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[mainiac]

Well throwing markets out entirely doesn't have a great track record.

[Eagle_eye]

No, replacing markets with dictatorial central management doesn't have a great track record.

[Reelya]

http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

from the Stalin-era to the early Brezhnev-era, the Soviet economy grew as fast as the Japanese economy and significantly faster than that of the United States.

Those central plans turned Russia from a much-maligned rural backwater into one of the industrial power-house nations.

They had a series of economic problems from the mid-1970's onwards, but those specifically popped up 50 years after the start of central planning, so it's intellectually dishonest to draw a straight line from Soviet planning, per se, to the shortages of the late 1970's.

There's really not a single LARGE country that got rich from Laissez-faire. Even most of the "miracle" low-tax countries like Singapore turn out to be run by a ruthlessly centralized economic bureaucracy.

Well, they love to say how great Russia was doing once they got rid of the Communist planning, in about 1990:

Spoiler (click to show/hide)

As you can see, if GDP had stayed on the pre-1990 track, the Russian economy would most likely be much larger today than it is. The economy post-soviet is in the toilet compared to before.

[alexandertnt]

It seems to me that the fact that there can be this much disagreement on what the proper policies are, despite the wealth of information available, is simply evidence that market economies don't work. We have the manpower and the resources to provide the necessities for all of humanity. Why do we have to make them dig ditches to get it? Markets make things that would otherwise be practical, like simply building housing for the homeless, or providing universal employment, impossible because of the potential side effects. I say just throw the whole thing out.

While some "socialist" contries did relatively well, their economic systems had plenty of disagreements on proper policies too.

I dislike capitalism as much as anyone else, but I don't think "just" throwing out the idea of the market economy straight out the window is the best idea. To indiscriminately throw the whole thing out seems like a bad idea derived from ideology.

To change from a market economy to something else (which I don't necessarily disagree with) would require time to more smoothly transition (the transition process would likely be quite complex), and it is likely that any new system would be fairly complex itself too. Wealth, labour, distribution etc are complicated things when dealing with irrational human beings on the scale on millions.

Peoples irrationality can be expressed as such:
Money Money money money money money money money money

It seems to me that the fact that there can be this much disagreement on what the proper policies are, despite the wealth of information available, is simply evidence that market economies don't work.

Is it?

No, replacing markets with dictatorial central management doesn't have a great track record.

Totalitarian and incompetent governments screw up countries. Someone would have to identify which bad parts of the country are caused by an alternative economic system as opposed to just bad governance, rather than looking at the country as a whole.

McCarthyism Diddn't help either (in regards to the opinion of anything not capitalist, the thought seems to make many people feel awkward even if the worst of McCarthyism has worn off).

[Frumple]

It seems to me that the fact that there can be this much disagreement on what the proper policies are, despite the wealth of information available, is simply evidence that market economies don't work.

To finish your sentence, since you cut off prematurely, you need the words, "on certain things." It's kind of a known thing, even among th'systems related to market economies themselves, that certain goods and services simply do not function as market economies. Pretty much everything that can be considered genuinely necessary*  is a problem for free markets, as I understand it. Some stuff just can't be influenced by market forces, or at least can't to the degree necessary to have a healthy system. Market economies are damn good at dealing with luxury items in general, stuff that the "invisible hand of the market" can actually work well on. Not so much healthcare when you leg just got cut off or gas, stuff like that.

*Sustenance-level food, shelter, health care, especially in emergency situations, transportation if it's required to function in a society. S'less of an issue when there's a surplus of any of those, but it's still a fairly fundamental "square peg, round hole" sort of situation.

[Helgoland]

Am I the only one who actually likes capitalism? Not in its present form, of course, but the basic idea appeals to me once you add a welfare state and some government interventions. It's sad how much bad politics is being done in the name of "capitalism".

[Sheb]

Nah, I dig it, generally speaking. But with reservations in some areas.

[scriver]

Once you've added a welfare state and goverment interventions you're in socialist territory, Helgoland. Just talking about "capitalism" tends to presumpt those out. You know, kind of like saying you like firestorms, after you've made sure it can't burn anyone and firefighters are present.

[Darvi]

I dig firestorms. 's all shiny and stuff.

[Helgoland]

How 'bout some middle ground: Social capitalism, Bonn Republic-style! (Soziale Marktwirtschaft, also known under the related term Rhineland Capitalism; the latter you can imagine as capitalism with a semi-paternalistic welfare state, and the former just cut out the paternalistic element.)

