Dear Ron,
You wrote:
Not clear that this is
true. If your taxes remove non-productive money (off-shore assets,
foreign travel, non-productive assets) and put it into productive efforts
such as dam building, road building, public infrastructure, rail construction,
etc. which are labour intensive and support a lot of private sector activity,
you allow the private sector to expand and develop corporate and individual
capabilities
I suppose you could make a case like that, but how do
you identify which money is “non-productive money”? Money in
liquid form is nonproductive (in your sense of that word) but is also required
to grease the skids of everyday commerce. Keynes did indeed understand
that liquidity is necessary for a smooth economy, but his solution ignored part
of the problem, at least that is how Hazlitt saw it, how Friedman explained it,
and how many free market economists explain the fallacy today.
I guess my point is that you can’t tell “nonproductive”
money from productive money with any degree of certainty. The cash that covers
payroll checks may have to be stuck in the bank for weeks prior to being issued
to the employees, but that doesn’t mean it is nonproductive.
Similar concerns apply to just about any bank account with cash in it; the cash
may be earmarked for an expense that hasn’t happened yet.
But your point is a good one; if there are ways to
identify the velocity of money usage, and to improve that velocity, the result
ought to be stimulative.
However, few of the government programs (whether
Reagan’s Carter’s Obama’s or whoever’s) are as
efficient as the private money. As Friedman said, we are much more
careful and productive with our own money than with our neighbor’s
money. So the point you raised is a good theoretical one, but if the
alternative is for an inefficient spend of money that would otherwise have had some
velocity and productivity P to a lower velocity and productivity factor P’
in a government spending project, it wont meet Keynes’ assumptions
anyway!
You continued:
If you print money rather
than borrow it, you devalue your currency
which helps exporters. This,
in turn, provides national relief by shifting the problem elsewhere(hopefully
to some country you don't care about - China was only partly worried about
the effect of its artificially low currency on the rest of the world and was
happy to have the high growth from exports).
Although inflating the money supply
helps exporters, it hurts importers by inflating costs of imported goods.
It also hurts anyone who is living on a fixed budget, such as retired folks,
fixed asset owners, and investors who have ongoing cash sinks not yet at the
productive stage. The balance of opinion (maybe I am reading more
conservative economists, so this balance is possibly less emphatic, but it is
still there) among economists is that inflation is destructive more than
constructive.
If you take the taxes and
spend it paying rent and buying food and
services in another
country (think military bases), you do not get the
long term benefits and
lose most of the short-term effect.
Agreed. That is a good
rationale for Ron Paul’s plan to reduce the military installations around
the world to conserve our foreign expenses. Also, the amount of money we
are sending to foreign aid with little economic insight about its return doesn’t
help the economy.
If you pay teachers,
firemen, street cleaners, etc. they pay mortgages,
rent, food, clothes which
mostly comes from the private sector. Not much long-term benefits unless the
firemen put out a fire at your place or educate someone who goes on to get a
job rather than be on public
assistance.
Teachers, firemen, street cleaners etc are local
government expenses. Local governments can’t print money, so Keynes’
liquidity theories don’t really apply there. The national
government can, of course, and does, but its record of making effective gains
per dollar of expense is very, very poor in that area. Government
spending has done well only for very limited areas, such as war, (it is very
expensive to lose one), some of the emergency funding (the part that is not
covered by insurance companies), caring for the disabled or others who cannot
take care of themselves, etc.
So while the argument that paying money to citizens
like you and me is quickly turned around in the economy is a good argument, it
ignores the time and expense that accrue to collecting the money in the first
place, to reaching an efficient plan of how to spend it, and to actually executing
that plan without excessive waste. Those things are less efficient in situations
where the owners of that money are not the same as the spenders of that
money. Friedman again.
The reason that this plays into the Self Interest
Ontology is that Friedman’s explanation of how self interest maintains an
efficient economic engine is a good one, and covers such examples as you raised
above.
Thanks for your insights,
-Rich
Sincerely,
Rich Cooper
EnglishLogicKernel.com
Rich AT EnglishLogicKernel DOT com
9 4 9 \ 5 2 5 - 5 7 1 2
-----Original Message-----
From: ontolog-forum-bounces@xxxxxxxxxxxxxxxx
[mailto:ontolog-forum-bounces@xxxxxxxxxxxxxxxx] On Behalf Of Ron Wheeler
Sent: Monday, November 07, 2011 9:45 AM
To: ontolog-forum@xxxxxxxxxxxxxxxx
Subject: Re: [ontolog-forum] Self
Interest Ontology
On 07/11/2011 12:04 PM, Rich Cooper wrote:
> Dear John,
>
> The issues you raise below are repeats of the
ones
> we have already discussed. I think your
view
> won't change on this, so I suggest we move on to
> something we can get our minds into, such as the
> definition of Keynesian economics.
>
> Keynes believed that by injecting liquidity into
> the economy (i.e., by increasing the money
supply)
> government could stimulate the economy. He
did
> not, as Hazlitt points out, take the full measure
> of the situation; the taxes extracted from the
> economy or the losses due to borrowing money to
> inject, both come from productive economic
markets
> which must be reduced to get the charge of money
> that is injected.
Not clear that this is true.
If your taxes remove non-productive money (off-shore assets,
foreign
travel, non-productive assets) and put it into
productive efforts such
as dam building, road building, public infrastructure,
rail
construction, etc. which are labour intensive and
support a lot of
private sector activity, you allow the private sector
to expand and
develop corporate and individual capabilities
The private sector also gets the benefits of cheap
power, more efficient
roads, cheaper infrastructure costs, high-speed rail
and lower freight
costs, etc. that last a long time and build more
wealth.
