Fiscal Policy and Stimulus: Crash Course Economics #8
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- เผยแพร่เมื่อ 27 ก.ย. 2024
- In which Jacob and Adriene teach you about the evils of fiscal policy and stimulus. Well, maybe the policies aren't evil, but there is an evil lair involved. In this episode we learn how government use taxes and spending influence the economy. Sometimes the government gives, and sometimes it takes. And the giving and the taking can have a profound effect on how economies behave.
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Sitting in quarantine trying to learn more about the economy... interesting how this video aged
I’m watching rn and before she said riots, I was thinking how we’re all unemployed, and getting mad 😂
*Main outtakes of this lesson*
1) _Recessionary gap_ - a situation wherein the real GDP is lower than potential GDP at the full employment level.
2) _Inflationary gap_ - the amount by which the actual gross domestic product (GDP) exceeds potential full-employment GDP.
3) _Macroeconomics_ - the study of the entire economy as a whole rather than individual markets.
4) _Fiscal policy_ - the way a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
a. _Expansionary Fiscal Policy_ - stimulates the economy during or anticipation of a business-cycle contraction.
b. _Contractionary Fiscal Policy_ - enacted by a government to reduce the money supply and ultimately the spending in a country.
c. Classical theories assumed that the economy will fix itself in a long run, and that government intervention will, at best, lead to unintended consequences and, at worst, cause massive inflation and debt.
5) _Deficit spending_ - the government spends more money than it collects in tax revenue.
a. _Crowding out_ - where increased public sector spending replaces, or drives down, private sector spending.
b. Keynesian economists maintain that _crowding out_ is only a problem if economy operates at full capacity, where all workers are employed and we're producing as much as we can.
6) _Austerity_ - raising taxes and cutting government spending to reduce debt. In crisis of 2008 was main policy of EU, which led to worse results than deficit spending policy in US.
7) _Multiplier effect_ - the initial increase in government spending of 100$ might turn out to be 175$ worth of actual spending in the economy.
a. When the economy is booming, multiplier is close to 1x.
b. When economy is in recession, the multiplier is around 2x.
c. Spending on infrastructure, and aid to state & local governments , also seems to have fairly high multiplier, about 1.5. But general cuts to payroll and income taxes seems to have a multiplier of about 1:. If the government cuts 100$ in taxes, the economy is going to grow by about 100$.
+Сергей Галиуллин Thanks a lot, man! Спасибо большое!
Austerity isnt raising taxes its just cutting the budget. Secondly it didnt bring worse results... the German and Dutch economies are growing and are healthy whilest the Greek, French and Italian economies suck due to the lack of austerity.
Thank you.
Сергей Галиуллин thank you!:)
oh my god, thanks, this eps is harder than other and it confuse me a lot
At the beginning I was looking for the skip ad button...
heheheeh...me too
feludaify me too loo
lolzz..xame here
I swear, they're so extra. And I love it.
The lady is cute!
Hey Crash Course, can we get a "why are we learning this" series? I'm a middle school science teacher and my kids always ask this question. Many times I am able to relate material to life but sometimes it's a struggle and I know it is for other teachers in science and other subjects as well. It would be fantastic to introduce a subject with a short video explaining different layers of importance of certain subjects as well as specific topics within them.
+Ryan Owens That'd be awesome
Inorganic Vegan will have a good comment on this in the future.
+Ryan Owens It's in the first video I believe.
It's pretty simple to me. You're learning about money. Everyone needs to learn how to deal with money.
+Ryan Owens Well, of course most stuff you learn in school is only the theoretical and doesn't directly translate into real life applications. Just because i know calculus i don't necessarily know how to build a car. But, and that's the point, have you ever tried to do so without calculus? It would of course never work. That goes for sciences as well as any other subject. From my experience this is one of the best explanations to show students why school education is important for their very lifes.
Where i come from teachers are supplied scientific journals (the schools pay for them) so that teachers can expand on the real life applications of their subjects and get the students interested. It is a shame that this doesn't happen everywhere, but that's how it goes, i guess.
+Ryan Owens For physics I have a technique. the first who ask why they learn physics, just throw something in their face and comment with "you learn physics to understand what just happened" and then you may talk about Newton's laws of inertia !
+Ryan Owens
Man, you are a teacher, it's YOUR job to cope with this.
But the easiest answer would be: If you don't learn it, I'll make sure you get bad grades and you'll not graduate at all or don't get into a good college (or non at all) as a result you'll have to work as a stripper or some other shitty jobs, being bossed around my morons, for the rest of your miserable life and die early and in poverty. You are competing here with the others, and those who loose this competition this early will be the bottom of barrel of society for the rest of your lives. Society disdains and punishes uneducated idiots.
Even most middle school kids understand this kind of logic, and if not, there's no hope anyway due to lack of intellectual capacity. Don't waste resources on those, where it is wasted, focus on those that have potential.
Oh yeah, you might want to add, that most NFL pros are bankrupt 5 years after career end, due to their inability to handle simple maths (=money) and drug dealers tend to have on average a rather short life span and model career won't work with that face, so these are no alternatives either.
Not nice, but it's true and will work at a lot better than trying to make up a reason, why it would be essential to have a grasp of a Bose-Einstein condensate or fluid dynamics.
Let the economics melee begin!
ACDCLeadership We need the belt
Cheers for this, been searching for "recession proof shares" for a while now, and I think this has helped. Have you heard people talk about - Teysaiah Recession Stopper - (Have a quick look on google cant remember the place now ) ? Ive heard some awesome things about it and my mate got cool results with it.