[mainiac]

Those central plans turned Russia from a much-maligned rural backwater into one of the industrial power-house nations.

Turning a backwater into an industrial power house isn't exactly an unusual feat.  That's what industrialization is.  You build a factory in a village, get a bunch of peasants move into it and viola you have an industrial town whose workers have dramatically higher productivity then before.  Plenty of places did this.  And plenty of them grew faster then the US while doing it.  When you are behind it's easy to catch up because there's tons of low hanging fruit in terms of processes to mechanize and technologies to import.  We're talking really obvious stuff here, the farmers don't have tractors and fertilizer so give them that stuff and you won't need as many farmers.

You'd need to argue that the Soviets were good at doing this process but they weren't particularly good.  They moved peasants into factories faster then most but they weren't good at running those factories in the long run.  It's not just that the USSR failed to achieve a higher living standard then the US.  The USSR was had a per capita economy about on par with Greece by the 1989.  If you prefer a 1970 comparison date that puts the USSR in the ballpark of Mexico.

[FearfulJesuit]

What mainiac said. It's absolutely true that the USSR's economy grew by leaps and bounds between about 1920 to 1960. But that's because the country was industrializing; industrial revolutions do miracles, but the trouble is, you only get one industrial revolution. After you've got your base of heavy industry, steam power and electrification, further gains rely on increasing productivity- and that's something that capitalism is very good at, unlike communism.

[Zangi]

What mainiac said. It's absolutely true that the USSR's economy grew by leaps and bounds between about 1920 to 1960. But that's because the country was industrializing; industrial revolutions do miracles, but the trouble is, you only get one industrial revolution. After you've got your base of heavy industry, steam power and electrification, further gains rely on increasing productivity- and that's something that capitalism is very good at, unlike communism.

Well, you also need a market... consumers at home and opening up markets abroad helps that process along...  free trade is it?

[GreatJustice]

And for their logic "there was no contraction of the money supply!" - the money supply was increasing at a MUCH slower rate than growth; that's a contraction by any sensible economic definition - less money per unit of production.

Wait, wait, wait, let me get this straight.

So the money supply was going up, but growth was going up faster, and by rather significant margins too. This resulted in overall price deflation. And you're saying that this means that it was a recession/depression.

I am pretty sure that in that statement he was arguing against the quote's claim of how "the alleged 'monetary contraction' never took place, the money supply increasing by 2.7 percent per year in this period", not directly about the goodness/badness of that deflation.

Okay. Yet he's also trying to argue that the period was actually a recession/depression. If there was net growth above 2.6% during the period where it hit hardest, then that's a rather silly claim. The definition of "monetary contraction" is only even debatably incorrect if the period was primarily characterized by growth, which completely undermines the rest of the argument.

Please, I feel like you're putting words in my mouth.

when I said "recession" i was echoing your use of the word in the prior statement:

So if you even consider it a recession, let alone a depression

...i was purely going off your use of the term, and assumed you were saying something which made sense (that the period was, or can be, considered a recession). Then, when I repeat your use of the terminology you jump on me with "AHA! you said 'recession' ". I was not making any specific claim about the period myself. It sounded like you were referring to it as a recession, so i used YOUR terminology in my reply.

My only point was to point out that GDP increasing faster than money supply is the same as a money contraction, for all practical intents and purposes. Any additional statements you tack onto that are your idea, not mine.

GDP growth precludes there being a recession, right? That's the definition. Which means USA is not in a recession right now.

Okay. So why did you bother making an argument? The fundamental question was whether 1869-1879 was a period of growth or not, and you didn't contest that so far as I could tell. Again, for growth to have outpaced the money supply, either the money supply was contracting (it wasn't), or there was growth in the first place.

By the definition of "recession", the USA isn't in one right now. However, the USA is also undergoing a distinctly shaky recovery that I'd bet $50 won't last five more years, which will then almost certainly be blamed on "Capitalism". Of course, that's entirely hypothetical and impossible to prove, but I haven't found many reasonable explanations as to how the recovery can continue when it's basically connected to Quantitative Easing efforts with increasingly short half-lives.

The ditch diggers would have found other, more worthwhile sources of employment, if at lower wages (an essential part of the correction, actually). The shovels would have been used to dig things consumers desired, or else not been made at all, the metal would have been used for something people wanted, the land would have been used more productively, etc etc etc

I am pretty sure that unemployment has existed even before minimum wages were created.

