Keynesian economics wrap up

A few days ago Brett and Julio sparred over Keynesian economics in our Second Great The Long Run Great Debate II. (Not to give a lot away but we're thinking of having the third as a pay-per-view event in Lagos.) Now lest you think my job in this debate was walking into the ring in a bikini with the title card, you stand corrected. Actually, I thought that was my job but Brett and Julio pointed out that in The First Great The Long Run Great Debate 1.0, Brett did a postmortem q&a. Right. So that duty now befalls me.

Keynes was right; then subsequently abused

It is a delight to be with you here today, discussing the policy prescriptions of the great John Maynard Keynes. (I like to pretend like it is an actual, face-to-face Ivy League-style debate.) Though I disagree with my opponent, I do appreciate his view. Unfortunately for him, it is just plain wrong.

Keynes wasn’t all wrong. He just wasn’t all right.

Keynes’ General Theory of Employment, Interest and Money revolutionized economic thought in 1936 and ignited a debate that continues to this day. Prior to Keynes, classical economists correctly believed that economies have self-correcting mechanisms that maintained prosperity and full employment. Keynes argued that the propensity of firms to invest could be too low compared with that of household savings, leading to recurring depressions. Keynes believed that through government fiscal policy, i.e. lower taxes and higher spending, that the government could help the private sector and restore full employment. Politicians seem to have forgotten the part of the policy about lower taxes for the most part.

The Great Long Run Blog Debate #2: Keynesian Economics

Keynes has been a popular topic lately. By Keynes I mean both John Maynard and his economic theory of government intervention into the free market. To quote wiki:

Congress agrees

Way back last December, I wrote about corporate jets where I made the case that they are valuable and justifiable business tools despite Congress being in an uproar given the pending auto industry bailout. Many of you agreed with Congress that such flight privileges were outrageous- especially on the taxpayer's dime. It seems that Congress has had a change of opinion and thinks private flights are just fine, especially when paid for by the taxpayer.

Metric System, Kinda

There's a lot of talk about this cash for clunkers program. Canada had something similar but it wrapped up last year. If you bought a certain fuel efficient new car you got a rebate from Transport Canada. You could get up to $2000. Which ain't bad.

I guess the cash for clunker intent is get older fuel inefficient cars off the road, get people to drive new fuel efficient cars, save the environment, save jobs, save the cheerleader, save the world. You know the drill.

A chicken recovery?

In trying to figure out the state of the economy, we analysts tend to look for lots of data. Not necessarily just systematic data, like figures on employment or housing (those are a given), but also anecdotal data which may provide economic insight or at least food for thought. Yesterday, an odd headline caught me eye. A good place to gauge the economy is by watching food sales- a fairly real time indicator.

Tyson Foods, the giant $27 billion processor of chicken, beef and pork and derivative products released quarterly earnings after which the stock traded down sharply in an otherwise bullish tape. When the economy improves, or at least bottoms out, companies like Tyson normally see improved pricing and demand. This is generally true of most food stuffs. Nonetheless, the CEO said (as always, emphasis is mine)

A quick thought on healthcare reform

I have a quick thought on healthcare reform tonight. One of the many arguments against the Obama/Dems current proposal to cover more people is where will we get the money from? Estimates expect the tab to run near $1 trillion over the next decade. Many extend this idea into something on the order of "why should I pay for someone else's coverage or care?"

What I haven't seen mentioned, is that we are already bearing the cost of their care. Huh? Well, there is no free lunch. That much we know. If uninsured people end up in the hospital, which they inevitably do, who foots the bill? Either the hospital or the taxpayer do, both of which must pass the cost along to the rest of us through higher prices or taxes lest they would be out of business. And we all know that ER visits and emergency care are much more expensive- perhaps an order of magnitude more- than regular care. Those pnemonia cases in the ER, for example, generate bills in the thousands compared to a few doctor visits and some antibiotics. The same goes for most treatments.

Of course, this isn't an endorsement of the current plan. There are plenty of valid arguments against the plan, this just isn't one of them.

Edit- Once you've read this, please be sure to read the comments.