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When everybody's fully employed, breaking windows to "create work" simply diverts income from one place to another at the current moment - people spend to replace windows that they would have productively used elsewhere.

But if the government spends money hiring unemployed and underemployed people to do jobs, even so crude a job as dig holes and refill them (though of course that's not particularly efficient, as it doesn't build capital), it can either take that money out of the system at a later date (i.e. deficit spending) or inflate it away via seigniorage. The point being that the shift in spending is temporal. And that's precisely what you want in a recession.

hiring people to destroy wealth is deficit spending and inflation. not sure where you're getting the "later time" bit.

this sort of jobs program is just welfare with the caveat that you have to be somewhere 40 hours a week. this helps workers save face. but the result is the same: value is being taken from one group and being used to prop up another. whether society as a whole benefits from such a safety net is a whole nother argument and I won't argue about the rightness or wrongness of such a plan here. but trying to transmorgrify the issue to obscure the means and ends is awful.

No. I think you're fundamentally missing the point, and moreover one of the most basic reasons for government.

Loans (deficits) shift expenditure from one time to another. Welfare and welfare-like policies funded by deficits (loans), in this branch's context of counter-cyclical policies, don't "take value from one group" and use it to "prop up another". They reduce consumption from the future, where hopefully we're richer, and increase consumption today, via loans.

a loan is predicated on the idea that the loaned money will be invested in wealth producing ventures, enabling a payback of principle + interest later. this is counter to the digging holes and filling them in bit, unless you plan on heavily taxing anyone who took assistance later on to make up for it. in which case again, why make them dig holes?

in the other case, where investment is made in a wealth producing venture, why is government needed? the only reason money isn't available for sound investment will be due to malinvestment brought about by shitty incentives in the first place.

also, WRT transferring future wealth to the present:http://unqualified-reservations.blogspot.com/2008/09/maturit...

Not to pile on, but I think you really are missing the point. The point of the current deficit spending (taking out loans) is not to invest in something that will create wealth later, it's to prevent the destruction of wealth now. That's what he means when he says it's "counter-cyclical" spending. We're smoothing out this negative GDP bump now by borrowing from a future positive GDP bump. You spend now to prevent a depression. When you pay the loan back you break even at best, probably lose a little, but it's better than not doing anything at all.

If you don't agree with this kind of macroeconomic reaction then that's the argument you should be making. To disagree with these loans because they can't possibly turn a profit just misses the point.

okay so the premise is that the government spending prevents a depression. this is based on an aggregate demand theory of the business cycle. since i'm supply side I doubt a debate would be very productive. neither one of us is going to budge the other from their axiom. I've tried to understand demand side economics and I can't.

I just sent a 40 pound box clear across the country UPS ground for less than $30. Say what you want about the bailouts or makeworks but our interstate roads are a freakin' national treasure.

I'm sure its possible to spend too much on roads but I don't think we've ever come even close. (I also think that while people are a bit more relaxed about owning that bit of "investment property" that they may one day build a house on and retire, it might be a fantastic time to greatly expand our railway lines.)

Great, except no ones spending the money on roads. 99% of its going to entitlements (year long extension of unemployment), money to states to shore up their underfunded pension plans, and a nice $250 bribe to our elder population.

The free market runs on firm failure, not just firm success.

To an outsider, the problem seems that the current establishment, posing as laissez-faire, has made an art of "privatizing the benefit, socializing the loss". With a bank, no one is risking the chaos of millions of people stripped out of their savings, roaming and ransacking. The prevention measures differ.

For example, Sweden nationalized a bank which nearly bankrupted, thus punishing the stakeholders by removing their profits. The USA just pays them more money. The message is clear: let's resume the financial bonfire, because risk pays.

At the end of the day who are more "libertarian", the socialists or the neo-liberals?

According to Keynesian theory, government spending improves money circulation throughout the whole economy in a way very similar to how bypass surgery improves blood circulation in the whole body. If you distribute money to people who need it (generally, the unemployed,) they'll end up spending it on important services (the hope is) which will end up in the much needed pockets of those providing the sevices, who will spend it on much needed services, etc. Government spending is a mechanism for redistributing the wealth in a way that saving won't swamp, for the economy is a sociological phenomenon.

However, it is to be argued that distributing money randomly in public works isn't exactly the best way to handle it. The previously unemployed are not the most likely to build businesses to find sustained employment, to create wealth for the economy. Random public works are not so likely to create wealth for the public. There's the possibility to do much better; unfortunately the simplified Keynesian analysis doesn't capture this.

One example of a terrific project is microfinance. These loans give people a chance to create actual sustainable businesses. The loans are repaid at a rate of nearly 97.7%. What this shows is several things. The first is that the capital of microfinance can keep on giving. At this repayment rate, the capital can be given out 30 times before it's at half of the initial amount. There's thus a huge multiplier effect there. Furthermore, the repayment comes from the proceeds of the operation. Hence, in 97.7% of the cases, the businesses that are funded will keep on going -- another huge multiplier effect. On a giving basis, there aren't enough dollars in the world to solve poverty: with a system like this, there might be.

even the relatively intelligent and contrarian crowd on HN doesn't like hearing this. there's no way we're not screwed in the long term.

