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Can anyone explain Keynesian Economics's views of how to promote economic growth in the private sec

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posted on Jun, 6 2012 @ 09:07 AM
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Can anyone explain Keynesian Economics's views of how to promote economic growth in the private sector I know Keynesian Economics supports Government Spending but Government Spending on what ? Public Works Projects ? Infrastructure Spending ? I know this is not a Keynesian forum but Keynesian Economics should work better then Trickle Down Economics in my view. Doesn't Keynesian Economics support Consumer Spending to help the Economy ? I hear Keynesians say we need Government Spending to put money in the pockets of the people who then will spend the money this they say will help promote Consumer Spending which will help create Jobs how do Keynesians plan to pocket money in people's pockets is it by giving the people Jobs rebuiliding or building Infrastructure ?

John Maynard Keynes
The General Theory of Employment, Interest and Money
Book III
The Propensity to Consume

Chapter 10. The Marginal Propensity to Consume and the Multiplier



V

We have seen above that the greater the marginal propensity to consume, the greater the multiplier, and hence the greater the disturbance to employment corresponding to a given change in investment. This might seem to lead to the paradoxical conclusion that a poor community in which saving is a very small proportion of income will be more subject to violent fluctuations than a wealthy community where saving is a larger proportion of income and the multiplier consequently smaller.
This conclusion, however, would overlook the distinction between the effects of the marginal propensity to consume and those of the average propensity to consume. For whilst a high marginal propensity to consume involves a larger proportionate effect from given percentage change in investment, the absolute effect will, nevertheless, be small if the average propensity to consume is also high. This may be illustrated as follows by a numerical example.
Let us suppose that a community’s propensity to consume is such that, so long as its real income does not exceed the output from employing 5,000,000 men on its existing capital equipment, it consumes the whole of its income; that of the output of the next 100,000 additional men employed it consumes 99 per cent., of the next 100,000 after that 98 per cent., of the third 100,000 97 per cent. and so on; and that 10,000,000 men employed represents full employment. It follows from this that, when 5,000,000 + n x 100,000 men are employed, the multiplier at the margin is 100/n, and n(n + 1)/2.(50 + n) per cent. of the national income is invested.

www.marxists.org...

Infrastructure Spending Builds American Jobs

Public Investments Help Private Businesses Create Jobs


By Kristina Costa, Adam Hersh | September 8, 2011

Jobs induced by direct and indirect hires when they make consumer purchases with their paychecks

www.americanprogress.org...

Infrastructure Spending Stimulates the Entire Economy

Pat O'Malley, Yahoo! Contributor Network
Jun 29, 2011 "Share your voice on Yahoo! websites. Start Here."

The Keynesian economic theory is one of the few classic economic principles that is based in reality. It maintains that government should increase spending during a recession. It should buy more of the things that government normally buys.
Those things are new and repaired roads, bridges, dams, harbors, levees, tunnels, buildings, schools, parking garages, subways, railways, parks, sewers, stadiums, airports, and other public facilities. That spending creates jobs for construction companies and workers. Those projects create demand for the supplies, equipment, tools, and other materials that they need for those projects. It creates demand for the trucking companies to ship them and the warehouses to store them. That creates jobs in all of those industries. If the companies supplying the construction industry have enough work, they can spend some of their revenue to hire more employees or to upgrade their own facilities. See, more demand, more jobs.

Then all of those workers have paychecks that they can spend on groceries, clothing, furniture, cars, houses, utilities, entertainment, appliances, restaurants, vacations, and all sorts of things. That creates demand in those industries. And that creates jobs. If those companies have enough work, they can spend some of their revenue to hire more employees or to upgrade their own facilities. See, more demand, more jobs. And government gets its new stuff built and its old stuff fixed. See. Everybody wins.

voices.yahoo.com...




posted on Jun, 6 2012 @ 09:10 AM
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reply to post by mikejohnson2006
 


what the ! i don't even
... wish i could help your my good member , but i came all the way here to post and tell you i haven't a clue ! , good luck ...



posted on Jun, 6 2012 @ 09:14 AM
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Keynesian economics can work, as it did post-WWII. But that economic model must start and stay as Keynes imagined it: as a primarily private model, with only guidance from the public sector. Inevitably, however, the government begins to grow beyond its intentions and plays a larger and larger role, to the extent that central planning has taken over and private business flounders, thus depressing the economy.

/TOA



posted on Jun, 6 2012 @ 09:22 AM
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Look the problem here, fundementally is that ANY form of economics, based in fractural reserve, and fiat currency, will never be stable, and will never be good for the people of the country it operates in.

It only services to continue padding the pockets of those who have always been in control. The old Monarchies of Europe.

So either Economics policy is wrong, unless we change the system at it's core.

~Tenth



posted on Jun, 6 2012 @ 09:31 AM
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I guess by giving everyone a 600 dollar check is the only way to do that. So the real question is: why give banks 700 billion when you can just split that up among 300 million americans.

