Since we couldn't view the Keynes Rap in school, here it is. Your assignment is to identify some of the Keynesian concepts that you have learned about. Describe these concepts in the comments section.
Sunday, March 28, 2010
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41 comments:
It is ridiculous to think that recession/depression will fix itself. it is important to take action, like "boosting aggregate demand." Spending is what fixes an economy, and saving is what keeps a bad economy from fixing itself. Spending anywhere from war costs to a broken window, as seen on the video, will contribute to the health of the economy.
"We need more government spending, now it's stimulus season" Government spending will increase aggregate supply, thus, price level will drop and more GDP. "The advice, real simple - boost aggregate demand" More aggregate demand means more consumer spending, which helps the economy out of a depression.
I believe there are times when the government should stimulate the economy, but only when its really bad, ie: The Great Depression, all other times such as now, it really isn't needed, we need to allow the invisible hand do its job. Every time there is a recession, we(the country) go insane and worry that we are going to slip into depression, which is human nature, but we need to learn to accept that the economy has cycles, and that ultimately we will prevail.
Like the rap said, according to Keynes, it is worse for consumers to save their money instead of spending it; money needs to keep flowing. Boosting aggregate demand helps stimulate the flow of money by having consumers spend money. Keynes also believed that the government does need to take some action, especially during a recession. The idea of government intervention challenged the ideas of previous economists.
Keynes believed to get out of a recession we need to spend, particularly government spending, to boost aggregate demand. A depression won’t fix itself. Too much saving leads to destruction of the economy, money needs to keep flowing. Keynes' ideas were very different from previous economists, who did not favor government intervention.
According to Keynes, spending, not saving, is key to economic growth. Spending is not limited to consumers - Keynes encouraged government spending, especially during the Great Depression of the 1920s. The money spent would drive the economy and give people more jobs. In the video, Keynes even says that a broken window is beneficial, for it gives the person who fixes it a job.
Both men rapped abut the circular flow and aggregate demand. Keynes believed the animal spirits of human took over their decision making skills. and that government spending is what would stimulate the government, not saving money.
Seriously, that video was a lot better than what i expected. The market can not be left alone. There is no invisible hand. During a recession or depression, the government needs to stimulate the economy by spending money. Also, make public works jobs to get people working. Say it loud. Say it proud. We are all Keynesians now! Just agree with me because in the long run, we are all dead.
Many of the concepts in the video give a brief overview of basic Keynesian theory. Keynes wants the market steered by increased government spending, allowing for a deficit because in the end "were all dead." Thus we need to boost aggregate demand before the boom and bust cycle takes its effect. Animal spirits (people's feelings and expectation in the market) has greater effect on savings, thrift, and consumption than interest rates. And of course because Keynes is so modest he had to point out that were all Keynesian now.
"saving is destruction, we need to spend more" shows how if we dont spend the economy will go down because their is a shortage of money this also leads to a decrease in aggregate demand.
Keynesian Concepts:
*Government spending is necessary to boost aggregate demand
*Government regulation of the economy is needed
*Paradox of thrift- without spending, the economy cannot grow
*We can't just wait on the economy to correct its self
As Keynes said, if circular flow slowly deteriorates because of saving (the paradox of thrift at work) then a stimulus, usually in the form of government spending, should happen. The whole thing with Keynes is that this should be lessened during booming economic times so that the deficit does not accumulate too much (such as our situation now) and swing too much the other way into inflation, leading to another, possibly worse, bust.
The rap discussed the need for government spending whenever the economy is in a slump. With this spending comes the flow of money necessary due to an increase in aggregate demand, creating more GDP. This is all based on the Keynesian multiplier.
"the advice, real simple - boost aggregate demand"
Keynesian theory advocates government intervention and consumer spending to stimulate a receding economy.
"don't keep money in your pocket or that growth will never lift"
Keynesian theory also holds that saving, especially during a recession, is folly.
The video even gives the example of a broken window as being good for the economy, as it creates work for a repair man and gets money circulating, thereby increasing GDP.
the economy is not solely based on consumer spending. Government can take part and boost the economy with spending. When we are in a depression the government is expected to stimulate the economy. Giving us jobs. just like FDR's new deal stuff. by creating jobs it helps the economy.
