Keynesian and leftist paradox

In his two articles, which we have merged into one for you, Adam Abelsky reflects on the paradoxes between the economic and intellectual thinking of the left. Consumption and consumption promoted by the left-wing economist JM Keynes, or inquiry and "anti-consumption" promoted by many left-wing intellectuals?

JM Keynes
JM Keynes

Lord John Maynard Keynes was a British economist who, in short, was the founding father of the economic theory of Keynesianism. The South Moravian Region has created an aggregate formula for the whole economy, which shows national income as aggregate demand AD, when AD = C + I + G (C - consumption, I - investment, G - government expenditure). Therefore, if there is insufficient consumption and investment (C and I), it is necessary to increase government spending (G). A very tempting theory, especially for politicians. An economic model already humbled by economic theory, but still used by politicians. The result of this theory is the growth of government spending.

The paradox of the left

Most left-wing voters are consumer people. Yet those who are most visible are left-wing intellectuals for the most part against consumption. Note Václav Havel, for example, asked why economies must grow steadily.

After all, the left has at its center altruism (concern for others, solidarity), which tends to disruption of our consumption, but not only that, at the expense of some higher (general) interest. The internal contradiction of the left therefore seems fundamental. It is succinctly stated the left against itself.

Although it seems strange, there is an explanation. Left-wing ideologies in their program have always had redistribution and thus a kind of apparent solidarity between citizens. Boarding John Maynard Keynes (hereinafter Jmk) and his economic theory, which was a very strong and glittering attraction for the left, was, however, defended in leftist ideology, apparently spontaneously. support for consumption, ie consumption through the state, and justification of budget deficits. By absorbing Keynesianism leftist ideology has come into conflict with itself.

Incentives are intended to support consumption and investment, which according to the South Moravian Region are insufficient (!) In times of crisis (the South Moravian Region still talked about period of crisis, while politicians seized these "drugs" even in periods of dynamic growth, because they felt the opportunities associated with it, but also the failure of the state would mean negative reactions from citizens). Keynesianism can be criticized, for example, in the methodology, yet the truth remains that the state of the South Moravian economy could describe quite well, it is no lie that there was less demand than in normal times, but unfortunately normative conclusions (what should be done) of these theories they are harmful.

The legacy of this important economist is therefore in left-wing programs leaves a lot of confusion. Probably someone will want to object to me that consumption is not automatically consumption, but it is a kind of exaggerated consumption, or rather a lifestyle of a society that focuses primarily on consumption. Society in recession is entering a phase where it is probably necessary to get rid of some bad investment and consumption decisions, ie somehow directs that consumption in the right or less destructive direction, and therefore if we prevent this by pumping state money into the economy, we basically support consumption as such. and we let him continue on a path that leads to the genesis of other bubbles and bad decisions. Now perhaps the point is clear.

Keynes's paradox

The paradox of the left is complemented by the paradox of Keynesianism. Directly in Keynes's consideration of insufficient aggregate demand is another contradiction in terms, if we consider demand as a phenomenon arising from a kind of psychological urge to consume and invest, as Keynes liked to explain with his help. animal spirit, so we would find that the solution of insufficient demand, ie an increase in government spending (G) will be reflected in zero way on the psychology or animal spirit of society and thus the mere consequence will be the creation of value without the demand of society (demand), thus only the share of the state in the economy will increase, while does not affect the causality of insufficient demand. It follows that this proposal is not only inefficient, as we already know today, but also static and not solving the problem, which the SMR itself defined.

The Keynesian argument would be that increased aggregate demand (AD) will stimulate economic activity and thus the animal spirit will change, the psychological wall will break. There is no logical or let's say theoretical looping here in the theory of the South Moravian Region, but we get a clear idea of ​​the dynamism of the theory of the South Moravian Region.

Thus, the South Moravian Region criticized the then mainstream (neo-classical economics) for the static nature that results from thinking in some special state (economic equilibrium), while he focused on the general state, which he considered dynamic and much closer to reality. However, if I return to the beginning of the theory on which he exhibited his economic and political proposals, I can show that the South Moravian Region itself is static in its analysis of the situation in recession, ie in a situation of insufficient AD. If he understood the development of AD constructed by him dynamically, he would have to conclude that the process, which is controlled by the animal spirit, cannot remain static in a dynamic environment.

In its dynamic perception of the economy, the South Moravian Region was not afraid to freeze that reluctance in society and thus create a starting position for arguments in favor of state intervention.

Note also for example rigid wages in JMK theory, which again may be rigid only if nothing happens in the economy, ie in a static state. However, if I perceive the economy dynamically, I must admit that, by its very nature, an economic actor can no longer wait motionless for a miracle from above. Have you ever seen a person who would not act and only wait in any difficult life situation?

Of course, wages can stagnate in a very short period, which is basically a very static period in the economy, but in the longer term it is more than clear that economic actors will make decisions and thus move with the whole wage and price system. Here it is evident logical lapse, which indicates the incomprehensibility of such a theory. It is no coincidence that neoclassical economists have locked the economy to a certain state. It is a logical procedure if you want to have a logically bulletproof theory, resp. paradigm. I'm not necessarily sayingthat the neoclassical approach is the only correct one obviously proves, however, that he demonstrates theoretical rigor throughout the Keynesianism. I would like to point out that the dynamic theories of the South Moravian Region and the approach to economics as a dynamic process of the Austrian school are something else. These are two different things.

Now to the dynamism of Keynesianism and the static nature of economic equilibrium. It follows from the above that JMK claimed its theory as dynamic, meaning the exclusion of its logical approach from the static state of economic equilibrium. However, the South Moravian Region did not realize, or deliberately neglected, one problem. In each of your logical processes, you have to stop that economic actor or the whole society for a while to be able to decide how the situation will develop further now. It's like when you study the trajectory of a moving car, you first have to stop the car and at that moment you determine its speed, direction of travel, centrifugal force and only then you can start saying what the next trajectory will look like, moreover only if you know that at that moment does not change direction, etc. (ceteris paribus). If you examined the car without stopping, the variables would constantly change and the result of the examination would be zero. He replaced this statics of JMK research with exogenously given axioms. For example, animal spirit, basically wage rigidity and more. JMK thus went around itself.

Now, the Keynesians should argue that the dynamic (general) state of the economy was perceived as a situation where markets are uncleaned and prices do not match demand and supply. Yes, that's right, but what does that mean? That we should examine the real situation in the economy? This brings me back to the previous argument about the impossibility of grasping purely dynamic values. Doing so in economic theory chyba, there is also a discretion between the interpretation of individual states and possible development. A fatal error can occur. The main problem is that as a result of examining such a dynamic state, we get to the position described above. In a position where we consider a state that is out of balance, we graft the static behavior of economic actors on it. Now perhaps the contradiction can be seen.

You can never study a dynamic process in motion, because your subsequent logical constructions break down in the dynamics of the process itself.

Now some of the empirical observation. The application of government spending in the 30s did not mean a recovery of the economy; on the contrary, the economy continued to wallow in trouble. The influence of state spending on animal spirit obviously didn't work, it's nice when the theory is confirmed in practice.

The article was originally published on the author's blog on iDnes.

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