The Daily Paul has been archived. Please see the continuation of the Daily Paul at Popular Liberty.com

Thank you for a great ride, and for 8 years of support!

Comment: Bravo!

(See in situ)

In post: .

Bravo!

Absolutely OUTSTANDING job standing up for principles and LEADING the discussion in what is truth vs. what is dogma. And ESPECIALLY outstanding in shutting down the person behind you who refused to think for himself.

Many of us have dealt with a mob of people who parrot the standard line, but few of us have had to do it in front of 150 people and a professor. So, congrats.

One reason that Keynesians get it wrong is that they view the economy in the aggregate, almost like a living, breathing thing. But the economy is NOT an aggregate. We use aggregate numbers to try to understand what is going on, but DECISIONS are made at the individual level, and often at the margin. So, Keynesians are constantly trying to "push on a string" and do not understand HOW they could be wrong, much less that they are wrong.

You might try the old natural disaster argument with the professor or class. Ask if a hurricane were to hit and destroy homes, there would have to be construction workers going in to clean up and rebuild. Ask: Would that disaster ultimately be a positive thing for the economy?

They are likely to say, yes. Then ask, but what about the OPPORTUNITY COST? Opportunity cost is something experienced at the individual level, not the aggregate. And it is something that is at the margin. Plus, it is literally impossible to calculate, so it does not resort into nice, academic formulas (which allows professors to write papers and books and get brownie points within their own subculture).

If insurance companies have to pay out claims for the hurricane, then premiums will rise for everyone else. If people have to pay costs such as insurance deductibles, higher premiums, and out-of-pocket expenses, then they lose the opportunity to do something else with the money, such as buy a new car, or take a vacation, or send their kids to college, or donate to charity to help the poor, or invest their money in the capital markets which would contribute to liquidity which makes it easier for companies to raise capital and employ more people.

Even if the people who have to pay for the natural disaster just wanted to use that money to pay for prostitutes, the Keynesian is hurting the livelihood of prostitutes and their needs for food, shelter, and clothing (well, maybe not clothing so much). ;-)

It is this opportunity cost that is simply IGNORED in the Keynesian model because it is not something that can be calculated in the aggregate, but it is a REAL factor within any economy.

If the professor thinks the natural disaster is a net positive to the economy, then simply ask him: Why don't you set your car on fire as a means of stimulating the economy?