mine has the probability of hedging the bets and only saying that some of these people are doing it for the agenda. I didn't even say how many, just "many", which is probable for many motivations given the number of Keynesian proponents around. It's statistically likely. [STA-CITE]>Proponents of New Keynesian economics are schooled in economic orthodoxy. Orthodox economics has New Keynesian assumptions at the base of many of its models. Proponents believe in New Keynesianism because it's true (meaning, accepted by the orthodox academic thought), not because it lies within their agenda. In fact, leftists have a variety of more appealing economic models, such as Marxism and the Labor Theory of Value. However, people don't refer to these models, not because they don't support their agenda (they do! and much better than Keynesianism) but because the LTOV is simply untrue. [END-CITE]This has nothing to do with my point whatsoever. My "many" can very well exist outside whatever group you're referring to with this statement. I suppose you think yours is more valid because it doesn't use that particular word. I have no idea what you're reading into what I said but "many" was never meant to be "most" or "all". It's closer to "some". Can we stop beating me over the head with my own vague language?

[JustDoItPeople]

[STA-CITE]>My understanding of Keynesian theory as applied to this kind of economic situation is that it prescribes the government to spend money by using public debt, getting that money to the worker and the spending class. This money, once spent, will require producers to produce more, meaning they need to hire more people, which will give those people more money to spend, creating a virtuous circle of economic growth. [END-CITE][STA-CITE]>Once recession is over and growth is good, the theory then says that the government should raise revenue out of the booming economy by taxing the producers, the saving class, and the wealthy so as to pay down the debt that it acquired in the previous step. [END-CITE]You've got a poor understanding of Keynesian normative theory then.

[jmsolerm]

[STA-CITE]> Keynesian economics is pure class warfare. Keynes and his followers believe that the working class deserves more and the capitalist class deserves less, and developed a theory to fit that opinion. [END-CITE]If you make an economic theory within feudalism, it benefits the feudal lords. No matter how much you help the peasants. You're just preventing uprisings. If you make a theory within a given economic system, you're **always** siding with the ruling class. A natural consequence of this is that no economic theory can ever be "politically neutral". Keynes merely acknowledges the self-destructing nature of capitalism and its grave consequences, then makes a series of proposals to soften the booms and busts inherent to the system. It's a "happily ever after" where the bourgeoisie wins, with just a few sacrifices to avoid things like the '29 crack and the following WWII, or even a full-blown Marxist revolution. Of course the bourgeoisie is not too good at making a few sacrifices when it can lobby for deregulation or just regulation that results in higher profit, and given the influence they have over supposedly democratic States, it can't last long.

[etown361]

I just want to point out that Keynesian economics calls for more government spending/less taxes in times of unemployment and recessions, and the opposite in times of growth and low unemployment. So in present circumstances, it may look to you like "class warfare", but if it were implemented 10 years ago, it would look the other way

[pensivegargoyle]

Number 2 is sort of, but not quite right in that the center-left did embrace Keynesianism after World War II (but so did the center-right for its own reasons), perceiving a working class interest in it but this was done as an attempt at finding a class compromise that would prevent a return to Depression conditions and politics rather than an advancing of class warfare. I think #4 is true too in that you aren't sure that Keynes was about sustaining capitalism rather than replacing it and you really need to have that clarified. Keynes was not a socialist of any kind and found the idea to be silly and dangerous. His work was as much a challenge to people who demanded a revolutionary replacement of the economic system as it was to people who thought that there was nothing much for government to do usefully other than protect property and enforce contracts.

[AuthorWannabe]

[STA-CITE]>From that, I conclude that Keynesianism is always either for the working class, the spending class, and the generally poor; and/or against the capitalist, the saving class, and the generally rich. [END-CITE]Most leftists have a tendency to view Keynesian economics as a left-centrist economic policy aimed toward distracting/appeasing the working class on behalf of the capitalist class. By advocating for the state to spend money toward the working class as a means for resolving a recession, Keynesian economic shifts the focus of the debate away from critically examining the cycle of capitalism toward issues of taxation, public spending, and the national debt. At it's best, the redistributionary policies of Keynesian economic simply prolong or lessen the magnitudes of these recessionary periods. To clarify, I am no expert on economics, and I don't feel qualified to debate the utility or success of Keynesian economics. However, "class warfare" is a powerful term used to describe the inherent conflict between the capitalist class and the proletariat, and while Keynesian economic may attempt to relatively improve the conditions of the working class, it does not seek to end the capitalist-worker relationship or the private ownership of the means of production.

