To be fair, Keynes did outline how this business cycle works, but from the perspective of aggregate demand. If this channel is still running, I'd recommend an explanation on Minsky's financial markets hypothesis, it seems more and more relevant for modern recessions.
This theory is like "I told you so", it has remedy for problems but it is to be done before the negative events start. Its doesn't tell about what to do when we are in a bad situation. For coming out of the downturns we must rely on other theories.
A theory doesn't need to explain a particular intervention to get out of a problem in order for it to be valuable...in the cases outlined, the economy adapting (or the shock being removed) helped things recover. The problem is people keep on panicking and clamoring for the government "to do something" which may, in reality, just plant the seeds for the next shock (e.g. a credit bubble).
Even modern economies suffer boom-bust cycles the source of which is the operation of land markets (land broadly defined as all of nature and assets with an inelastic supply). Whether money and credit are systemic as well or better described as externalities continues to be the subject to intense debate. Ricardo was on the right track as he developed his "law of rent," if he had only extended his analysis beyond that of agricultural land. The real high rents arise as a claim on production as population growth occurs in cities. As Henry George observed, it is the failure of the community to collect societally-created rents to pay for public goods and services that forces government to tax earned incomes, tax capital goods and tax commerce -- all such taxes imposed serious deadweight losses on economic output while enriching non-producing "rentier" interests. The result is and has been a land market cycle lasting an average 18-21 years going back several hundred years.
Minor question: Why is Hayek's head used alongside Friedman and Keynes as opposed to Mises. Wasn't it Mises who laid down the bulk of the theoretical groundwork of the Austrian businesd cycle in Theory of Money and Credit?
James Taylor yes but Hayek opposed keynes who was very popular and (sorry for the political term) he was the republican to Keynes's democrat. It was really more about press. But your right in the Mises did much more
Would it be more correct to present a supply shock such as a oil one as a shift of the SAS only ? The potential growth is supposed to stay constant for a while and to possibly shift only after a while if there is a change in the long run determinants of the LR growth , or am I missing anything?
Because oil is priced in U.S. dollars, the price goes up when the dollar goes down. Nixon's devaluations after August 15, 1971 inflated the price of all commodities when measured in dollars. A falling dollar made oil cheaper to other countries and made it smarter for sellers (including Texas; not just OPEC) to hoard oil for a while rather than sell it.
Yes, OPEC raised the price of gas but what about the affect of monetary policy on OPEC. Following the end of Bretton Woods and the Gold Standard, the Dollar lost a third of its value over the course of the 70's. As OPEC dealt in PetroDollars, it seems like there might be some link between monetary policy and OPEC's increase. Also in reference to Brazil, you mention the government instability and poor regulatory practices, doesn't the government set monetary policy? In other words, it seems that RBC explains the precipitating market factors leading to downturns, while treating monetary policy as if it were static.
One also has to consider that real business cycle theory is incapable of explaining why inflation is often negatively related with GDP growth. A leftward shift in the supply curve should cause aggregate prices to rise; however, both Japan during the 1990s and the US during the Great Depression experienced deflation in a time of falling GDP. Real Business cycle theory seems more well suited to explain the Stagflation of the late 70s and early 80s.
Yes. I think that aggregate supply refers to Real GDP and Aggregate demand is rather the spending or the desire if to spend on goods and services which is calculated as GDP
To be fair, Keynes did outline how this business cycle works, but from the perspective of aggregate demand. If this channel is still running, I'd recommend an explanation on Minsky's financial markets hypothesis, it seems more and more relevant for modern recessions.
This theory is like "I told you so", it has remedy for problems but it is to be done before the negative events start. Its doesn't tell about what to do when we are in a bad situation. For coming out of the downturns we must rely on other theories.
A theory doesn't need to explain a particular intervention to get out of a problem in order for it to be valuable...in the cases outlined, the economy adapting (or the shock being removed) helped things recover. The problem is people keep on panicking and clamoring for the government "to do something" which may, in reality, just plant the seeds for the next shock (e.g. a credit bubble).
Thanks You This Video Was really helpful.
The terma you told i never heard before it is amazing
Even modern economies suffer boom-bust cycles the source of which is the operation of land markets (land broadly defined as all of nature and assets with an inelastic supply). Whether money and credit are systemic as well or better described as externalities continues to be the subject to intense debate. Ricardo was on the right track as he developed his "law of rent," if he had only extended his analysis beyond that of agricultural land. The real high rents arise as a claim on production as population growth occurs in cities. As Henry George observed, it is the failure of the community to collect societally-created rents to pay for public goods and services that forces government to tax earned incomes, tax capital goods and tax commerce -- all such taxes imposed serious deadweight losses on economic output while enriching non-producing "rentier" interests. The result is and has been a land market cycle lasting an average 18-21 years going back several hundred years.
Minor question: Why is Hayek's head used alongside Friedman and Keynes as opposed to Mises. Wasn't it Mises who laid down the bulk of the theoretical groundwork of the Austrian businesd cycle in Theory of Money and Credit?
James Taylor Mises isn't in this video...
Aristotele il filosofo Reread my question again - slowly
James Taylor Done, i'm sorry :/
probably because Hayek is just better known than Mises
James Taylor yes but Hayek opposed keynes who was very popular and (sorry for the political term) he was the republican to Keynes's democrat. It was really more about press. But your right in the Mises did much more
Would it be more correct to present a supply shock such as a oil one as a shift of the SAS only ? The potential growth is supposed to stay constant for a while and to possibly shift only after a while if there is a change in the long run determinants of the LR growth , or am I missing anything?
Because oil is priced in U.S. dollars, the price goes up when the dollar goes down. Nixon's devaluations after August 15, 1971 inflated the price of all commodities when measured in dollars. A falling dollar made oil cheaper to other countries and made it smarter for sellers (including Texas; not just OPEC) to hoard oil for a while rather than sell it.
Economists forget that they aren't psychologists they can't really predict human behaviour in a competitive market.
Yes, OPEC raised the price of gas but what about the affect of monetary policy on OPEC. Following the end of Bretton Woods and the Gold Standard, the Dollar lost a third of its value over the course of the 70's. As OPEC dealt in PetroDollars, it seems like there might be some link between monetary policy and OPEC's increase. Also in reference to Brazil, you mention the government instability and poor regulatory practices, doesn't the government set monetary policy? In other words, it seems that RBC explains the precipitating market factors leading to downturns, while treating monetary policy as if it were static.
Neoclassical model does not take monetary policy into account
One also has to consider that real business cycle theory is incapable of explaining why inflation is often negatively related with GDP growth. A leftward shift in the supply curve should cause aggregate prices to rise; however, both Japan during the 1990s and the US during the Great Depression experienced deflation in a time of falling GDP. Real Business cycle theory seems more well suited to explain the Stagflation of the late 70s and early 80s.
I think they covered this when they showed how demand also decreases.
Question; The real business cycles refer to real GDP?
Aggregate Demand = Real GDP
Aggregate Supply = Real GNP
I guess so.
Yes. I think that aggregate supply refers to Real GDP and Aggregate demand is rather the spending or the desire if to spend on goods and services which is calculated as GDP
Fuck economics. The more I try to learn about it, the more confused i become