My God, you are an idiot.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

I don't think it's a transfer at all. I think there is a natural business cycle and the natural tendency, in normal times, is toward growth. On the other side of the canyon there is always a wall of height roughly equivalent to the one off which the economy had fallen. Once the private sector kicks in and starts the boom/bust cycle again, the equilibrium is near what it was when the recession started, and it usually moves upward for a time from there. Then there's a recession, and the process repeats.

Keynesian policies are the bridge. Nothing more, nothing less.

This is wrong. The point of Keynesian policies is that they're not just a bridge to where you would get to eventually. They help you get to a better place than you would otherwise. More like a subway than a bridge.

His point and mine don't clash. Ours is a disagreement in terms of degree. He says Keynesianism ensures the other side of the recession is at the same level. I don't think that's true. Keynsianism just speeds up the end of the recession, and picks winners. It keeps the status quo where if Hayek had the wheel, new winners buying the assets of losers would take over on a slower time table.

No no no. The first paragraph of that post again:

One of the most important ideas of 20th century economics was Keynes demonstration that Say's Law does not hold for whole economies. Say's law argued that economies will right themselves - tend to equilibrium - at full production. Keynes showed that will economies tend to equilibrium, they don't tend to equilibrium at what is called a "Pareto Optimal" state. That is the point where there are no "win-win" situations left, in specific terms no one's utility can be increased without an exactly equal decrease in someone else's utility. Sometimes the ship of an economy rights itself, by sinking to the bottom.

Keynes says you may reach equilibrium at less than full production. That's the point. You need Keynesian policies to get to full production instead of an inferior equilibrium.