Quote of the day: John Maynard Keynes

[elfs]

Unemployment exists because employers have been deprived of profit. The loss of profit may be due to all sorts of causes. But, short of going over to Communism, there is no possible means of curing unemployment except by restoring employers to a proper margin of profit. There are two ways of doing this - by increasing the demand for output, which is the expansionist cure, or by decreasing the cost of output, which is the contractionist cure. Both of these try to touch the spot. Which is to be preferred?
— John Maynard Keynes, 1931

Brad DeLong posted this

Comments

[solarbird]

...except corporate profits are through the roof and aren't hiring anyone. Particularly the financial sector. The dynamic Keynes describes has become less and less applicable to large corporations over the last two and a half decades.

It's double-dipping

[shunra.livejournal.com]

And there's a reason that double-dipping is notorious for being greedy.

[bldrnrpdx.livejournal.com]

"deprived"? Seriously?

[l33tminion]

More profit equal more hiring only when adding people increases production, and is the cheapest way to do so.

The financial sector can't necessarily make more money by hiring more people (as opposed to by having fewer people manage more money). There are probably other sectors that work like that at least some of the time.

In other sectors, it's become cheaper to increase productivity by adding automation than by adding labor. Keynes did touch on the possibility of technological unemployment, but my impression (not well-read in economics) is that he underestimated how much of a problem that could become.

[elfs.livejournal.com]

I believe it is a term of art, and not to be taken in the popular sense.

[fayanora.livejournal.com]

Or the third option: switch to an economy based on neither expansion nor contraction, which we should have done decades ago.

Some context

[ideaphile.livejournal.com]

Keynes said this when government spending as a share of GDP was around 10% (and about to rise sharply as FDR avoided letting a crisis go to waste).

Keynes probably didn't fully appreciate just how clever and effective the government could be at depriving employers of their profits. He was also describing an economy driven largely by low-yield labor-- farming, low-tech manufacturing, transportation, retail, etc.

In any event, if you're trying to imply that Keynes was wrong because we have unemployment and unusually high corporate profits, you are a fool.

1) The business sectors making the highest profits aren't the ones that employ the largest portions of the workforce.

2) Profit margins are not unusually high across the whole economy; they're higher than historical averages, but only by a percent or so.

You are being made a fool of by people who publish irrelevant statistics such as total profit in dollars without adjustment for inflation. They use these measurements precisely because they will fool those who are only looking for data to confirm their prejudices anyway.

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