[pjabrony]

Well, no, Keynesianism isn't socialism, any more than supply-side economics is capitalism. Actually, this post could have been about both of those schools. Both are, I assert, views within a mixed economy that seek to tilt the balance toward one class or the other; Keynesianism toward the poor and the workers, supply-side toward the rich and the investors.

[AuthorWannabe]

The idea of class conflict was developed by Marx and is central to all socialist schools of thought. If Keynesian economics are not socialist then how can they be a tool of "class warfare?" While Keynesian economics may seek to "tilt the balance" toward the workers, the ultimate question is which class do they serve? By lessening the severity of capitalistic recessions, and by spending public funds on the working class, Keynesian economics may seek to alleviate the plight of the proletariat, but only as a means of keeping the working class from questioning the capitalist system itself. In the end, Keynesian economics seeks to maintain our current system of production - it serves the capitalists, not the proletariat.

[pjabrony]

I think what Marx missed is that it's not only the proletarians who will revolt. They believe they have the right to a sustainable livelihood, but the producers believe they have a right to their profits. If the producers are angered, they'll "revolt," not by tearing down the system, but by buying it. Which, I would contend, it what has more or less happened.

[AuthorWannabe]

I think that we have different ideas of what constitutes a "revolution." Revolutions cannot occur within the system, they must remove the current system. The capitalist class cannot revolt. When they "buy out" the government, the system is functioning as intended. Regardless, I don't see how this changes my original point. Keynesian economics in no way advocates for abolishing the private ownership of the means of production. It simply perpetuates the current mode of production we are in.

[pjabrony]

[STA-CITE]> The capitalist class cannot revolt. When they "buy out" the government, the system is functioning as intended. [END-CITE]Not really. The capitalist system is supposed to have an independent referee that can't be bought by either the producers or the workers. That referee is supposed to only make a move in extreme cases, and in most cases say "laissez faire." When the government says that they're going to make a move either for the producers or for the workers, then it's no longer capitalist, and the system is removed. Or at least altered beyond recognition.

[AuthorWannabe]

Saying that the state acts as an independent "referee" in the capitalist mode of production is structurally and historically inaccurate. While perhaps in an idealized form of free market exchange the state would act as a third party, in the modern capitalist mode of production capitalism and the state are symbiotic of one another. Capitalism depends on the state's monopoly on violence to maintain private control of the means of production. For example if a group of workers were to attempt to repossess a factory, the police would be called in to stop them. Shifts between different economic policies are not the result of competition between the rich and the working class, but rather between different groups of powerful political investors with different economic interests.

[SocialistMath]

Marx analyzed the class conflict that was already there, he didn't invent it. He may have been (one of) the first to really point their fingers at it in an eloquent way, though. A large point of socialist thought is that *the rich* wage permanent class warfare against the working class, and it is time for the working class to fight back. Finally, I feel that Keynesian economics isn't necessarily specific to capitalism. It would also be applicable to market socialism.

[RustyRook]

[STA-CITE]> From that, I conclude that Keynesianism is always either for the working class, the spending class, and the generally poor; and/or against the capitalist, the saving class, and the generally rich. The activities of the former group are economically good and should be encouraged; the activities of the latter group are economically bad (albeit necessary) and should be discouraged, minimized to only what’s absolutely needed to support the activities of the former group. [END-CITE]It's a little more complicated than that. You are partly-correct, but missing some key information. Keynesian economics is highly focused on unemployment, and during a recession unemployment does hit the working class very severely. Due to job loss, demand for goods and services declines and the profits of the "capitalist" manufacturers decline as well. Fiscal policy treats both as *vital* - it really isn't the case that one is more important than the other. Those who say so are talking politics. In economics, both supply and demand are essential. And Keynesian economics addresses this very directly. I should add that every sensible economist would recommend a mix of Keynesian and monetarist policies. The battle b/w them is politics. I suppose I'm talking of points 2. and 4.

