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Sunday, August 1, 2010

THE ROLE OF THE GOVERNMENT IN THE USA ECONOMY. OR LEFT-WING AND CERTAIN RIGHT-WING DELUSIONSLEFT-WING DELUSIONS ON THE TOPIC

Today's Buggy Topic Is . . .

 . . . Set out in three lengthy buggy posts at Economist's View, the hokum that prof bug has tried to tear apart and refute subscribed to not just by lots of left-wing and right-wing ideologues in the USA, but by a number of EU bloggers and posters who believe that the USA's per capita income --- around 33% higher on an average than that of the EU West European countries --- rests on purposefully fraudulent American statistics manipulated by our government. Click here for the fact-based reality. 

And Keep in Mind That . . .

the initial bugged-out post ranges much more widely than the use of GDP inflation-deflators by the Bureau of Economic Analysis of the Commerce Department (responsible for our national-income accounts) and by the Bureau of Labor Statistics that tracks the Consumer Price Indexes  (CPI) of various sorts.  

It deal with the much more important topic of whether government efforts to correct problems of the free-market --- called "market failures" in economics --- will help or not to offset and improve on those failures.  The answer?  Sometimes and sometimes not. And the well-established reasons for such straddling uncertainty . . . much to the discomfort of most of the habitual left-wing posters, about 9 or 10, who hog most of the posts in every thread at Economist's View.  Professor Mark Thoma himself, please note, is much more moderate and balanced --- a very good economist even if prof bug doesn't always agree with his thread-starting commentaries.

Remember too As You Read the Posts

Government policies that deal with the economy are of various sorts:

  • Monetary and Fiscal policies to stabilize the aggregate economy --- part of macroeconomics, subject to big debates among original Keynesians (a small group now in economics), New Keynesians, and New Classicals . . . the latter favoring essentially a hands-off overall policy above and beyond stable monetary policies to keep the overall price-system in the economy stable.  New Keynesians have tried to meet the New Classicals on their basic theoretical ground --- the need, unlike in Old Keynesian economics, to establish their theoretical work in the concrete behavior of individual economic agents: businesses, financial institutions, workers,  savers, investors in financial markets, and consumers --- while arguing that there is still a need for monetary policies and even at times limited fiscal policies for dealing with the swings in the business cycle . . . and especially now in a major recessionary spillover into high unemployment after the recession ended last July (2010).

 

  • And a host of "microeconomic" policies to deal with market failures and other problems: tax policies, regulative policies of corporations, financial institutions and labor markets, trade policies, distribution policies like social security, healthcare regulations and government spending, and redistributive policies like welfare benefits, unemployment insurance, and the earned income tax-credits for low-wage workers.

 

  • Not to forget other microeconomic policies like anti-monopoly laws, and dealing with externalities --- bad ones like pollution, insufficiently provided ones by the market such as education, and providing public goods like the common defense and highways and parks and certain kinds of R&D, and the use of agencies like the FDA to provide safeguards and information about medicines or whatever else the other agencies do.