The parent post was modded down to -1, but had no replies. That is NOT appropriate on this site.

You only downmod for spam and stupid comments. If they are wrong they go to 0. If you disagree then reply, but you don't downmod just because you disagree.

he was at -3 when i originally responded. I can understand why a comment like that gets downvoted. to the other side it sounds like pretty bald rhetoric. unfortunately the broken window fallacy is very much with us. most people don't grasp the underlying difference between money and wealth, which is why I'm constantly handing out PG's essays.

You only downmod for spam and stupid comments.

That is still under discussion.

http://news.ycombinator.com/item?id=1057347

(The linked comment is not the most current comment on the issue, I'm pretty sure, but one that came up readily by searching.) An older comment by pg

http://news.ycombinator.com/item?id=117171

appears now to be superseded in part. I will follow the group culture here where pg (the site founder) and the moderators take it.

in reality people will always vote in accordance with making the thread look more like they think the thread should look.

As others have pointed out, we were screwed in the long term anyway. We (1) ran deficits through the previous decade, (2) we left the interest rates too low for too long and (3) we went on a spending binge in all levels of society (consumers bought too much, banks lent too much).

The time for making the correct choices has long passed. Now there are only bad choices and worse choices. If we hadn't done (1) and (3), then running deficits right now would be a good option. After a certain point, increases in debt begin to dampen growth in GDP, which means that the gov't won't be able to stimulus away the problem anymore.

In that light, the current administration is merely doing what makes sense. Spend whatever amount of stimulus makes sense during their tenure because the economy will need it whether it's now or later. Not spending it will mean that whoever is the challenger in 2012 may well win, and whoever the challenger is will probably dish out stimulus money in some form or another anyway.

The world still has a lot of wealth and is continually generating more wealth. The financial system is imaginary enough that our best macroeconomists can probably sort out the collapse of US government debt. It won't be pretty, but it won't be the end of the world or even the end of the USA.

yes, humans run a surplus. but what do they use that surplus for? I'm concerned about the underlying lack of critical thinking when it comes to basic economics. finance majors shouldn't be the only people to understand marginal utility, preference ranking etc. these things impact everyone every day of their lives.

I used to rage at all the ignorance on display even among the more thoughtful/non-violent libertarian types. But I've lately become apathetic. The same arguments have been going around and around since the time of Cato the Younger. The more history I study the more I believe that humans are not going to save themselves by virtue of critical thinking about social engineering. It's basically technology or bust. And that is a dangerous game. Sorry for the melodrama. It's late.

I graduated from college 3 months ago and didn't get a real job and I haven't been looking for a real job. My Tim Ferris-like businesses pay the bills so I've had a lot of time to read on the internet. I also figured out how to keep up with the comments on Less Wrong, and it feels like being able to comment there without getting downmodded for being wrong has really changed my thought patterns. I'd really recommend trying to read the recent comments page and reply whenever you can say something that isn't wrong, even if you need to minimize yourself by adding lots of phrases like "I think."

I've basically given up on politics. I self-identify as a left-libertarian, but I think most left-libertarians are deeply misguided, just like most right-libertarians. Most right-libertarians can't even see that they have a great deal of shared beliefs with left-libertarians. Anarchism is just my favorite political utopia; not a pragmatic ideology. Some hybrid of left and right libertarianism would be much better in practice than either extreme. Political discourse needs a healthy dose of meta-discussion.

An example reason why I've given up on politics: We know exactly what is happening with global warming, the IPCC report from 2007 is basically correct. Global warming is happening, and thousands and thousands of animal species are going to go extinct, and hundreds of millions of people are going to have more trouble getting food and water. That's bad, and we should be doing a lot to stop it, but it's basically too late to stop. The current argument about global warming will just preserve the scenarios outlined by the IPCC in 2007.

So the left misses that global warming has absolutely no chance of bringing the end of human civilization. And the right misses that global warming is certainly happening and is still really bad, even though it isn't going to bring about the downfall of human civilization.

My private discussions since my Less Wrong post about the Craigslist Revolution have actually lead to some very interesting private discussions about saving humanity with social engineering, but you're right, it's basically technology or bust. I'm an optimist.

The US government debt is all in US dollars. Who controls the value of the US dollar? Yeah. Do the math.

Oh yeah. Drop the value of the USD by 50%, I dare you. So tell me, what doesn't the USA import?

For the most part, our politicians. Notable exceptions being gov of California.

Not sure that we import many weapons, since we make so much at home.

We have lots of corn and pigs.

So what's the point?

My point is that the sudden doubling of the price of oil and every other import would have a profound effect on the USA. It might be desirable anyway, despite the cost, but it is not something that can be done on a whim without any consequences, as the parent to my comment seemed to suggest.

"In the long term, we are all dead." J. M. Keynes