Wednesday, November 26, 2008

Obama to name Volcker to head economic group

Fiscal conservatives everywhere are cheering!

Any chance of a Keynesian response to this crisis is dead.


googleheim said...

from wikipedia :

Supply-side economics developed during the 1970s in response to the Keynesian dominance of economic policy, and in particular the failure of demand management to stabilize Western economies during the stagflation of the 1970s, in the wake of the oil crisis in 1973.[13] It drew on a range of non-Keynesian economic thought, particularly Austrian school thinking on entrepreneurship and new classical macroeconomics. The intellectual roots of supply-side economics have also been traced back to various early economic thinkers such as Ibn Khaldun, Jonathan Swift, David Hume, Adam Smith and Alexander Hamilton.[14]

As in classical economics, supply-side economics proposed that production or supply is the key to economic prosperity and that consumption or demand is merely a secondary consequence. Early on this idea had been summarized in Say's Law of economics, which states: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." John Maynard Keynes, the founder of Keynesianism, summarized Say's Law as "supply creates its own demand." He turned Say's Law on its head in the 1930s by declaring that demand creates its own supply. [15] However, Say's Law does not state that production creates a demand for the product itself, but rather a demand for "other products to the full extent of its own value." A better formulation of the law is that the supply of one good constitutes demand for one or more other goods.[16]

In 1978 Jude Wanniski published The Way the World Works in which he laid out the central thesis of supply-side economics and detailed the failure of high tax-rate progressive income tax systems and U.S. monetary policy under Nixon in the 1970s. Wanniski advocated lower tax rates and a return to some kind of gold standard, similar to the 1944-1971 Bretton Woods System that Nixon abandoned.

In 1983, economist Victor Canto, a disciple of Arthur Laffer, published The Foundations of Supply-Side Economics. This theory focuses on the effects of marginal tax rates on the incentive to work and save, which affect the growth of the "supply side" or what Keynesians call potential output. While the latter focus on changes in the rate of supply-side growth in the long run, the "new" supply-siders often promised short-term results.

richtersw said...

Don't you think the appointment of Volcker is simply symbolic? The guy is in his 80's, take a look at him, he is about to keel over and die any minute. He is probably taking daily meds for several health problems. One long flight of stairs and that will be that.

Like or dislike his economics, he is well known and right now that is one of the most important attributes in Obama's mind. Continuity. Goolsbee will be the one pulling the strings, but who ever heard of Goolsbee?

Volcker's only contribution will be the grins he gets from others when he repeats the same old yarns about the good old days when he was buds with Reagan.

Mike Norman said...

Who ever heard of Obama four years ago?

googleheim said...


volcker is of german stock that can last in the late 90's easily,

obama is painting away his youthfulness with some serious aged cheese and wine.