[pjabrony]

[STA-CITE]> Keynesian economics is highly focused on unemployment, and during a recession unemployment does hit the working class very severely [END-CITE]Interesting. I found this page: http://www.econlib.org/library/Enc/KeynesianEconomics.html which says that the reason for being focused on unemployment is "sticky wages." Also that inflation is less of a problem than unemployment. Which I think still goes back to point 1, but with some support. Basically, if I'm reading it right, it's saying that changing an unemployed person to employed will "fix" inflation faster than adopting anti-inflation policies will employ that person. Which is a point of efficiency, but not effectiveness. We could still work on inflation by favoring the investor class, and increase aggregate demand, it would just take longer.

[ThisIsNoodles]

Just some info that you might find interesting about "stickiness." Economic "stickiness" is a pivotal part of Keynsian stimulus because it allows the government to lower interest rates by increasing the money supply. Where classical theory suggests that more dollars means inflation, Keynsian theory says that prices remain static in the short run. Because it takes time for the price level to rise, an influx of dollars into an economy increases the supply of funds to be lent out. This lowers the effective cost of borrowing, interest rates. Low rates incentivize people to spend today because they don't stand to gain as much from waiting for their deposits earn interest. Modern Keynsian economics is often focused on using monetary policy to correct for declines in demand during recessions, etc.

[RustyRook]

[STA-CITE]> Basically, if I'm reading it right, it's saying that changing an unemployed person to employed will "fix" inflation faster than adopting anti-inflation policies will employ that person [END-CITE]That's a good way of looking at it, though inflation isn't always what needs to be fixed urgently. Monetary policies are good, but less predictable in their outcomes as fiscal policy. And yes, monetary policies are often slower at stabilizing economies. Keynesian policies have been effective much quicker. As I said, most sensible people advocate the use of both. It's unfortunate that these policies are talked of in terms of "deserve" this or that. Economic policy is meant to reduce economic suffering across the board and enrich society as a whole. For a poor person who gets laid off during a recession, the effect is felt by the person's entire family, and social mobility is reduced as well. It does not hurt the richer classes as much. Now whether it's unfair that the policy is designed and meant to reduce the harm felt by those who are hurt more is for you to decide. But where you stand may speak volumes about how you perceive the situation.

[pjabrony]

∆ I think this is the most complete explanation. The best position for me to adopt is that stimulus is sometimes necessary, but because of my own values, I should champion doing it for the people I think deserve it most, and then taxing those I think deserve that most to pay for it.

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[RustyRook]

Thank you. That page you linked to is the same organization that produces the Econtalk podcast. Very good podcast; give it a listen. The recent matching markets episode was very good.

[KexanR]

They're good resources but be aware that both the website Econlib and the podcast Econtalk are run by economists from a very libertarian school of thought. They do not represent the perspective of economics as a whole. Russ Roberts tries hard to be as objective as he can and not let his biases affect his hosting but it's always there in the background and affects everything from the topics chosen to the directions the conversations will go.

[RustyRook]

You're right, and I'm aware of Russ's biases. He still does a good job, in my opinion, of conducting interviews that discuss very varied topics. It's still one of the most interesting podcasts that discuss economic issues. Thanks for the heads up.

[nutelle]

[STA-CITE]>because of my own values, I should champion doing it for the people I think deserve it most, and then taxing those I think deserve that most to pay for it. [END-CITE]I really hope that's not what you end up taking away. A welfare-maximizing Neo-Keynesian would probably advocate for the policies that had the greatest fiscal multipliers. Simply, that's the most efficient way to get the economy going again. SNAP may have a larger multiplier than tax cuts, or tax cuts may have a larger multiplier than SNAP, but the first dollar you want to spend is on what gets you the more bang for your buck. See this article from China, which finds that stimulus spending in certain sectors is actually a 'free lunch' meaning that it generates enough economic activity to pay for itself and more. https://research.stlouisfed.org/wp/2013/2013-013.pdf In this case, it would actually be inefficient to target a group for stimulus based on your moral values of who is 'deserving' instead of a group whose spending has a demonstrated higher fiscal multiplier.

[pjabrony]

[STA-CITE]> In this case, it would actually be inefficient to target a group for stimulus based on your moral values of who is 'deserving' instead of a group whose spending has a demonstrated higher fiscal multiplier. [END-CITE]Sure, but just knowing the most efficient way to grow an economy doesn't mean it's the most ethical way to do so. Saying that I'm OK with slower growth if it means being just and good is a perfectly legitimate position.