It's good to see you on crash course, bud! I watch your videos on your channel and now they're here! :D
You talk super fast
I'm surprised you didn't make more use of that really expensive looking under ground lair set.
+Hen Barrison They literally just introduced it and we're not even halfway through the series. The stuff from the intro video was footage from this episode. Wait a couple of months before coming to conclusions.
+Hen Barrison Pretty sure that's a TH-cam Space set, not a specifically designed Crash Course one. Think I've seen it in a few other YT's video's.
+Ted Cullen (Twister) Yep, was used in a Warp Zone video as well.
+Ted Cullen (Twister) Yep, was used in a Warp Zone video as well.
+Hen Barrison Thats not a set, that's Stan's bedroom.
I've learned more watching 11:53 minutes of this than the whole semester at my University.
i am watching your videos for over an hour now, which is literally saving me from failing my macroeconomics test tomorrow morning. you explain that stuff way better than some profs in university as your videos are perfect to understand mathemetically complicated theories! Greets from germany and lots of thanks for all the work :-)
As you said, Keynes also said that in inflation times - when the economy is running well - the government should increase taxes and decrease government spending. The problem is that many countries do not do that, so their debt rises and rises. That's one of the main problem many countries nowadays have in my opinion.
Friedmann=anti-Keynes=wrong
GIVE US CRASH COURSE PHYSICS, DAMMIT!
..nice video, by the way.
+Sexual Potatoes FYI: Hank updates a Physics playlist on the Sci-Show channel. But I agree, a Crash Course series on the subject would be great.
They need about $8k more per month to have the funds for it. See their patreon page.
+Sexual Potatoes cc english please!!!!!!!
I want a crash course computer science.
Zach Glover nah you need to be able to practice that right after you hear it go to khan academy
"Maybe it's about that thing you didn't have in sixth grade: *confidence* ."
Gurl, please. It's been years since then, and I STILL don't have that!
I would love to see sources on Crash Course videos. Just a "we used these papers for sourcing" type deal. Allow some of us to dig deeper if we want.
@CrashCourse, I would really appreciate if you guys had a recap/ summary of the main points we've learned at the end of all your videos like how Hank Green does on his SciShow videos.
Thanks for putting this together!
Now I can make informed decisions while making my opinions on government policy AND better manage my economy while playing Galactic Civilizations 2 and the like.
+Michael Turner I just put space malls everywhere I can put 'em :)
+Michael Turner
throw a coin.
+Michael Turner GalCiv 2 and the like have unfortunately limited economic models. Bonus: You don't have to deal with recessions.
Not until you study the critics of Inflationism and mercantilism.
Read Bastiat, Hazlitt, Hayek, Mises, and Rothbard, or watch the "Keynes Hayek rap" on youtube as a good pop introduction.
Loving this series so far, you guys are doing a great job, I was skeptical at first but keep it up guys!
mgs1398
You should remain skeptical. This is little more than pro-Keynes ra ra nonsense.
"Maybe it's all about that thing you didn't have when you are in 6th grade: confidence."
I still don't have it by now.
it's a bit fast...hard for beginners to catch.
This helped me grasp this concept SO much easier. I was lost and thought I'd fail my essay. I am extremely grateful for this video and the rest of the economics series. Keep up the great work.
The comparison to the US and EU policy did not take into account the massively different interest rates those countries where paying for debt that the effect that expansionary spending would have on the interest rates of new debt. Greece is the most extreme, with the interest of 10 year loans getting to over 40%. Meaning if had an expansionary spending where government debt spending was 10% of it's GDP, after 3 years interest on ONLY the new loans would be 12% of GDP. No one believes that Greece would ever get the growth that would allow them to pay that debt, so the debt rate only goes higher. US debt interest on the other hand was only ~2%, so the cost of expansionary spending was very low for the US. You can't cover everything, but that was a big key when comparing US and EU spending. Also, the main reason the US did not see much growth in spite of spend $800B, is that when government debt went from 70% of GDP to 100% of GDP, private sector debt when to ~260% of GDP to 200% GDP, causing a net loss of 30% of total debt over as a percent of GDP over ~6 years.
Sure, but it's hard to compare economies full stop. When you want to, you have to comprimise. The US compared to the EU is never going to be perfect but it's not the worst comparison and it was convenient to explain fiscal policy as they used different ideas of economics to respond to similar crises.
+99thTuesday Actually, any comparison involving the US and another country IS the the worst comparison. After 2008 the US turned on the money printers and let the rest of the world who uses dollars (including th EU) pay for their spending. If the EU got to take money from the US instead im sure they'd have grown more and the US less.
+Loathomar I don't think they were trying to say the EU made the wrong decision or who made the correct one, but rather they tried to show the difference in how those actions affected growth. We just want to learn how the money works.
+PajamaMan I think you are right, and yet I agree with Loathomar that the way the numbers were presented gave a somewhat misleading view of the situation, or let's say one that does not factor in all possibly very relevant circumstances.
I would have found it better to look at some countries in the eurozone individually.
PajamaMan Learn how money works is great, but it means compare apples to apples. The US could do expansionary spending where is the results of expansionary spending in Greece or Spain would have been bankruptcy. The comparison for the US and Germany or the UK is fine, as those countries did not face a high interest rate but much closer to the US at less the 4% interest.
