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Scotty71
Scotty71
Joined: Mar 5, 2011
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November 9th, 2012 at 4:32:47 PM permalink
i'm fine with more time...I might be slow in my judging but I'll try to look at the thread every day.
when man determined to destroy himself he picked the was of shall and finding only why smashed it into because." — E.E. Cummings
chickenman
chickenman
Joined: Nov 1, 2009
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November 10th, 2012 at 3:23:23 AM permalink
I'm good. The time constraints were artificial, if the debaters have decided to waive them then those are the conditions henceforth.
Croupier
Croupier
Joined: Nov 15, 2009
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November 10th, 2012 at 1:30:58 PM permalink
Quote: chickenman

I'm good. The time constraints were artificial, if the debaters have decided to waive them then those are the conditions henceforth.



Agreed.
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bigfoot66
bigfoot66
Joined: Feb 5, 2010
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November 10th, 2012 at 1:45:35 PM permalink
I'll have it up by the end of the day Sunday. Its been nutty at work. Thank you all for your patience.
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bigfoot66
bigfoot66
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November 11th, 2012 at 8:38:20 PM permalink
Sorry guys, I am a slow writer. I worked on it 4 HOURS yesterday and have spent another hour tonight. I promise to post it no later than monday pm, I am off work tomorrow and should be able to clean it up completely by then. Hopefully you will find it to be worth the wait.
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bigfoot66
bigfoot66
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November 12th, 2012 at 11:46:06 AM permalink
Introduction

Economics is the study of how man allocates scarce resources, and the field is divided into two spheres, microeconomics and macroeconomics. Microeconomics (micro) is the study of how individual actors allocate scarce resources through production, consumption, and trade. Macroeconomics (macro) is the study of how resources are distributed within the context of the entire society. Economists like Paul Krugman who write articles in the newspaper or appear on TV are almost always discussing macroeconomic topics, concepts like GDP, Stimulus, Balance of Trade, Currency Markets, etc are all macro. While there is very little controversy in microeconomics, there are many schools of macroeconomic thought and government policy is predicated on macroeconomic analysis. I do not hold an economics degree, but my arguments here are based on my understanding of the Austrian School of economics. I also want to remind the reader that economies are very complex. Please understand that I may oversimplify some concepts in order to explain them well. My examples are especially simplified and I assume people do not engage in force or fraud. Keep in mind that I speak ceteris paribus, holding all other factors constant.

In a micro analysis, it is clear that rational people acting in their own self interest leads to the best total results for those involved. If I offer to trade my ham sandwich for your cookies, I must prefer the cookies to the sandwich, and if you accept you must prefer the ham sandwich to the cookies. We are both be better off if we trade, and I have referred to this before as an economic miracle because value is created, and in this case without any additional goods or services being produced. I argue that what we call “the economy” is simply 300 million people engaging in production, consumption, and mutually beneficial exchanges. Since each individual trade in a free economy is voluntarily entered into and improves the position of all parties involved, taken together the entire free economy represents the most good for the most participants in the market. Just like no system of bets can overcome the house edge in a negative EV game, any set of free chosen contracts must be beneficial to all parties involved. The Keynesian argues that my analysis is accurate on the micro level, but the market on the macro level is affected by the ‘animal spirits’ in man. The bull and the bear affect consumer confidence and ultimately leads to the business cycle in the larger economy.
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bigfoot66
bigfoot66
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November 12th, 2012 at 11:46:49 AM permalink
Keynesian Business Cycle Theory

At some point during a healthy market people start to lose faith and start saving more and spending less. Maybe a young couple puts another $100 in the bank instead of going out for cocktails with friends one weekend. The drop in consumer spending leads to less income for the bar they would have gone to. This causes the bar to spend less on alcohol, and the alcohol company spends less on grain, so the farmer spends less on…. etc. Lower demand leads to lower income leads to lower demand: the economy gets worse and worse. Employees are laid off as production decreases. As more and more of the work force is unemployed the cycle feeds on itself.
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bigfoot66
bigfoot66
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November 12th, 2012 at 11:47:29 AM permalink
The Keynesian Solution

Let’s say the economy is capable of producing $100,000 worth of goods per year but consumer confidence has shrunk so that people only are spending $70,000 per year and stuffing the rest in the bank or under the mattress. The society is missing out on $30,000 worth of production because people and resources sit idle, and the Keynesian solution is to find a way to artificially pop up demand. While the situation will usually sort itself out eventually over time, we can get a free lunch of sorts by having the government borrow money to pay those unemployed people to be productive. The classic example is New Deal era programs like the CCC, but the government does not have to directly employ people, just about any spending will work. How many of us (especially in Vegas) have a brother in law who was a damn fine welder but hasn’t been able to find work since 2009? Why not have him work on building a new wing at the local elementary school instead of watching Judge Judy all day until the economy fixes itself? Not only do we end up with a better school, but now he will spend more money at the restaurant, which will then be able to employ another bartender, who will gamble at the casino, which will…. This idea that government stimulus money will continue to benefit people as it changes hands is called the Keynesian Multiplier, and it means that $1 in government stimulus spending will actually increase the total production in the economy $3 or $4 because of the ripple effect from the dollar moving from pocket to pocket.