[usrname42]

Here is a quote from Keynes talking about communism in Russia: [STA-CITE]> How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeois and the intelligentsia who, with whatever faults, are the quality in life and surely carry the seeds of all human advancement?  [END-CITE]Those are not the words of a class warrior who hates the rich. Also, stimulus can come in the form of spending increases or tax cuts, and conversely debt can be cut by cutting spending as well as increasing taxes. It's simply that spending increases may be more effective stimulus than tax cuts (since some of the tax cut may be saved, but all of the increase in government spending will be spent).

[pjabrony]

So you're saying that my #2 above is the most likely case? That Keynesian stimulus could go to the rich and paybacks on debt could be taken from the poor?

[Tony_M_Cannoli]

WW2 is the most successful example of Keynesian economics at work. And I'd say that big expenditure was more about protecting the world than class warfare (even though poor people did get jobs out of it). Keynesian economics is just a tool - not a political theory. It can be used in a variety of different ways. I personally think the word "class warfare" itself is biased against the idea of wealth redistribution (need it always come out of anger), putting this discussion in loaded terms to begin with.

[aguafiestas]

Keynesian economics, at its simplest, boils down to the idea that total demand for goods is the key driver of the economy, and that shifts in demand drive recessions and booms. The prescription Keynes advocated was to level out demand via changes in government spending (if demand drops, government makes up for it) in order to stabilize the economy in the long run. In particular, the government should mitigate the effects of decreased demand that occur during recessions but increasing public spending. The idea is to avoid recessions, which shrink the economy and hurt both the rich and the poor. Recessions cause layoffs, but they also cause businesses to fail and stock values to go down. Increased public spending during periods of decreased demand would help keep the working class employed, but it would also help keep businesses alive and the economy growing in general.

[jetpacksforall]

One possibility you're missing: capital tends to accumulate faster than other types of income, and this accumulation tends to destabilize economies, making business cycles far worse. Therefore Keynesian economic policy is designed to offset an inherently negative feature of free market capitalist economies. Why does accumulated capital make business cycle booms and busts worse? It's fairly straightforward if you think about it. If a relatively small number of people own the vast majority of the capital in a society -- and *if* that capital is in liquid form (stocks, easily tradeable commodities, cash, etc.) -- then they tend to run out of new investments. While economic growth is good, from their POV at least, there seem to be fewer and fewer opportunities to invest their capital for large returns. Therefore this entire class of people tends to invest in fewer and fewer types of investment or security. This produces what is called an "asset bubble," where a large group of investors flocks to a single commodity or group of commodities that cannot possibly in the long run sustain the growth it sees in the short run simply because of all the people jumping on the bandwagon. If everyone's buying into real estate mortgage CDOs, they show phenomenal growth for a relatively short period simply because the demand is artificially high. When a few people have all the money, there's a strong tendency for them to focus on an asset bubble like this. As for the idea that "capital inherently grows more quickly than other types of income," Piketty pretty well proved that in [*Capital in the Twenty-First Century*](https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century) with his famous r[STA-CITE]>g formula. [END-CITE]To sum up, one way to look at Keynesian econ. policy is that it is designed to offset an *inherent* structural defect in the way capitalism works, a defect that winds up harming nearly everyone in a society (or as in 2008, the world), rich and poor alike.

[pjabrony]

[STA-CITE]> If a relatively small number of people own the vast majority of the capital in a society ... [END-CITE][STA-CITE]> , a defect that winds up harming nearly everyone in a society (or as in 2008, the world), rich and poor alike. [END-CITE]But does it harm those few people who hold all the capital?

[jetpacksforall]

[STA-CITE]> But does it harm those few people who hold all the capital? [END-CITE]Yes: they find themselves facing fewer and fewer opportunities for investment (because while they are getting richer, the economy around them is effectively shrinking as the majority of people have less and less to spend or invest). Plus they face an increased risk of asset bubbles, recessions, credit crunches and liquidity crises.

[Palidane7]

Well, if the growing economy makes a lot more money for the producers than they lose in higher taxes, what's the problem? Keynesian economics doesn't state you have to tax the producers within an inch of their life, you can still leave them enough to reward them for their success. The rich get more money, because of the government spending, the poor get some of the rich people's money, everybody wins. In theory of course.