I normally would've found the idea of an Economics crash course being co-hosted a little ridiculous, but these two are just so dorky and engaging and adorable. Love the work!
Very relevant right now!
The fallacy that government spending creates jobs is hardly older than the rebuttal to it. While it is true that even a broken window helps the glazier to get some cash, the person who pays the glazier would otherwise have spent that money elsewhere. This means that no new capital has been created. Only the direction of spending has been altered. The same principle applies on a national scale; as the money used to build a road or a bridge isn't conjured out of thin air, but is simply a redirection of where that money would have been spent. So not only have you not created jobs, but you may well have destroyed some. All this before we get to the problem of national debt and inflation.
+Barry Gormley What? every dollar spent on roads or infrastructure will bring back and least 2 dollars back to the government on the long run. It also injects money in the economic loop when it's freeze by economic pessimism. Windows break, there is a demand for window repairs. Cars break, there is a demand for car mechanics, it's all part of money circulation, but if money circulation is slow, there's no one better than the government to start it back again.
+Barry Gormley Expansionary fiscal policy IS the altering of the direction of where money is spent
+hillcon45 At least two dollars that would have been spent anyway, just not in the same place. Again, broken windows do increase demand for window repair, but only because you need a new window more than you need a new suit, or to eat in a restaurant or countless other things that you could have spent that money on. This means that all you've done is swift demand toward one industry at the expense of at least one other (and I do mean "at least"). Of course economists who advocate government spending will only point to the increase in employment within the window fixing industry, and this will keep their readers/students/employers from realising that there hasn't actually been a net increase in employment over all.
Barry Gormley A grocers window breaks during a storm, the grocer pays a glazier to repair it, he pays his suppliers which than pays its employees which goes to the grocers to buy their lunch. It's a loop, it's 1000x more complex, but it's what it is.
hillcon45
A grocer's window does not break during a storm. The next day the grocer goes to a tailor and buys himself a new suit. The tailor pays his suppliers who then pay their employees who go back to the grocer to buy their lunch. Same thing. And yes, I'm aware that the materials to make the suit probably came from over sees, but we're keeping it simple.
It's easy to say that economic policy by the fed helps regulate the business cycle, but historically, it hasn't had a measurably positive effect on the economy. Since the creation of the fed we've had larger depressions, not less.
It's easy to say "Oh, it could have been worse," but that can only go so far when it's always the answer to failures.
+Sgman1991 In the long term, it would be amazing if there was no measurably positive or negative effect on the economy. In the short term it is somewhat measurably, but you are always measuring theoretical economy. This theoretical economy can be reasonable estimated by comparison it to other economies. Not just the EU, but China, Japan, South America, ect. If all economy are doing bad, and your economy is doing OK, it is likely that what you are doing is good. If all over economies are doing great and you are see reasonable growth, it is likely that what you are doing is bad. Also, even though government debt jumped from 70% of GDP to 100% of GDP, private sector debt when to ~260% of GDP to 200% GDP, causing a net loss of 30% of total debt over as a percent of GDP over ~6 years. If we had just shrunk 60% of US GDP worth of debt over 6 years, it is reasonable to say it would have been worse.
Thats right but it also makes sense, since you have to make sure that there is a cash flow to run the economy
+Sgman1991 "Since the creation of the fed we've had larger depressions, not less"
Ha ha ha ha ha ha, no. Seriously, did you just spout the exact opposite of what history says is the truth?
You need the fed to regulate the supply of money unless you want the gold standard again which historically couldn't survive crises.
+99thTuesday I'll take the gold standard over fiat currency and 0% interest rates all day
Unemployment is at 5.1%, but the labor participation rate is at an all time low. The way Unemployment is calculated doesn't really tell the whole story.
In deficit spending, you're borrowing money to (possibly) enhance the economy now. But at what cost, really? It's intergenerational debt. The debt we have now will never be repaid in any of our lifetimes. That seems like extreme taxation without representation. Literally a tax on the unborn. Hardcore.
+UnknownXV
Which is in principle not THAT bad, as the money is used to create value. The next generation doesn't only inherit the debt, but also the assets (e.g. infrastructure, universities, laboratories etc.) created with this money. So you need to balance the debt with the assets. Making debt ain't bad in principle if you invest it and the ROI is higher than the cost of capital.
The only problem here is, that we all know, how efficient governments work, as their resource allocation is not based upon maximizing efficiency, but maximizing the politically intended effect.
Actually, the real unemployment rate is like 11%.
Frank Schneider It's more that this decision is made without any representation for them, given they literally aren't even alive yet. Deficit spending doesn't feel moral if it's accumulating so much debt that it can't be repaid in the generation of those who accrue it to begin with. Especially given there's no guarantee there will be any value from it.
We had a lot of deficit spending during wartime. In fact, this made us less safe. We spend money to create a negative. It's rare that deficit spending is directed towards infrastructure, which is one of the few things which probably yields a positive result.
UnknownXV
I am not a big fan of deficit spending either, but it's not as black and white as you painted it. All the money spent went somewhere, including sensible investments, like schools and universities etc, which ensures our current state of living. But I certainly do not negate the fact, that a lot of this money was certainly wasted.
I love how extra the intro is
Who else is watching in 2020
Love u Adriene , your teaching ! Thank you all for making such videos which are very helpful in understanding economics .