They do do this in some extent, it's called welfare.



posted on Jun, 6 2012 @ 09:36 AM
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Originally posted by tothetenthpower
Look the problem here, fundementally is that ANY form of economics, based in fractural reserve, and fiat currency, will never be stable, and will never be good for the people of the country it operates in.

It only services to continue padding the pockets of those who have always been in control. The old Monarchies of Europe.

So either Economics policy is wrong, unless we change the system at it's core.

~Tenth


You are so right. any improvement under a fractional reserve, debt based currency will only bring temporary improvements before the laws of math slap it back down. We need the Treasury to issue the money without debt attached. That is the only way Keynesian economics will ever work.



posted on Jun, 6 2012 @ 09:37 AM
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reply to post by mikejohnson2006
 


Write your own term paper.



posted on Jun, 6 2012 @ 09:40 AM
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Keynesian Economics's is the broken window theory in practice.

The thought is that some kids break a window playing and that the person has to buy a new window thus the broken window is good for the economy as it forces spending when no spending would of occurred.

Why Keynesian Economics's doesn't work is because the broken window theory is a fallacy. What is invisible to the theory is what would of become of the money if the window never broke. Perhaps the money would of been spent elsewhere. Perhaps it would of been saved for a larger purchase in the future. It ignores that the money is wasted being spent fixing something that already exist rather than adding productivity to the marketplace by creating something new and building off past purchases.

If Keynesian Economics's worked than we should all be cheering every time a natural disaster strikes. Obviously natural disasters are bad for the economy because it does not add anything, it waste what has already been spent.

Keynesian Economics's is the assumption that the government can control a free market and have the outcome be good. The obvious retort to that would be that once a government places controls and spend, the market is no longer a free market.

Keynes himself detested that his theory was still being used post depression and wrote many articles against his theory being used during normal economic conditions before his death.

Keynesian's believe that government spending can replace public spending and must replace public spending during an economic crisis. Government loves this theory because it not only gives them the excuse to spend other peoples money, it makes it imperative that they do. Of course, just like the broken window, what is not seen is what this government spending replaces what the people would be spending if the government does not take the money and spend it.

To the person who says that Keynesian Economics's can work and used ww2 and the great depression as evidence, by all accounts Keynesian Economics's prolonged the depression just as it is doing today. Government intervention in the economy just creates new winners and losers. It creates more problems than it solves, if it ever solves any that is.

The government intervention started by Hoover and put into full effect by FDR is what's to blame for why the great depression lasted as long as it did.

here is a good primer on the great depression from a Harvard trained historian with an economics focus
video.google.com...
edit on 6-6-2012 by sageofmonticello because: (no reason given)



posted on Jun, 6 2012 @ 09:41 AM
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Originally posted by tothetenthpower
Look the problem here, fundementally is that ANY form of economics, based in fractural reserve, and fiat currency, will never be stable, and will never be good for the people of the country it operates in.

It only services to continue padding the pockets of those who have always been in control. The old Monarchies of Europe.

So either Economics policy is wrong, unless we change the system at it's core.

~Tenth


exactly, when any system is used corruptly, it can never work for the better of all involved. fractional reserve banking or in laymen terms, when the banking industry makes money from interest and hedging other peoples money and buries everyone in debt, to pay the fat cats way through life.



posted on Jun, 6 2012 @ 12:28 PM
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Originally posted by tothetenthpower
based in fractural reserve

There is nothing evil about fractional reserve banking. Without fractual reserve no lending.
Here a short explanation:



Originally posted by tothetenthpower
, and fiat currency


There is no other kind of currency. Numbers on paper are just as arbitrary as amounts of gold, sea shells, amethysts and diamonds. The only reason you accept any of those as payment is that you can be sure that other people will do the same.
edit on 6-6-2012 by narwahl because: (no reason given)

edit on 6-6-2012 by narwahl because: (no reason given)



posted on Jun, 6 2012 @ 02:56 PM
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reply to post by mikejohnson2006
 


Core Keynesian principle: By spending through Government you put "Capital" in the hands of corporations which in turn use it to purchase goods and services from other vendors that in turn buy goods and services from other vendors that in turn buy goods from other vendors etc etc etc. The ideology being that if you utilize a service from a specific industry, and that industry uses it's capital reserves from profit to expand operations that all levels of the economy expand through wages and new hires that in turn expand the economy through consumption.

Think of the economy as a deflated balloon and the Government blows air into it: Theoretically it expands.

However Keynesian Economics does NOT take into account "Human Nature" which is instinctual. Our primary instinct is thus: Survival. So in a severe economic downturn if you give a corporation a huge profit what will they do? Spend? No .... they will sit on it, maybe invest it, perhaps deleverage ... but they will not spend it.

Keynesian Economics has NEVER worked to bring a nation out of a Depression. WWII was not because of Keynesian Economics either, that was strictly Capitalism working by its self. The huge government expenditures did absolutely nothing to help the economy until a new massive demand was introduced: The war. Through the War facilitating demand and decimating the working population the economy rebound.

