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SREK V, Mojmirovce 26 apr 201 4

SREK V, Mojmirovce 26 apr 201 4. available for kindle, nook, and kobo!. Contents Introduction 1.   The Turn from Laissez Faire 2.    The Bolshevik Revolution and the Socialist Calculation Debate 3.    The Roaring Twenties and Austrian Business Cycle Theory

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SREK V, Mojmirovce 26 apr 201 4

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  1. SREK V, Mojmirovce 26 apr 2014

  2. available for kindle, nook, and kobo!

  3. Contents Introduction 1.   The Turn from Laissez Faire 2.    The Bolshevik Revolution and the Socialist Calculation Debate 3.    The Roaring Twenties and Austrian Business Cycle Theory 4.     The New Deal and Institutionalist Economics 5.    The Great Depression and Keynes’s General Theory 6.    The Second World War and Hayek’s Road to Serfdom 7.    Postwar British Socialism and the Fabian Society 8.    The Mont Pelerin Society and the Rebirth of Smithian Economics 9.    The Postwar German “Wonder Economy” and Ordoliberalism 10.  Indian Planning and Development Economics 11.  Bretton Woods and International Monetary Thought 12.  The Great Inflation and Monetarism 13. The Growth of Government: Public Goods and Public Choice 14.  Free Trade, Protectionism, and Trade Deficits 15.  From Pleasant Deficit Spending to Unpleasant Sovereign Debt Crisis

  4. 1942 UK Labour Party 1942 pamphlet: • “As a necessary prerequisite to the reorganization of society, the main War-time controls in industry and agriculture should be maintained”

  5. Beatrice Webb, Sidney Webb, GB Shaw

  6. Walter Eucken

  7. Germany, 1945-48 Germany Year Zero

  8. Ludwig Erhard Gen. Lucius Clay

  9. Wirtschaftswunder

  10. India, 1947

  11. PT Bauer BR Shenoy, author: “Note of Dissent” on India’s Second Five-Year Plan (1955)

  12. Western economists to India: plan growth • Growth planning advocates: • John Kenneth Galbraith • Joan Robinson • Nicholas Kaldor • Oskar Lange • Paul Rosenstein-Rodan • Tjalling Koopmans • Jan Tinbergen • Ragnar Frisch • Gunnar Myrdal, … • In dissent: • P. T. Bauer, Milton Friedman

  13. The Permit Raj

  14. Bretton Woods begins Harry Dexter White, John Maynard Keynes: Bretton Woods, NH, July 1944

  15. Bretton Woods ends Pres. Richard Nixon, 8 August 1971

  16. Milton Friedman, Richard Nixon, Arthur Burns

  17. Greece 2009: budget deficit > 13% of GDP debt = 113% percent of GDP April 2010: 2-year govt. bonds yields at 12.26% Ireland 2010: Budget deficit = 31% of GDP Debt = 97% of GDP (up from 25% in 2007) Fall 2010: 10-year govt. bond yields at 8.2%

  18. Washington Post, 16 Nov. 2011, p. A17

  19. Sovereign “debt trap” • Government rolls over its debt • for Greece, approx. 1/3 per year • If: borrowing interest rate > GDP growth rate, then: debt growth > GDP growth even when primary deficit (excluding debt service) is zero • As debt-to-GDP ratio rises with no credible commitment to reverse it, creditworthiness declines further • Borrowing rate rises even further, etc.

  20. Fiscal Keynesianism: Yes Fiscal Orthodoxy (“Austerianism”): No Does debt-financed government spending promote prosperity? • (John Maynard Keynes) • Alvin Hansen • Abba Lerner • Otto Eckstein • Paul Krugman • Joseph Stiglitz • Adam Smith • David Ricardo • Milton Friedman • James Buchanan • Roger Garrison • Robert Barro • Thomas Sargent

  21. Fiscal Keynesianism What about debt incurred during periods of unemployment? … Resources would have been idle, so no other outputs are foregone. In fact, output is likely to be increased by the multiplier effects of the initial spending. Thus, the creation of debt in this situation raises output and is likely to raise investment and the total growth of the economy. (1973) I.e., debt-financed spending is better than a free lunch at anything less than full employment.

  22. The Keynesian model that underlies positive “multiplier” estimates for government spending “implicitly assumes that the government is better than the private market at marshaling idle resources to produce useful stuff. Unemployed labor and capital can be utilized at essentially zero social cost, but the private market is somehow unable to figure any of this out. … A much more plausible starting point is a multiplier of zero.” Barro, 2009

  23. How to get fiscal discipline? No bailouts. Remember that under the gold standard, there was no law that restricted your debt-GDP ratio or deficit-GDP ratio. Feasibility and credit markets did the job. If a country wanted to be on the gold standard, it had to balance its budget in a present-value sense. Thomas Sargent, 2010 Balanced budget “in the present value sense” = spending balanced by present taxes or a credible commitment to future taxes Unlike the ECB, the gold standard offered no possibility of bailouts for over-indebted countries, so controlled moral hazard

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