One major problem with the US unemployment rate: Most of the drop of unemployment has resulted not from people finding jobs but from people dropping out of the labor force whatsoever and quitting their search for a job.
it's good to see informed Americans
According to who? According to the BLS the number of jobs in the U.S. has increased by 4.5% since 2014
Source?
Other than the writings of Hazlitt, Bastiat, Mises, Rothbard, and Hayek available in free pdfs on Mises.org, a good place to start when thinking about the economic history of these neo-mercantilist experiments is with the financial analysts who spelled out how the 2008 recession would occur.
Peter Schiff, David Stockman, Jim Rogers are a good place to start.
I love Evil Stan Voice. GIFF ME MOAR!!!
Classical economics is akin to the physical world -as- Keynesian Economics is to altering the behavior of atoms (fiat currency) and molecules (fiscal policy).. and grants the "alter-ee" immeasurable power over reality.. if he can keep it in check, if not well...
Hayek FTW! Make a video about Hayek theories!
Marshall & Lily teaching you life lessons!
Yeah, can't say I wholy agree... The big problem is that this tool is cursed to fail by design, since it's usage will be always tending towards improving political agendas then fixing the economy.
+Sangwa There is no evidence to suggest that this is the case. In fact, this looks a lot more like a political talking point than a serious economic hypothesis. Funny, that.
Robert Richter
In other words, you disagree but cannot articulate, much less formulate, the reasons for your opinion.
The thing with tax cuts is that they're not created equal either. Cutting taxes on those who don't have much would have a greater multiplier than those who do. But you acted like everyone is taxed the same.
+Alverant They didn't specify, theres a difference ;)
+Alverant tax cuts are always beneficial. In one case they increase spending and other case they increase investments. Both result in jobs creation.
They literally said that the multiplier is much lower when taxes are targeted at higher incomes, that are more likely to save rather than spend.
I get more out of these CrashCourse presentations that just about any other resource I'm provided with. I've written entire papers with the material from a 10-minute video. NICE JOB!!
Crash Course Sociology? Crash Course Tale of Two Cities?
Recessionary Gap , Inflationary Gap , Macroeconomics , Fiscal Policy , Expansionary Fiscal Policy , Contractionary Fiscal Policy , Deficit Spend , Crowding Out , Austerity , Multiplier Effect .
Jacob, you speak too fast. STAHP! D:
+Ali Haleem is it haram are you going to decapitate him
Ali Haleem It's not inappropriate, it's just a name.
I am a very sexy set of potatoes.
+Sexual Potatoes they both speak too fast !
Ali Haleem It's ok, bb
+Jay Crunchy sorry
During the 'great moderation' in the 1980's Thatcher and Reagan hated fiscal policy!
Keynes: Y'all mind if I BREAK SOME WINDOWS???
Awesome underground lair set!
To prove that deficit spending is preferred than austerity, you gave the example of the U.S. vs. the Eurozone after the 2008 crisis, where the U.S. did spending and its economy grew, while the Eurozone had austerity and its economy contracted.I don't think you can compare them both. It's oranges and apples. U.S. has a strong economic structure, and only experienced a server debt crisis, but overcame it... on the other hand, Eurozone has very shaky political and economical structure, and the fiscal policy between Eurozone countries varies... so I don't think you can compare them. And besides, the U.K. and Germany both did austerity after the 2008 crisis, and yet their economies grew, and their unemployment was less than in the U.S.... As economists, please be more carful when you draw conclusions between two economies, and especially when it's about a hot political issue....Anyway, I still very much enjoy your videos, keep'em up!!Thank you
unless what????? OMG the suspense is killing me!!!!!!!
Uploading this when the GOP debate is on... you win this round Green Brothers.
It might have been helpful to discuss the debt-to-GDP ratio controversy caused by the Harvard study and the jaw-dropping revelation that Excel errors may have led to these divergent recovery approaches. It's still the most tragicomic thing I've ever heard, especially when you look at the suffering of the Greek people, and wonder how things could have turned out differently.
I feel like this debuted about a month too soon. ....was intended for Halloween and got a little too stimulus and jumped the gun.
Theres something I dont understand...
So people are complaining inflation is high and prices are high, and they dont have enough money to buy their needs. So the government prevents people from spending(by raising taxes) to reduce inflation? Those people are already in pain because they cannot buy enough... That sounds more like aggravating a problem.
I understand that inflation is the rate of increase of the prices of products.
How do expectations about the future by households and businesses affect the effectiveness of fiscal policy?
Is she crying at 10:56? Great video anyway, loving the series.
According to the U.S. Census Bureau report "Income and Poverty in the United States: 2014" released this month, the rich got richer and the poor got poorer from 2006-2014. Unemployment rate might have gone down but only because people gave up looking for work so they aren't counted. It's "educational" material like crash course is why history repeats itself.
Who else is here for the ib Econ test?
This is such an awesome series. Keep up the great work, guys!
Here's an idea - low taxes, low govt. spending.
At some point you will bring up Friedman, Hayek, and Mises right? The Fed? Printing money? Taken us off the gold standard? Petrodollars?
This comments section: people who can't handle that economics is largely Keynesian.
+TomHasVideo *New Keynesian
No one analyzes economics through purely Keynesian models anymore. Check out DSGE models
+The Revolution Even though it's taught fairly regularly in sch....
Ya you're right, no one will remember it.
+TomHasVide Schools of economic theory change over the course of history. think of economic theories like fashion trends. fur will be in vogue until something new comes around to replace based on someone wearing it well. all it take is the successful execution of another school of thought to change the dominant school.