Not anywhere close to as much, even during periods of massive immigration and excess labour (eg. the Irish in the mid 1800s).

Reading the last few pages, you guys have really lost me. I guess being in the lower end of the income bracket, high economics is only a real abstract idea to me, so I have no idea what you guys are arguing. So, Greatjustice, could you please just succinctly sum up what you'd like to see the government do policy-wise?

Cut spending drastically, cut taxes somewhat less drastically. Ending legal tender would be helpful, but the Fed raising rates (slightly) would probably be sufficient otherwise.

depression

Well now, that one's easy. Actually, that's what killed classical Keynesianism for two decades.

That's not a depression.  Maybe before criticizing Keynesianism you should learn the most basic thing about the situation it is most important for?

One of the key properties of a Keynesian depression is that real interest rates are abnormally close to zero or outright negative for secure assets.

Seeing as we were discussing depressions and what stimulus does during depressions the fact that you would bring a non-depression as a counter example of depression situation behavoir shows either profound ignorance or dishonesty.

And no, Keynesian economics did not die in the 1970s.  A bunch of galt wannabes just went to hide in their treehouse and pretended they were the academic center of the universe.  Meanwhile the US and every other major market economy continued to operate on Keynesian principles because guess what... they work.

As always you have proven that the audacity of ignorance is boundless.  I'm sure that it is indeed easy to come to an incorrect opinion on a matter which you do not understand.

>That's not a depression

Uh huh. Well, there's a generally accepted definition for recession, which is two consecutive periods of negative GDP growth. There is no such generally accepted definition for depression, and the only uncontested example would be, surprise surprise, the Great Depression. The second most widely accepted example would be the Long Depression, which I'd say has been pretty soundly proven to not be much of a depression. So going by that, there has been... one depression. Whoop-dee-doo.

It would be very kind of you to, I don't know, provide a source or two, rather than utilizing bombastic, sweeping statements and declarations.

And no, Keynesian economics did not die in the 1970s.  A bunch of galt wannabes just went to hide in their treehouse and pretended they were the academic center of the universe.  Meanwhile the US and every other major market economy continued to operate on Keynesian principles because guess what... they work.

So the Supply Siders, Maggie Thatcher and Milton Friedman were Keynesian? Oh, not to mention I didn't say Keynesianism died, I said CLASSICAL Keynesianism died. Were you half as knowledgeable as you claim to be, you would have noticed the difference almost immediately, seeing as how they're two very different things these days.

One of the key properties of a Keynesian depression is that real interest rates are abnormally close to zero or outright negative for secure assets.

Okay. Well besides the fact that you're basically proving yourself right by creating your own definitions, there's also the fact that real interest rates actually WERE negative during this period.

http://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union

from the Stalin-era to the early Brezhnev-era, the Soviet economy grew as fast as the Japanese economy and significantly faster than that of the United States.

Those central plans turned Russia from a much-maligned rural backwater into one of the industrial power-house nations.

They had a series of economic problems from the mid-1970's onwards, but those specifically popped up 50 years after the start of central planning, so it's intellectually dishonest to draw a straight line from Soviet planning, per se, to the shortages of the late 1970's.

There's really not a single LARGE country that got rich from Laissez-faire. Even most of the "miracle" low-tax countries like Singapore turn out to be run by a ruthlessly centralized economic bureaucracy.

Well, they love to say how great Russia was doing once they got rid of the Communist planning, in about 1990:

Spoiler (click to show/hide)

As you can see, if GDP had stayed on the pre-1990 track, the Russian economy would most likely be much larger today than it is. The economy post-soviet is in the toilet compared to before.

Russian GDP grew because of a disproportionate amount of military spending, and inefficiency/waste only made GDP look bigger. The average Soviet citizen's life wasn't significantly, if at all, improved when GDP grew.

It's also worth mentioning that the Soviet Union's industrialization wasn't worth much at the end of the day. Yes, they ended up with an industrial nation and factories; most of them ended up being closed after the USSR fell because they were completely inefficient and out of date compared to the rest of the world. Furthermore, millions of lives were lost in the process of industrialization (primarily during Stalin's rule, mind, but later industrialization was built off of Stalin's initial efforts).

[mainiac]

GreatJustice, if the most basic knowledge of economics is controversial to you then there won't be much productive conversation.  The difference between a depression and stagflation is such a basic principle that someone who calls stagflation a depression clearly has no interest in economics.