[pjabrony]

[STA-CITE]> Well, if the growing economy makes a lot more money for the producers than they lose in higher taxes, what's the problem? [END-CITE]The problem is that all the work has been done with their money, borrowed at first and then paid back with taxes. It wasn't a loan to the rich that they paid back with interest, it was a gift to the poor that the rich paid back with interest. In other words, while it's true that the informal, private-sector economic growth was distributed to all classes, the formal, government movement of money was all from the rich to the poor.

[Ragark]

I would argue in the opposite direction. Keynesian economics is class warfare from the rich towards the poor. With the state taxing the rich and giving out welfare, they are blunting the anger of the poorer classes. With the state working like that, the rich can't exploit the poorer classes as much. Without that, the poorer classes would fight back in open class warfare. Remember, between lobbying, being friends, having positions open, etc, the people of the state and the rich will always be good friends.

[SocialistMath]

Everybody pays taxes, including the workers and employees who receive a higher income thanks to Keynesian spending policies. If the rich pay a proportionally larger share due to progressive taxation, then that's a feature of the progressive taxation. This matter is independent of the Keynesian prescription of anti-cyclical fiscal policy.

[Kman17]

Keynesian economics does believe that a 100% pure free market *can* behave erratically and against it's own best interest, and it does tend to prescribe public works projects during recession and progressive tax during booms. There isn't any sentiment in that statement. The depression was, objectively, caused by an erratic stock market and huge disparities of wealth that was compounded by an agricultural failure. FDR populist policies and WW2 reconstruction did indeed catapult the US out of the depression and into a world power. Keynesian theory was published in 1936. It seems more likely that it was the result of an analysis of the great depression and a refute of laissez faire which had *just* failed than some sort of conspiracy to demonize the wealthy. What I think you'r missing is that Keynesian theory isn't some sort of call for economic equality - that's a caricature of it. It simply believes that *demand* is the important driver. If no one can confidently buy your goods, it isn't good for anyone - the wealthy included. "Class Warfare" is a politically charged but ultimately meaningless phrase used by opponents of the theory. Every tax cut or tax implementation will affect classes differently. A tax cut is "class warfare" just as much as a new tax. Laissez faire / supply side boomed & busted in the 20's, so the pendulum swung in the other direction for 50 years until the stagflation of the 70's. Then the supply side was king from Reagan to the '08 bust and issues the millennials are having now, so we're probably due for a Keynesian correction for a little while. That's not class warfare - that's just solving the challenges of our times.

[___OccamsChainsaw___]

Are you talking about 'Keynesian economics' as described by economists (and, if so, exactly which formalization?) or 'Keynesian economics' as described by media pundits, politicians, /r/politics &c.?

[pjabrony]

Assuredly the latter. I am but a humble layperson who has no economic training, and therefore am far more set in my view than any actual economist. But more seriously, if economics is something that can only be understood by professionals, then surely there's no point in ever making recommendations like these, because the common man like myself can't understand it, and I'm certainly not going to accept what I can't understand.

[___OccamsChainsaw___]

[STA-CITE]> Assuredly the latter. [END-CITE]Then your view is kind of... I don't know, pointless? Of course the media and reactionary idiots like you find on reddit are going to say stupid things and pretend they have an empirical basis for it. That isn't something unexpected or special, and doesn't say anything about economics or Keynes other than that laymen would rather make economics plastic to their ideology than the other way around. [STA-CITE]> But more seriously, if economics is something that can only be understood by professionals, then surely there's no point in ever making recommendations like these, because the common man like myself can't understand it, and I'm certainly not going to accept what I can't understand. [END-CITE]Do you understand general relativity? Quantum theory? Time-series analysis? Assuredly not, but I doubt you harbor any significant degree of skepticism for any of them. This doesn't mean you don't have the capacity to understand them, just that you haven't (and will not) put in the time to understand them. In light of that, it would be ill-advised to pretend that your disagreement with the academic consensus (if indeed you do disagree) is in any way justified. This is as true for economics as it is for physics or statistics. In contemporary economics, 'New Keynesian' models owe more to *Friedman* than to Keynes anyway, and contemporary economic *policy* (at least policy that isn't vote-baiting) is almost entirely on the monetary side of things, *not* the fiscal. Classic Keynes assumed we were at the ZLB, even.

[huadpe]

Just a heads up that this is really close to the line on Rule 2. I'll allow it since you're being substantive, but try to keep it from being personal.