The Revolution It would be silly to assume that economic models shouldn't change.
Iznikroc I completely agree, with the most obvious example being Austrian economics. It's not that Austrian economics became completely discredited, it's that the merits from Austrian economics became incorporated into the currently mainstream synthesis.
TomHasVideo Well, I think because macroeconomic models are only about a century in development its definetly silly, but not because models have an inherent transient quality to them.
Best intro/outro thus far.
Did she just compare laissez-faire economics to bloodletting and Keynesian economics to modern medicine? Wow.
Erm do you have a problem with that? It was a good analogy imo.
This is supposed to be a non-partisan educational series. They're flirting with the line between presenting unbiased educational facts and pushing a political agenda. The theory of modern medicine is based on scientific and clinical research. They study the effects of treatments using control groups so they know what happens when they do and don't give patients the treatment. Bloodletting was an idea that someone made up and it seemed to work so they ran with it for hundreds of years without ever really examining the evidence or testing their hypothesis. Bloodletting is a dead idea not worth spending any more time researching. This is what people mean when they make that comparison. Both Keynesian economics and laissez-faire capitalism are theories which can and have
Been empirically tested and each has been found to have its own merits. There is lots of debate as to which is better and in what circumstances. I personally think that the evidence speaks for itself unequivocally, but research is a never-ending process. We need to keep studying both and testing hypotheses in the pursuit of improving human life.
Comparing laissez-faire capitalism to bloodletting is asserting that it no longer needs to be looked at seriously and can be dismissed as quackery. That is far from the truth and only serves to deter people from giving it any serious thought.
UserNameAnonymous Perhaps you're taking it too seriously?
Feynstein 100 - Yes, I take it very seriously. The spread of false information like that can affect millions of lives.
UserNameAnonymous Lmao that's overreacting a bit. But I do agree that false information shouldn't be spread.
Detailed analysis
"In the long run, we're all dead" LOL
Fiscal policy (A way that the government steps into the economy to prevent excessive inflation or stimulate sluggish economy. The means are "government spending" and "taxes")
1. Expansionary policy
- When the economy is in a recession, the government increases government spending (reducing unemployment rate) and reduce taxes (stimulating consumption).
2. Contractionary policy
- When the economy is growing too fast, the government decreases government spending and increases taxes (reduces government and consumer consumption).
3. How effective?
- The U.S. government implemented expansionary policy in 2009, and it seemed like a failure. However, in the most of the European countries that exactly did the opposite (contractionary), the unemployment rate was raised and GDP got lowered. Economists conclude that the situation could've been worse if the U.S. did not implement the expansionary fiscal policy.
Keynes model worked great for Argentina...
oh, wait...
Great intro and ending!
Don't ever put Empire Strikes back and... that _other_ movie in the same sentence ever again.
You guys are doing a great job 😁
Yes crash course :D
What if government spending goes to foreign entreprises and foreign work forces? Does it help stimulate the economy as well?
yeah.... taxes were only raised on the poor and working classes here in the UK, since they don't vote much, the Tory's cut the taxes of the super rich and corporations
+Field Marshal Fry baaaaa
1. NEVER trust a government official who has no shadow!
2. When that musician got his $50, he actually used all of it to pay down his debt from the equipment purchases he'd made three years ago. He's still hungry.
The intro was the most accurate part of this video. slow down the agenda pushing please.
Hayek all day!!!
Keynesian economics is the mechanism that fuels Crony Capitalism.
+Q-Hack! Nonsense.
truth.
maybe
+Q-Hack! Do you believe in evidence at all, or are you just in the baseless accusations business?
+Jesse Weber The evidence pretty much speaks for itself. The very definition of Keynesian economics allows the government to spend money where they think will do the best good. Sometimes the government will get it right. Most of the time, not so much. The whole system plays right into the hands of those who can afford lobbyist. Ever wonder why Washington DC has some of the richest people living there? Hob-knobing with politicians can be quite profitable.
never studied Keyenes, but just a key sentence that economy is not working well when people are not producing as much as they can makes me shiver. slavery? brutal one? is that when people producing as much as they can? working from dawn till dusk?
+Black Ami Keynesian economists do not advocate slavery, nor do any other economists that I am aware of. The economy isn't working well when there is high unemployment, factories lying dormant etc. it isn't implying that everyone should work 15 hours a day as slaves.
Slave labour is less productive than free labour.
But one aspect of Keynes that modern scholars misunderstand is the emphasis on full employment rather than full production as the goal of economic policy. Keynes adopted this error wholesale from the mercantilists. But for the mercantilists full employment DID mean its frank corollary: forced labour.
But if you took this reasoning seriously it should be quite a simple task to create full employment, simply by destroying capital. Have the government mandate businesses to drive their construction equipment into the sea to make use of labour.
Or socialist make work schemes. Keynes was fond of the idea of pyramid building, or employing the state to burry bottles full of money, and using business to dig it back up.
These are the type of mercantilist fallacies that Bastiat demolished by the beginning of the 19th century.
The concept of capital accumulation is completely absent from Keynes system, and this is the root of his hostility toward saving and investment. He ascribes the future rise in human welfare to an abundant millennium brought on through credit expansion.
+SlayerSC2 "it isn't implying that everyone should work 15 hours a day as slaves."
what does it imply? " everyone should work 18 hours a day as free people"? naturally, working 18 hours people who told that they are free are more productive than working 15 hours people who realize that they are slaves, right?