Keynes states that saving is bad and that spending stimulates the economy and causes it to go round. I always thought this point was a little counter-intuitive because we've all been taught that saving is essential for being healthy financially. As Keynes said, when a person saves, that's someone else who isn't receiving a paycheck (whom in turn can't spend what he doesn't have, starting a vicious cycle of everyone not spending and everyone being out a paycheck).
Until Hayek started bustin’ his rhyme, the video was a waste of time. The market, when truly set free, will control itself. The trouble is, of course, the lack of individuals to want to work as ditch diggers or vegetable pickers in the fields of southern California. If Americans really wanted to bail themselves out of this mess, they would use their natural talents of innovation, or work where positions are open. (Note: A college degree doesn’t entitle you to a white-collar job, a house, 2.4 kids, a white picket fence, healthcare, or even a dog.) We have created an entitlement program which has denied too many Americans of the need to want to work. Everything is free; why not wait for it to come to me? (So say the laziest of the lazy.) Keynesian theory is the accommodating principle which accounts for entitlement and supports a nanny state. Every time government spending occurs, it means that it will be regulating something else, and continues to grow until such as point as full totalitarianism is reached, or it collapses under its own weight. The trick to economic success for one’s self is to study the markets and carefully place your portfolio on the correct side of each cycle. Keynes is the same sort of progressive who collapsed the Soviet Union, “[so] what brought down the Soviet Union? Its budget deficit and foreign debt soared during the 1990s following the price decline of its most lucrative export, oil,” and father of the mentality which will collapse this nation in due time (Beck). Do any of the fundamental problems experienced by the Soviet Union sound familiar, here, in America TODAY? Keynes, as further confirmed by this rap video, is wrong.
“Savings is destruction that’s the paradox of thrift” – This is a reference to Keynes idea that when people save to protect themselves during the coming hard times, they help to trigger the hard times because they are decreasing demand by keeping their money in the bank and not in the market place. The paradox of thrift, a self-fulfilling prophecy, is the result, savings trigger the recession that they were to protect against.
Well Keynes told to increase aggregate demand: C + I + G = Y. this would boost spending, and get a country out of depression. this was his argument in great depression.
His famous quote "Like I said, in the long run we are all dead."
Well Keynes told to increase aggregate demand: C + I + G = Y. this would boost spending, and get a country out of depression. this was his argument in great depression.
His famous quote "Like I said, in the long run we are all dead."
The video states his point advocating decreasing saving in depression and increase consumer spending
Keynes want to steer the market but Hayek wants to set it free.
Hayek says to increase savings because I believe his point is money is needed in future and he advocates not to invest in mal-investments
The government needs to increase spending in times of recession in order to boost consumer confidence. People always think it's better to save in times of recession, but saving only hurts the economy even more.
C I G altogether gets to Y . if you keep that total flowing ,watch the econoomy fly.this guy might be one cocky bird, but he's a genius. if you keep the money circulating there shouldnt be an issue. the more you spend, the better it is for everyone. the circular will keep circling the "dough" is indeed everything.
P.S this might be the only rap i will not mock.:) kudos to the rappers.
The video talks about boosting aggregate demand, its all about government spending, and "in the long run we are all dead." Keynes believed that in order to boost the aggregate demand and get out of a recession, the government must spend more.
-Megan Kinneman
Keynes concept that people should stop saving and start spending in crisis is right.People need to keep their money in circulation, especially in a recession. It is the government's job to make sure the economy stays afloat, and spending is the only way to do that. The economy can not "magically" pick back up by itself, it needs to be stimulated. Fear is the main factor that keeps Keynes simple concept from taking it's full effect . Many people do not want to risk their money, which people believe to be their source for everything (true in one sense). The faultiness of that concept is that without the risk of spending, the economy would tank. There basically would be no economy without spending, so Keynes was right take the risk because in the "long run we're dead".
The chorus of the rap addresses the primary principle of Keynesian theory: governments should intervene to fix an economy that is suffering from a depression. The rap also addresses the need to increase aggregate demand, which in turn will lead to more money in circulation and a higher employment rate. According to Keynes, this increase in aggregate demand would help get the economy out of a recession.
