Time to build ten thousand digital shrines to this new world sage, Bill Vickrey. In spite of the disreputable distinction of winning the economics pseudo-Nobel, on the three big battle fronts of the global klass krieg -- jobs, inflation, and deficits -- Doctor Bill was peerlessly fierce and fearless.
In particular, he was a good deal bolder than, for example, that impish Mephisto, Harvard Yard's own Mitt Romney advisor, Greg Mankiw. Greg tut-tuttingly quotes Vickrey:
Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity....Mankiw sniffily comments:[W]hat I would like to see is a budget deficit of about $500 billion averaging for the next five years, until we get from 5 percent unemployment down to 1 percent unemployment.
Was Vickrey a kook? Advocating $500 billion deficits in 1996 certainly sounds kooky. Correcting for inflation and real growth, that would be about $800 billion today.But no, he was not a kook: He was one of the last hard-core Keynesians, far more Keynesian than so-called new Keynesians like me....$800 billion times 5 years equals four trillion: not enough, of course, but a grand start.
Now Wild Bill's schemes might not pass a thorough audit, at least as laid out in pop lingo here; but as cautiously glossed here, the full force of his vision brought down to us from the mountaintop is vastly understated.
Comments (5)
The delicious irony is that Bill and Hill replanted the stinking tree of the DP to the right of the RP on this key topic, which remains (behind the double-talk) pretty old-skool military-K.
Between the two dog-heads, the level of understanding of this classical and super-timely issue is lower than ever before. Approaching 1931 levels, from what I can see...
Posted by Michael Dawson | November 13, 2008 2:00 PM
Posted on November 13, 2008 14:00
Too much "sniffily" commenting here, I can't tell who's being praised and who's being put down. The core of Vickrey's idea as quoted by Mankiw seem straight-forward Keynes, well-expressed and even good-natured. I dont get Michael's comment equating Vickre with Hillary.
Posted by seneca | November 13, 2008 2:18 PM
Posted on November 13, 2008 14:18
The delicious irony is that Bill and Hill replanted the stinking tree of the DP to the right of the RP on this key topic, which remains (behind the double-talk) pretty old-skool military-K.
Between the two dog-heads, the level of understanding of this classical and super-timely issue is lower than ever before. Approaching 1931 levels, from what I can see...
Posted by Michael Dawson | November 13, 2008 2:18 PM
Posted on November 13, 2008 14:18
Seneca, I'm agreeing with op-san and Vickrey, that we could easily "help the middle class" (by which I myself mean help the bottom 90 percent) by good, classical Keynesianism, financed at first by big deficits.
The point is that, when the deficit is used for genuinely productive investment, it grows the economy, which grows the tax base, which closes the deficit used to launch the whole thing. WWII was Exhibit A of this process. You just build stuff that you need, and the gov't pays for it at first with borrowed funds.
But the Democrats are now firmly against Keynesianism, thanks to the Clintons, who made political hay out of Ross Perot's "deficit reduction" ignorance.
The basic problem, as Keynes himself knew it would be, is that capitalists will not tolerate the scale of deficit-financed public investment it would take to make the whole thing work. That would compete with capitalist sales and discredit capitalist ideology. Hence, they greatly prefer Depression to JM Keynes.
We could easily have a New New Deal, and it would work. But that's exactly the point that both parties must (and will) keep hidden.
Especially the Democrats, (kind of) ironically.
Is that better?
Posted by Michael Dawson | November 13, 2008 2:28 PM
Posted on November 13, 2008 14:28
Why not take the resources available and apply them directly to the things we, the general population, desire? And I'm not convinced that what we really desire are 'jobs'* and 'productivity'. What we really desire can only be determined when we are in a position to take action in that direction, however one can speculate...not being demeaned by a manager, might be desirable, e.g.
Incidentally: I think that power is what drives politics and that what we call 'economics' is simply a component, artificially detached in discussion, of politics; I think focusing singlemindedly on economics ignores, probably intentionally, the central issue--lack of democracy; I think that our present economic state is as efficient as it can be without those in power sacrificing some of their power.
*In orthodox discourse, such as in the WSJ, 'jobs' functions as a euphemism for profits.
Posted by Peter Ward | November 16, 2008 9:19 PM
Posted on November 16, 2008 21:19