+PrivateAckbar thanks, that makes things clearer, except one, are you supported of Kaynesian economy ?
Something tells me the intro was over budget
Graph at 2:00 can be described as riding a bike. We started to study economics, we learned how to reduce our periods of decreased GDP, but that didn't mean we had learned how to ride our bike over a pot hole and not crash.
Indeed, at financial turmoil, government spending is very useful for a period of no more than 2 years, and that to eliminate political incentives. In a stable economy, only well-reasoned and targeted stimulus to specific sectors is necessary
When the government tries to decide for the transactions of millions of citizens with different opinions, who know what is best for themselves, something get wrong.
but they aren't saying that. That's North Korea, and pretty well no-where else
@ Adriene I love your sense of humor and the way you look at Jacob when he talks makes me laugh 😂
Thanks for this Wonderful Course Team!
Just one error to point out (behavioural economics): a musician wouldn't save 50%
European countries are using austerity methods mainly because eurozone is multinational monetary unions and not currency of single nation, where it is much easier to take risks..f.e by taking out loans for investments.. Also debt isn't that bad for USA because it is relatively easy to deflate the currency (dollars)..when as in Eurozone deflating a currency would mean that countries that where doing relatively well will be draged into a pit as well..
Honestly, you guys speak way too fast, you have to realize that people come to your channel to learn and retain information.
In the settings you can slow the speed down... also pause and re-watch as necessary.
take notes and rewatch the lecture.
speeding down is funny
but the next slowest speed is 0.5 times aaannnnddddd tttthhhhhiiiiiisssssss iiiiiiiiiissssss wwwwwwwaaaaaaaayyyyyy tttttttooooooo sssssssssllllllooooooooowwwwww
it's called crash course for a reason.
Debt is only one of the problems. Another, possibly worse, problem is that temporary government spending creates bubbles by feeding money into less efficient decorous of the market that won’t be used nearly as much once the private sector is relied upon to choose where money should be spent. When these bubbles pop you get back to unemployment
Yes, you can speak for the Eurozone, being "less successful". But that's the Eurozone, with it's massive problems such as, ooh, I don't know GREECE, and SPAIN, and ITALY, and their massive debts. The UNITED KINGDOM's GDP, however, is also growing, by 2.6 in 2014 and our unemployment in 2015 is 5.4%, a fantastic measure. And that's under 5 years of limited austerity under the coalition government. That's with 1 hand tied behind our back. This government is going to bring in more economic policy which will decrease unemployment even further, and reduce taxes, whilst reducing spending, and the economy's going to get even better in this country, whilst reducing the national debt.
You make a good point about the UK being a better comparison to the US than the EU for structural reasons, however the US is growing faster and has a smaller budgetary deficit than the UK which suggests a benefit to deficit spending.
+99thTuesday Or a stronger economy to begin with. For what it's worth, Germany has a 4.7% unemployment rate and grew their economy by 3-4% during the austerity years. They've since plateaued, as the Greek situation hit German banks especially hard, and they've been funneling money to bail Greece out.
End of the day the comparison used was patently misleading and unfair. There's a case for the government to make use of cheap labour to build infrastructure during economic downturns, but overall Keynesian policies just sow the seeds of new bubbles.
+Johan Järvinen There's certainly a case about the risk of new bubbles being made out of the attempts to fix the old. However, I've always attributed this to the expansion of credit through monetary policy to address crises rather than fiscal policy responses. I appreciate your reference to the benefits of using cheap labour and would add that the 'parable of the broken' window suggests at least some benefit to Keynesian policies.
The problem I have with using Germany as a comparison is that it had an artificially lowered currency through the crisis and were able to export their way to growth. It's one of the same reasons I wouldn't use China as a comparison
+99thTuesday Sorry, I meant to say the critiques of the broken window.
The broken window is used to imply that destructive practices can be beneficial to the economy, which honestly isn't a very solid position, nor very relevant.
What I was trying to get at was that there are always certain infrastructural needs which in general have to be fulfilled by the government, but which will be beneficial to the economy afterwards. Conducting these works during a recession is both cheaper for the government and helps create a better basis for new growth (for example if the IT infrastructure were improved on). Or it could address lingering issues, such as the disrepair of bridges in the U.S. (which funnily enough the U.S. Recovery Act only spent less than 5% on, with infra spending as a whole being around 110bn of what ended up being a 830bn stimulus).
You could have talked about Friedrich Hayek while mentioning Classical theory and how the US economy boomed by 1950 following his theory.
What are you talking about? Are you saying that Franklin Delano Roosevelt followed Friedrich Hayek's theories? Have you read Hayek?
HAYEEEEEK
Very educational!.. pls. crash course philosophy! tnx :D
at 7:05 I was like "I thought u.s. debt went over $10t already, what happens to the clock?"so I googled and, guess what, another digit is added to it.
that is so sarcastically convenient as how congress raises the debt ceiling
Keynes`s policy is working in USA so well because americans consume almost exclusively national made products (imports comes mainly in the form of extremely exclusive luxury goods, let`s say italians supercars or extremely cheap goods, let`s say clothes and other stuff from China, Bangladesh etc. ). Also it is a very large federation. EU is not a federation at all. For instance you can`t really apply Keynes`s policy in Romania, because those workers that would get employed in the works, will spend their money on second hand foreign clothes, cars, electronics or even foreign food. You need to have a strong economy to do that, but also a protectionist consumer.