Note that while Keynes did write about the ‘animal spirits’ theory, Keynesians will also argue that a contraction in the supply of money coupled with ‘sticky prices’ can play the same role as the drop in consumer confidence. In classical economics, we assume that prices are directly related to the amount of money in the economy. Simply printing additional money does not make society any wealthier as prices will rise accordingly. Imagine that the supply of money were magically sliced in half overnight (while still being distributed as it was before). In the long run, we would not be any poorer than we were before, but it would cause some initial confusion in the economy and then prices/wages would fall in half as well. The Keynesian argues that the short term ‘confusion’ will cause the economy to seize up considerably and could lead to a depression because prices and wages are ‘sticky‘. For example, a produce distributor might have futures contracts with farmers to buy corn at $10 a bushel 8 months from now, or a union labor contracts commit an employer to continue paying his workers a certain wage (with built in raises!) for the next four years. In addition to contractual agreements, there is a sort of inertia in the movement of prices. Think of the economy as like a 1960’s era grocery store where the items are all labeled with a price sticker, it takes a lot of time and resources to reprice things. So the reduction in the supply of money has the effect of temporarily raising real prices which leads to a decrease in demand. It is this decrease in demand that Keneysians claim causes a recession.
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bigfoot66
bigfoot66
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November 12th, 2012 at 11:48:14 AM permalink
Introduction to Austrian Theory

The Keynesian system is what so many of us assume is real economics. As Nixon famously said, “We are all Keynesians now.” The major fallacy made in the Keynesian analysis is that all demand for goods is lumped together in one big number called AGREGATE DEMAND. They do not make enough of the distinction between consumer goods and investment goods, like factories, or destructive spending like war. Pure free markets is not only the most moral way to organize men, it is also the system that maximizes the creation of value.

Keynesians typically agree with me that during a period of healthy growth in an economy, minimal government intervention in the marketplace is best. We might disagree on topics like welfare payments to the disabled, for example. But both schools of thought teach that a free market typically steers the economy pretty well during periods of growth, and that a more productive economy is generally better for all participants of the economy (compare this to Marxist thought, which teaches that a more productive economy harms laborers). We differ radically on how to create more value for society during recessions. The Keynesian diagnoses the problem, as I outlined above, as a drop in aggregate demand caused by a drop in consumer confidence, a contraction in the supply of money, or both. The boom period reflects healthy growth and the bust period is an unhealthy time that needs to be countered so that the economy can reach its full productive capabilities. The analysis is exactly backwards, we should fear the boom and allow the bust to run its course. Please note that the boom period of the boom bust cycle is not the same thing as a period of healthy growth.
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bigfoot66
bigfoot66
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November 12th, 2012 at 11:48:51 AM permalink
The Role of Prices in an Economy

When I refer to ‘the price’ here, I am referring to the price level for a good that clears the market and leaves neither shortages nor excesses. At a lower price consumers demand more and producers supply less of a product, and as the price rises the amount demanded decreases and the amount supplied increases. Consider the table below which compares the number of ham sandwiches that would be demanded and produced each day in Fernly, NV at various price points.

Price Amount Demanded Amount Supplied
$5 180 30
$7 110 40
$9 60 60
$11 25 120


In our example it is clear that the price will settle at $9. Exactly 60 people will successfully try to buy a sandwich, and the producers will exhaust their stock. Imagine that the mayor of Fernley, hoping to win the favor of the hungry ham consumer, told the chief of police in Fallon to arrest anyone caught selling ham sandwiches for more than $7? Where 60 people used to go to the deli each day, now 110 people will come to buy lunch. And where 60 sandwiches were produced, now only 40 are. Perhaps one seller cannot profitably offer ham sandwhiches at $7 each and moves into the lucrative, unregulated world of pastrami. This creates a huge shortage and 70 consumers are disappointed. Not only are more people interested in buying sandwiches, but producers lose interest in making them as they have become less profitable. The mayor, though, gives speeches where he tells his constituents how he has saved the town $80 a week on its lunch, and he condemns the evil deli owner for not being prepared to serve ham the hungry citizens of Fernley.
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