[___OccamsChainsaw___]

Thank you. Twas not my intention. Which part in particular, if I could ask?

[huadpe]

[STA-CITE]> In light of that, it would be phenomenally stupid to pretend that your disagreement with the academic consensus (if indeed you do disagree) is in any way justified. [END-CITE]That's riding the line.

[___OccamsChainsaw___]

Alright, thank you.

[pjabrony]

[STA-CITE]> Do you understand general relativity? Quantum theory? Time-series analysis? Assuredly not, but I doubt you harbor any significant degree of skepticism for any of them. This doesn't mean you don't have the capacity to understand them, just that you haven't (and will not) put in the time to understand them. In light of that, it would be phenomenally stupid to pretend that your disagreement with the academic consensus (if indeed you do disagree) is in any way justified. This is as true for economics as it is for physics or statistics. [END-CITE]Is it really the same? Economics is a social science. If we all decided that we were going to act against what the theory says, then the theory becomes untrue. That's not the case in physics. To wit: [STA-CITE]> Then your view is kind of... I don't know, pointless? Of course the media and reactionary idiots like you find on reddit are going to say stupid things and pretend they have an empirical basis for it. That isn't something unexpected or special, and doesn't say anything about economics or Keynes other than that laymen would rather make economics plastic to their ideology than the other way around. [END-CITE]Yes, but we all vote, donate to political candidates, and argue in public. We have influence over the economy and the policies of the government toward it. So I assert that our views are useful because we can affect the reality, as opposed to my view on high-end physical sciences which don't change what is.

[___OccamsChainsaw___]

[STA-CITE]> Is it really the same? [END-CITE]Yes, it is. People, in groups, are predictable. There's no such thing as... I don't know what you'd call it, dark rationality? [STA-CITE]> Yes, but we all vote, donate to political candidates, and argue in public. We have influence over the economy and the policies of the government toward it. So I assert that our views are useful because we can affect the reality, as opposed to my view on high-end physical sciences which don't change what is. [END-CITE]This has nothing to do with Keynes, Keynesianism, or economics in general. The opinion of the masses can affect the economy, but it will affect it in ways nonetheless described by economics.

[pjabrony]

[STA-CITE]> Yes, it is. People, in groups, are predictable. There's no such thing as... I don't know what you'd call it, dark rationality? [END-CITE]I'm thinking more of Unintended Consequences. In physical sciences, they can be avoided. In social ones, they basically can't.

[___OccamsChainsaw___]

[STA-CITE]> In physical sciences, they can be avoided. In social ones, they basically can't. [END-CITE]Wrong. Unintended consequences exist in all scientific endeavours. If you don't believe me just ask Madam Curie. We do things, make mistakes, learn from them, and correct them when we try again. There's a reason why nobody thinks we should tighten monetary policy during a recession and there's a reason we don't handle radioactive material with our bare hands.

[Sqeaky]

[STA-CITE]> Economics is a social science. [END-CITE]That just means getting to good empirical results is harder, not impossible. It wasn't all that long ago that biology was a softer science, then DNA provided a good way to work out all that silly bio stuff into some sort of empirical order. [STA-CITE]>Is it really the same? > If we all decided.. [END-CITE]Yes, it really is the same, or close enough it makes no difference. Keynesian economics makes heavy use of statistics, and there won't likely be any unanimous decisions by millions of people (but I guess if there was it would require a new theory). Add onto this that plenty of Keynesian economics has nothing to do with class. The biggest I took from when I studied was that government spending can be used to shore up the civilian to help get through slow economic time to mitigate the suffering normally associated with economic turmoil. Then when the economy is good again surpluses can be used to pay of those deficits and an economy can be prepared for the next troubling time. If anything that is the antithesis of class warfare. We can look at places doing it too. Here in the USA when the economy slows government spending ramps up. Then compare to Greece who has 1 in 5 people not getting enough food because they cut back on government spending while already in an economic slump. Sure exceptions exist but we can look at this from statistical viewpoint and try to understand how the exceptions become exceptions and how the rules function when people and governments take different actions. Finally, please check out the wiki page. It mentions nothing of class and one would be hard pressed to convert the concept of "private sector" and "public sector" as the wiki page puts it into some sort of class warfare mould. https://en.wikipedia.org/wiki/Keynesian_economics

[pjabrony]

[STA-CITE]> If anything that is the antithesis of class warfare. We can look at places doing it too. Here in the USA when the economy slows government spending ramps up. Then compare to Greece who has 1 in 5 people not getting enough food because they cut back on government spending while already in an economic slump. [END-CITE]But that's my initial view. Keynesian economics says that when the poor complain about not enough food and the rich complain about not enough profits, that it's the food that needs to be taken care of by the government. But when the poor have plenty of food and the rich have plenty of profits, the money to pay back debt should come from the profits. Is that the case?