>EU
>Austerity
Yeah, Okay. The only EU country that had any semblance of austerity was Estonia, and the multiplier effect is just a Broken Window fallacy. To add to that Hoover was not laissez faire in any sense.
You're a joke. The EU did go austerity very much. It was big news for a long time and many protests.
You don't understand what the broken window fallacy is. Spending money on useful things is not a broken window
+orayole I agree Broken window fallacy isn't about disputing whether or the multiplier effect is real. If anything, it's more about whether or not destruction or war is good for the economy. .
+orayole
The EU did go Austerity ? I guess this is why public debt in most countries rose by roughly 20% in 2 years. You call that Austerity ?
Not a single country actually reduced its spending. They all, Greece included, spend more money today than they did in 2008. How is that austerity? Growing less is not shrinking, regardless of how loudly local governments claim it to be.
Thanks
Jacob needs to talk more slowly
Yes im from the south and i can not follow him at all 🤣
I like the first part of the intro way better.
Hmm...
So in the case of the US, the recovery would have been worse without government spending (because I have a crystal ball), and yet the "Eurozone" grew less with austerity, but no free pass that maybe more austerity was needed.
Uh-huh.
And of course comparing the US to the whole Eurozone is perfectly apt, as the US was attempting to save Canada (those damn Canadians!) from insolvency at the same time. Please ignore Latvia and Iceland.
Maybe there needs to be a Crash Course on Logic, and not misrepresenting facts.
+quintessenceSL This is exactly a good point. I don't support austerity only but I guess in the statist way of thinking about things, its logical. But yes Keynsianism always gets a free pass and will say it would have been worse if we didnt do anything, but then now if persons said we needed more austerity the keynsians would have held their arms up in the air. ( its funny that the "austerity" they spoke about didn't even achieve budget surpluses but only cut the rate of spending which is basically what the US does ) the only reason the US can get away with what they do is because of their reserve dollar status.
You can't do controlled experiments in economics. It's hard to compare differenr economies and they did say that this was only the view of 'most economists'. I think they're trying there best to make things simple tiounderstand while still presenting the mainstream views of economics (whether they turn out to be right or wrong)
+Damien Dunn
It's even more bizarre to speak of stimulus spending when there were multitudes of infrastructure projects that were neglected prior to the recession, that were somehow also neglected with stimulus. I mean the NHTSA rated bridge safety prior to the recession as D-. After stimulus spending it is now at D-. Several trillion buys a lot of bridges, but I suppose public safety is secondary to bailing out banks.
At that gets to the crux of criticisms about stimulus spending. Even the most hardened austerity supporters would grumble but concede that if you are going to stimulate the economy, you might as well get something for your dollars that will hopefully have a payoff long term.
Instead they are sold that all spending is equal, and there is no way anyone would ever abuse such a situation. No sirree! And at the end of the surplus, you are left no better off than before.
Except now you have gargantuan debit too.
+quintessenceSL
Indeed, if economy breaks, there will be a lot more dead people because of that, than from a breaking bridge (or 2 or 100). Most people don't understand that there is a direct correlation between GDP and life expectancy (and also causation). For every dropped GDP percentage point people die.
+Frank Schneider
If infrastructure falls apart, you can be most assured even the most robust economy will crash and may never recover. To simply look at it as a few dead people from bridge collapse instead of millions dead when goods can't be shipped is incredibly short-sighted.
Tell me how points of GDP do you lose when goods can't be transported? How many people die when medicine can't be shipped?
Wow. I both love and hate this video. So much good and bad.
1. Why is there a business cycle, what drives it?
2. Is potential GDP really a thing or a bad concept?
3. Why was there Great Moderation of GDP change? Was it good, or did it cause/lead to the crash? Or did it make the crash bigger?
4. When was the last time government policy promoted full employment?
5. What drives an economy into going 'too slow' or 'too fast'? Are there government policies that do this?
6. Why did the Australian stimulus work even better than the US one?
7. Was an expansionary fiscal policy during the mining economic boom what made Peter Costello Australia's worst Treasurer ever?
8. Do we want the economy to grow?
9. Why do economists still predominantly follow classical theory and yet this is presented in the video as antiquated medical practices?
10. What is government policy that encourages consumer spending called? How does that work?
11. Why do governments need to pay for deficit spending? They control the money pyramid. Why do they need to borrow money?
12. Has crowding out ever been a problem? Has there ever been full employment?
13. Since Aus currently has 2million workers looking for more work why does Gov not continuously apply expansionary fiscal policy to reduce the unemployed?
14. Gov interest rates are completely different to consumer interest rates - and this is way more complicated than this flippant comment.
15. Why did US 2009 expansionary policy work so poorly?
16. If US unemployment fell to 5.5% why has its (2015) Worker Participation rate fallen to 63% and still falling?
17. Why are they discussing a debunked concept like the multiplier effect? This was the biggest failure of the US 2009 stimulus.
18. Why are they called Keynesian theories when they differ so much from his ideas and are far more similar to Hicks?
19. Why were banks and private debt not at all discussed in relation to any of these ideas?
20. The rest of the video was actually really good and I enjoyed it! :D
I know you guys try very hard to sound unbiased, but your bias for Keynesian economics still shows.
Its not bias when the data bears it out.