So umm Keynes didn't believe that an economy could fix itself. He believed that government should step in and increase spending during a recession and spend less when inflation is high. So increase Aggrerate Demand during a recession and decrease it during inflation.
Keynes asserted that if the government actively managed the economy and remedied fiscal problems, the results would be much more effective than the classical theory's solution of letting the "economy run itself." That's why Keynes has that line that goes, "waiting for recovery? Seriously? That's outrageous!"
Keynes also disliked savings, "the paradox of thrift." Too much savings means that a significant amount of consumption has disappeared, consequently leading to producers losing profits because of inadequate sales. That in turn leads producers to cut jobs in order to recuperate from their losses.
Keynes asserted that "full employment is not the natural state of the economy." It is ridiculous to believe that full employment can be reached for any nation. He said full employment is "an accident if we reach it." There will always be people that are unemployed. Prior to the Great Depression, economists believed full employment could be reached. But after the stock market crashed, unemployment rose to 25% and all theories of full employment ended up being false. Keynes recognized that the nation's economy can't be fully employed.
Keynes was very wise in that he knew that the only way for the economy to stabilize, was to keep it moving. His theory was encouraging the spending of money and said that saving was the worst option you could choose.
I've got to admit, I really liked the video. The Government spending is a necessity, but it does no good if the public doesn't help fix the economy by spending after. Boosting aggregate demand is a smart idea, but people need to be convinced to spend money for that to happen, and today, it seems like that isn't the case.
According to Keynes, the government needs to spend more during times of recession because it will "boost aggregate demand". Although people think saving is better in times of recession, it actually causes more problems in the economy.
-Callie McDonald
If a persons income is kept under the sofa and not being spent then thats just that much more money thats taken out of the system. Only when people begin spending all the money they receive will the economy be even remotely predictable. Until that time the size of the economy is decided mostly on how comfortable people are with spending their money. And if they are not comfortable the economy will continue to stagnate.
Basically what Keynes said was that you have to buy yourself out of a depression. He believed that government spending would shift the aggregate demand curve to the right, eventually leading us out of a depression. Not spending at all leads to a decline in aggregate demand.
Three comments:
1, I am not a good fan of rap music. But this one is an exception to that fact. Kudos to Economics!
2, Quoting from the lines of Keynes, " Savings is destruction, that's the paradox of thrift," okay, that is explained. I understand the fact that the more money circulating in the system is caused mainly by spending money. So, during recession, the savings could lead to more problems.
3, Well, I agree partly to Hayek as well. "Real savings come first if you want to invest" is the one line I am confused about. We need a source of money for investments when we go to bank for loans - which would lead to savings.
I am confused. I DON'T KNOW WHICH SIDE TO PICK!!!
Rosemaria Varghese
Period:7
Savings are too low to actually be part of the business cycle where the gov can draw on it for spending.
At the same time, gov spending is supposed to boost aggregate demand by creating more jobs.
If the nation is in a recession, it makes sense to spend money in order to get the economy back on its feet rather than just sit around and save everything. If we just wait for something to happen, then nothing will happen and we spiral downward. As hard as it may be, consumer spending is the key to boosting the economy - just like the rap says.
-Gabe Zolayvar
Keynesian theory declares that spending, not saving is the name of the game. In that respect, consumer and governemnt spending will stimulate the economy, decrease unemployment, and ultimately pull a struggling country out of recession.
Keynes biggest and most surprising belief was that they way to get out of a recession is to spend spend spend. He also felt that the ultimate culprit during a depression was saving. While i understand why saving could continue to damage an already hurting economy, i do not think over spending is the answer either. Our goverment continues to spend money we do not have and that is why we are so deep in debt.
Keynes basically believed that the economy would not save itself and that we must doing the saving. He said that by government spending we would be able to save ourselves because saving was not good in this situation. He was a world apart in thought from the dead economist's of his past.
According to Keynes, a depression won't fix itself! For an economy to keep flowing money needs to be spent. Without government spending the economy can't go up or down. Saving is always good, but you have to spend it at some point!!
Though both sides have a point the government cannot simply sit idle and let chaos ensue. The predictions of Hayek have come to pass time and time again so it is not the intention of the government's actions which need to be altered but rather the course of action taken.
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