Then there was "reconstruction" and the fact that until the 80's we had absolutely no economic competitor.
edit on 6/6/2012 by Rockpuck because: (no reason given)

edit on 6/6/2012 by Rockpuck because: (no reason given)



posted on Jun, 6 2012 @ 06:28 PM
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I'm no economics professor, or even learned in economics at all. But it seems to me, the way to grow an economy is to manufacture goods, and sell services.

I think the only way to really get this economy moving again is to start building things here in America, and sell those products at competitive prices to Americans and foreign markets.

Building infrastructure is fine, honestly this country could use a better railway system, but unless we are manufacturing quality cheap products that we can export to other countries, we aren't really going to have a stable economic base that will drive this economy higher.



posted on Jun, 7 2012 @ 12:10 PM
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Keynes was a realist and a keen observer of human traits spaning centuries through studies, unlike deluded economists whom takes the crystal ball gazing statistical approach to economics, without realizing and factoring that humans are unpredictable.

Keynes understood that good or bad times are never forever. Life progresses through changes most of the time. Thus, he made no predictions, but rather actions to take when encountering such changes. It can be simply summed up as:-

When in good times, govt and corporate leaders MUST save,
But when in bad times, they MUST SPEND.

The very opposite of how consumers behave and do.

In good times, when the economy is functioning relatively well, that would be the time for austerity measures, for it will hurt none. Money is flowing within the economy, loss of jobs from one company means another door opening easily elsewhere.

Govts can decrease taxes then, let go or let attrition rates take care of staff levels. Any public excesses or wastage must be curbed then. It will not hurt, as money is flowing then.

Corporations similarly should be doing the same - cutting waste, ensuring each job created is backed by value and not for fun. Those whom don't perform should be sent for further training or be let to find job opportunities elsewhere. Less painful as money is flowing then.


However, when in bad times, govt will have to spend, as banks are cutting and recalling loans, capital from every person is hoarded up, resulting in NO CIRCULATION OF MONEY.

Govts will have to break a hole on their treasuries or print more money for circulation, such as in critically needed infrastructure projects that could increase better productivity for trade and education. They can also inject needed capital into investigated 'good companies' that has the potential to grow and expand, to help in job creations, AND NOT BAILOUT BANKS OR FUND FAILING COMPANIES.

Private enterprise, if are promising ones, but due to a crisis, MUST NOT hold back. To do so is to die.

Crisis would be the best time to capture market share, because those companies whom produce shoddy products or have bad management or both, will the first to collapse when money is not circulated, thus clearing out COMPETITION in the market place.

That private enterprise must then INCREASE research, production, marketing/advertising teams, and sales. When a crisis happens, everyone is only afraid. Money stopped circulating, BUT NEEDS HAD NOT STOPPED! Humans still have needs and our planet still have bountiful resources yet for another few more millenia.

Thus, that private enterprise MUST figure out those needs, give quality and value, meet production, capture the market and it will gain high market share.

It will need money for such an expansion, and thus the reason to save for such circumstances. However, if not possible, seek for the PEOPLE's help through govt funding if the company is promising, have value, produces quality products and have good management, unlike GM or the solar companies that did not have govt tarrif protection.

Other ways to seek financing is still possible as banks would have stopped lending. Family, relatives and friends are options. Most of them will have money, or know of someone who have. It is only a matter of being honest, upfront in the way to seek for funds, espacially if a viable enterprise, for they too, are seeking for trusted avenues to grow their funds.

And when succeeded, always remember to share wealth. The old ways that had almost doom us all must end. CEOs are meant to be leaders, not some crony brother who knows nut, come into the office at ten, leaves for a hearty lunch, then followed by golf.

During crisis, it calls for true leaders to stand. A human of courage, pragmatic and realist, with moral principles, and adaptable with every changing current to stay afloat, taking care of not only his company, but staff, consumers and the nation as well.



posted on Jun, 7 2012 @ 12:21 PM
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reply to post by mikejohnson2006
 


By keeping the entire economy stable and predictable

You encourage stability. When there is a short supply

Of money from the private sector, the public supposedly

Maintains circulation, which means business will still

Have capital to spend.



posted on Jun, 7 2012 @ 03:54 PM
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The Center for American Progress is a liberal think tank, and it should be self explanatory what the Marxist site represents.

That being said, I am sure they are all for the Keynesian spending of capital by the govt, as much as possible. Remember, these people are into govt centralization, and that means of capital too, as much of it as they can get. They love it when private capital flows into the govt to spend spend spend spend spend. But if they can't get it through taxpayers, they will just ask the Fed.



posted on Jun, 7 2012 @ 04:05 PM
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Originally posted by Beanskinner
reply to post by mikejohnson2006
 


By keeping the entire economy stable and predictable

You encourage stability. When there is a short supply

Of money from the private sector, the public supposedly

Maintains circulation, which means business will still

Have capital to spend.


In spite of the baillout, lending institutions are not lending so much. Govt (read taxpayer) funded baillouts only encourage more govt abuse by a runaway big spending Congress and administration. Will the spending keep us out of a prolonged depression or just kick the collapse a couple feet down the field?







 
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