@@Hyperpandas show me that data then
@@ericterry4335 Yeah, sorry... 70+ years of data doesn't fit in a TH-cam comment. Maybe note that major government is engaging in fiscal and monetary stimulus right now, regardless of political persuasion. Oh, and the countries who turned to austerity during the last crisis watched their recovery slow as soon as they did (e.g. the UK).
@@Hyperpandas The world also was engaging in communism regardless of their political persuasion.
go back a little further and everyone was engaging in slavery regardless of their political persuasion.
Saying that everyone's doing this and using it as evidence is easy and just as often wrong.
Here one more for fun. A few decades ago everyone was buying beanie babies as investments regardless of their political persuasion.
As for the bit about classical economics slowing recovery the slowest recovery is the great depression and the 2008 financial crisis only occurred after direct control was attempted by government. That's still circumstantial evidence but it's a lot better evidence than simply comparing the very different economies of America and Europe. Better would be comparing the economy of America to the economy of America where there is plenty of repeated evidence including like it or not economic growth under Trump only recently. Of course if that riles you there's plenty more evidence back through history
@@ericterry4335 Please provide your understanding of what communism is.
hilarious opening and ending
This is PROPAGANDA!!! They never mentioned AUSTRIAN ECONOMICS!
Looks like they forgot to mention that there is a multiplier effect for when people save money in the banks. Since the reserve requirement is 10%, banks will lend out the other 90%. Whoever borrows the 90% will then spend it, thus creating the same affect as government spending without having the government debt.
James Leslie Yes but if you encourage higher spending the impact is greater because 1) 100% of spent money is spent, unlike 90% of savings 2) Skips the problem of a liquidity trap 3) Banks can invest in fixed income.
Taxation is theft, theft is bad for an economy
Taxation is not theft. Unless you want to be charged separately every time you walk or drive on a road, be charged for maintenance of electrical network in addition to the electricity you consume every time you turn on a light, etc...
Taxation goes towards common goods (infrastructure, education, healthcare, etc), aiding new businesses to develop, etc...
+Entropy3ko If I went to your mother's front door with a gun and said "give me money so I can put flowers on my lawn or I will lock you in a cage" is that not coercion? But the federal US gov't does just that via taxes, demands your money with the threat of force or incarceration to put hundreds of thousands of dollars of flowers on the White House lawn every year. Even the common good services are funded by theft. Just because an end is good doesn't entail that the means are moral. Whatever the government does is coercive therefore aggressive. Violence does not productively grow an economy in the long run. The government doesn't build infrastructure, people in construction companies do, without the government redistributing (inefficiently) money to these services, drivers would still pay companies to make and maintain roads. The government has a monopoly on roads, and forced monopolies are unjust and inefficient. Voluntaryism.
Tommy Boyle and the Party of One
"" If I went to your mother's front door with a gun and said "give me money so I can put flowers on my lawn or I will lock you in a cage" is that not coercion?""
Yes but that is not the same as taxation.
First of all taxes pay for necessary goods. Where do you think the money came from for building the wires that make the electricity go into your PC, the fibre that transports internet data, tubing that transports clean water and sewer.
If you are happy to live in a place with no taxes, but also no electricity (unless you have some sort of generator), no running water (have fun digging a well) and no communication (unless you opt for smoke signals) be my guests.
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"The government doesn't build infrastructure, people in construction companies do,"
Let's avoid this rhetoric nonsense. Yes the president himself does not go down to dig ditches, but those construction companies are paid by the government.
Unless you have PRIVATIZED infrastructure... in that case you would have to pay the single companies... and you would be much worse off
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"without the government redistributing (inefficiently) money to these services, drivers would still pay companies to make and maintain roads."
You assume companies would treat you fairly... privatization, most of the time, leads to monopoly and people getting screwed.
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"The government has a monopoly on roads, and forced monopolies are unjust and inefficient. "
Only difference is that the people have something to say about the government. They can elect their officials.
How many rights you have with private companies? ZERO.
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Yes governments can be inefficient or even bad, granted, and total lack of privatization is also bad (ie communism), but most EU governments are pretty good and the US government is not that bad either.
+Entropy3ko Necessary goods and services don't need to be provided by the government was what I was aiming for. Yes the government pays for infrastructure but where do they get the money? Coercion called taxation. Why does there have to be a monopoly on government services? In fact people get power from solar panels, i do have a well that provides water for my own home, i would much rather directly pay a private company for only the roads my family uses than be forced to pay for the government's monopolized service. It's not that I don't want people to have the services, i think it's unfortunate people are forced at gunpoint to pay for things they may or may not use
No they don't, but since in the private sector earnings count far more than general well-being, privatization is usually bad.
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"In fact people get power from solar panels"
Good luck using your PC at night LOL
Jokes aside many governments actually finance people to get Solar Panels, which are still very expensive.
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" do have a well that provides water for my own home"
Good for you. Only problem is that not everyone can dig a well, since underground clean water is not ubiquitous.
Also governments demand regular checks on water safety (at least good governments)
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" i would much rather directly pay a private company for only the roads my family uses "
Yes and than that company will squeeze you dry.
Imagine Apple in charge of roads. They would remove traffic lights and charge you for it haha.
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"I think it's unfortunate people are forced at gunpoint to pay for things they may or may not use"
The only problem is that you use the, all the time. Even if YOU personally never drive, all the goods you get are transported and much of that transportation is made possible by common infrastructure.
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What you want is perhaps anarchy. It has never worked.
I don't know why, but the voice at the end reminded me of: "Ladies and gentlemen, the president of America, president Camacho!"...