It is not clear that this reduces economic markets at
all. It just
shuffles it about and removes the premium for
financial risk which makes
the projects move faster.
It also broadens the tax base and improves the general
sense of
well-being in a country.
If you print money rather than borrow it, you devalue
your currency
which helps exporters
This, in turn, provides national relief by shifting
the problem
elsewhere(hopefully to some country you don't care
about - China
was
only partly worried about the effect of its
artificially low currency on
the rest of the world and was happy to have the high
growth from exports).
If you take the taxes and spend it paying rent and
buying food and
services in another country (think military bases),
you do not get the
long term benefits and lose most of the short-term
effect.
If you pay teachers, firemen, street cleaners, etc.
they pay mortages,
rent, food, clothes which mostly comes from the private
sector. Not much
long-term benefits unless the firemen put out a fire
at your place or
educate someone who goes on to get a job rather than
be on public
assistance.
>
> By not including that loss in his calculations,
> Keynes committed the error of incorrectly drawing
> the lines of the economic system he studied.
> Hazlitt made that clear, and therefore improved
> knowledge of how the Keynesian strategies ignored
> a significant part of the system he studied.
But it did regulate the ups and downs of the economy
for both Democratic
and Republican administrations as John pointed out.
> -Rich
>
> Sincerely,
> Rich Cooper
> EnglishLogicKernel.com
> Rich AT EnglishLogicKernel DOT com
> 9 4 9 \ 5 2 5 - 5 7 1 2
>
> -----Original Message-----
> From: ontolog-forum-bounces@xxxxxxxxxxxxxxxx
> [mailto:ontolog-forum-bounces@xxxxxxxxxxxxxxxx]
On
> Behalf Of John F. Sowa
> Sent: Sunday, November 06, 2011 9:50 PM
> To: ontolog-forum@xxxxxxxxxxxxxxxx
> Subject: Re: [ontolog-forum]
Self Interest
> Ontology
>
> On 11/5/2011 3:31 PM, Rich Cooper wrote:
>> I discovered a book written in 1948 that
> explains why the Keynesian
>> theories don't work - he describes what he
calls
> the "broken window
>> fallacy" here:
>>
>>
> http://www.fee.org/library/books/economics-in-one-
> lesson/
>> I hope that helps stimulate more discussion
of
> the role of self
>> interest in AI and in ontology developments.
> Two points:
>
> 1. The author, Henry Hazlitt,
is a typical
> blue-sky academic with lots
> of opinions,
but no facts or experimental
> evidence to back them up.
>
> 2. Keynes was also an
academic. But he became
> wealthy by observing
> the facts
about currency fluctuations,
> formulating a theory based
> on the facts,
and testing his theory with his
> own money. Today,
> currency
trading is not a good field for
> making money because
> everybody
follows the same principles that
> Keynes established.
>
> I'm not going to defend all Keynesian policies
> because there has
> been 80 years of further research and practice.
> But US presidents
> from Franklin Roosevelt to Ronald Reagan have
> shown that the basic
> ideas are sound. Roosevelt
applied some of
> Keynes' ideas in the
> 1930s. He helped to mitigate the disaster
created
> by 12 years
> of Republican economics. But he didn't
spend
> enough money until
> 1939, when he used the war in Europe
as an excuse
> for big-time
> spending. The massive war-time spending
ended the
> Depression,
> as Keynes had predicted.
>
> I hate to give credit to Hitler for anything, but
> I have to admit
> that he got Germany out of an even worse
financial
> problem by
> classical Keynesian means: a huge amount of
> military spending
> that created prosperity for Germany several
years
> before Roosevelt
> started the really big-time spending.
>
> Ronald Reagan also dug the US out of a
recession
> by classical
> Keynesian spending. The Republicans
mistakenly
> say that he cut
> government. But that is false. It is
true that
> he cut domestic
> federal spending by shifting the burden to the
> states. But his
> military spending *tripled* the federal
debt. The
> Republicans
> also say that he cut taxes. For the rich,
he did.
> But for the
> middle class, the increase in state and local
> taxes wiped out
> the tiny tax cut that Reagan gave them.
>
> Reagan's collectivism wasn't as blatant as
> Stalin's. Instead of
> directly taking small farms and bundling them as
> large collectives,
> he just subsidized the big corporate farms and
> drove small farmers
> out of business. The big subsidies were
reserved
> for huge collectives
> that grow corn and soybeans. The small
farmers
> who grew vegetables
> for the local markets got nothing.
>
> Reagan's policy of welfare for big corporations
> was very similar
> to Hitler's policy of promoting big corporations
> at the expense of
> the small businesses and individuals. That
isn't
> as blatant as
> Stalin's collectivism. It's a more subtle
form of
> collectivism
> and anti-individualism.
>
> Republicans treat Reagan as a god for promoting
> "wealth building".
> Look at the statistics: In 1979, the top 1%
of
> all Americans earned
> 9% of the total amount of income. But in
2009,
> the top 1% earned
> 17% of the total. That is almost double the
> amount they got before
> Reagan. The bottom 50% of all taxpayers
earn only
> 13% of the total.
>
> Finance professionals really love the term
"wealth
> building."
> They got a 238% increase. (Statistics from New
> York
Times,
> 30 October 2011, Sunday Review, page 10)
>
> Whenever you hear Republicans say "wealth
> building", that's
> a synonym for "rape the middle
class". I am very
> strongly in
> favor of self interest. That's why I am no
longer
> a Republican.
>
> John
>
>
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