[Sqeaky]

I am pretty sure that Keynesian economics, at least what I learned in school is entirely mute on the subject of "poor people" and "rich people". From the economist's standpoint they behave the same. If you lump the poor and the rich together in your statement and then say something like "during economic growth the private sector pays back deficits incurred by by social welfare programs during economic recessions" then your statements are correct. But the separation of the poor from the rich a strong part of your statements, so maybe you disagree. Either I have not seen a situation where Keynesians grouped people buy wealth. It is more important to them whether people can write laws and whether or not people are subject to normal economic competition. In practice Governments do not compete and make laws. Monopolies compete not all but cannot write laws. Government contractors compete less but still a little. Private companies and most employees must compete and cannot make laws. I must admit though, I took one economics class and invested only a few dozen hours reading up this some years ago. I could be wrong but I would require a source citation to believe it though.

[brierrat]

There is a problem with your formulation, both as to the assumptions about economic systems and the motivations of economic theory, and as the genesis of your thoughts about this. First, the genesis. Normally we say that macroeconomics is not to be compared to household finances. In the Greek case, they are exactly like household finances because the Greeks (and indeed all of the countries in the EU) do not control their money supply. Their exports and imports must be balanced to make their economy work. Their situation, as such, is unique in terms of macroeconomics. Second, the question of Kensian economics is not about pitting groups against each other. It is about what works. Government spending, in the Kensian thought, is a huge active mass to move the economy. It's like the biggest baddest bank you can imagine went and gave a loan to every single person in the economy to spend however they want. The loan is paid back by taxes of a more active economy. It is very really a massive government investment into the entire economy, no different really than any bank investing in a startup through venture capital. If everything works out, the government makes its money back, plus some. Now, consider the alternative. That is pure class warfare. Cut taxes, reward the good people with jobs... and... er... Profit. Cutting taxes is passive. You are relying on people spending that savings... But people without jobs will take that extra hundred dollars and put it under their mattress. Nobody goes on a spending spree unless they have steady income. But both theories are models of the actual happenings of economics, in the same way mathematics models fluid flow or stress in a beam or electrical current in a circuit. Active government investment in the economy seems to be work better than passive tax cuts. Whether something works or not should be the measure of effectiveness. Finally, who do you think directly benefits from government spending? Well, businesses, owned by those wealthy 1% you are so worried about.

[pjabrony]

[STA-CITE]> You are relying on people spending that savings... But people without jobs will take that extra hundred dollars and put it under their mattress. Nobody goes on a spending spree unless they have steady income. [END-CITE]I thought it was the other way around. That rich people saved and poor people spent.

[brierrat]

It's the middle class that I'm talking about there. They are the ones that are struggling when an economy cools and sheds jobs and who also have purchasing power to collectively move the economy. These are also the folks who attempt to save everything they can when things turn bad because they tend to be financially conservative. They don't have the money to invest during down times, and they aren't hand to mouth either.

[superjambi]

Poor people spend as little as they possibly can - the reason they are poor is because even that is barely enough to survive. When you are poor and you find a 100 dollars on the ground, you don't just go and splurge it on a pair of shoes - you save it in case you get sick or in case you lose your job.

[thiazzi1]

It's not that they'll treat themselves to shoes which means the poor spend, it's that they may well need to use up that saved £100 in order to pay for basic necessities.

[stmk]

There is actually evidence that the poorer or members of the lower class will spend a large percentage of their earnings on either food, house, or even some luxuries. The middle class tends to save a larger percentage of their earnings, and the upper class tends to invest a large percentage of their earnings.

[Wild_Loose_Comma]

I feel like that completely depends on the level of poor we're talking about. The "I don't have money to eat today" people will absolutely spend every penny they can. They don't save money because they dont' have enough money to live on anyway.