I consider him closely related to Austrian economics, neoliberal economics... at least when it comes to business cycles.
A lot of "keynsians" are much more removed from keynes himslef than Friedman is from Hayek, Mises, Bastiat..
Obviously every individual is different and taxonomies are fuzzy. I'm not attached to my taxonomy, just trying to comment without lots of footnotes.
I'm not arguing the nature of the facts, just pointing out the fact. Hopefully you can relax a bit, this is just a dialog and not a debate where I'm trying to score points against your claims.
You left out Marx.
I think there's very little Marxist economics left, in the technical sense.
Marx is pretty early.
It basically boils down to Marx's Law of Profitability, where the rate of profitability tends to fall as investment in fixed capital increases:
https://en.m.wikipedia.org/wiki/Tendency_of_the_rate_of_prof...
"If the amount of paper notes in circulation were doubled the prices would double" and things like that. I really do wonder what those economists would think of modern economics.
Marxist.
I'm indeed Marxist, how did you know? We recently commemorated the 40th anniversary of Groucho's death, by the way.
Or maybe you were correcting me? https://en.wikipedia.org/wiki/Marxian_economics
'Freshwater' economics / econometrics and even complexity / system theorists have given us a lot of insights into bubble formation. Dealing with recessions is something that doesn't really have an expert consensus beyond 'avoiding obviously bad things'. Heck, go ask economists to reconcile recessions with the efficient market theory.
In terms of maturity, economics is where medicine was after people accepted Ignaz Semmelweis’ theory that doctors and surgeons should wash their hands. The consensus opinion is against things like leeching (a gold standard) and people more or less agree on the right things to optimize (low, stable inflation; lower unemployment; somewhat high reserve requirements for banks, etc.).
For anyone reading this, I recommend the book "Manias, Panics, and Crashes" it's not well organized but it's very interesting.
Bubbles have a few things in common, they're speculative in nature, they're hypergeometric, and they’re fueled by credit expansion. More or less – too much money chasing ideas that aren’t going to pay off.
I’ve been warning people about used car prices since 2015 (though I expected the prices to decline about 8 months before they did). That clearly fits the pattern – after the recession used car prices were high so banks felt it was a relatively secure loan to make, but then the volume of car credit products (loans and leases) went up and made car credit too cheap, people bought too many new cars and now those cars are starting to flood the market which is a problem because banks expected to get more money out of the cars.
There’s speculation (I think cars will be worth a lot when they’re off lease). There’s credit (here Mr. 610 FICO, you can get a new RAM). There’s hypergeometric growth (the U.S auto industry sales grew much faster than the economy – a weak case of hypergeometric growth).
And now there’s the bust. We haven’t seen panic selling yet, but we might soon.
In my opinion, the clearest sign that something’s wrong is in the bond market. Something like ¼ of the world’s government bonds have a negative interest rate. People put up money today in exchange for less money in the future, it doesn’t make sense. It’s a sign that something is seriously wrong in the world economy. Too much money chasing too few ideas. I have a heterodox view – many economists think that interest rates are too low, but I think they’re too high. The market is trying to burn off excess value that’s not being used well and world governments are trying to insolate rich people from those effects.
At the same time there’s a few trillion in negative interest rate bonds, it’s hard to raise capital to start a business. That’s messed up.
There is some hope. I think we could continue the expansion for a at least 4 more years if we overhauled the tax code, we slashed rentier’s regulations (zoning, occupational licensing, and a few more), and we opened our boarders to high performance immigrants – not drug slingers but Ph. Ds / Executives / etc.
Could this be related to past 30 years of consolidations in the banking industry?
Smaller/specialized institutions invest differently than large ones. Anecdotally, they can be more willing to take on small high-risk investments in local businesses (R&D, small-scale disruption) or cyclical low-risk low-yield investments (small farms)...
Taleb makes a similar argument in Antifragile. I think his arguments lack in formality, but [England's Work](http://www.englandlab.com/uploads/7/8/0/3/7803054/2013jcpsre...) on the matter certainly support him.
In my opinion, something that happen periodically and continually to a system can't be easily classified as 'abnormal'.
I think 'inherent' would be a better word.
I'm not convinced that recessions and contractions NEED to happen. I'd bet that they're more common in market based economies but I haven't seen anything that suggests they're critical to equilibriums as we know it.
It's funny, I made two responses[0][1], two weeks ago along these lines surrounding the Tesla bond auction. IMO, most people don't want to hear it because they believe they are doing the best they can with whats available for them to allocate. Too much money chasing the same shit that's consistently providing less and less returns… best to sit quiet in the background and do what one must's in this environment despite it all…
Yeah, yeah, it will be so good for Tesla to sell its new expensive (how many people can afford a $35k+ out of pocket for something that will sit idle for most of its lifetime?), the future™, cars with 0% down to subprime on the mass market once it gets at scale™ to people who can barely afford monthly payments on their used old and busted gas guzzlers… for fucks sake, hedge funds pay for satellite time to time their shorts based on bloated auto inventory now, because people are just waiting to have their new electric cars… who knows, maybe there will be a new gov program, an EBT of sorts for autos, cash for clunkers was a good step in that direction lol
>The market is trying to burn off excess value that’s not being used well and world governments are trying to insolate rich people from those effects.
I think this is only going to exacerbate feedback loops that end up only weakening the governing systems because "god forbid" that any of the The Market™ burn off accidentally get allocated to those who end up besting those who are trying so hard to lock in less money 5-100 years from now on gov/corp bonds…
While we're at it, original Keynesian theory has been considered disproven by the existence of stagflation, which the theory would consider impossible.
See instead:
https://en.wikipedia.org/wiki/Saltwater_and_freshwater_econo...
That's like saying there's two families of space research, Astronomy and Astrology. One of these things is mainstream and taken seriously, one is not. As the other guy said, it's Keynsian vs Chicago, Austrian isn't in the game, it's fringe stuff.
..at least relative to this topic, busines cycles.
Explaining business cycles has been a primary motivation for macroeconomics' existence as a field. There are many theories, but theories are hard to disprove in economics.
The two big, long-lived families of macroeconomic explanation are from the Keynsian and Austrian/liberal "schools."
Austrian economics has Hayek & Mises' nobel prize winning theories, and built on by monetarists like Milton Friedman. These theories revolve around credit/money supply. Too much money is available at too low a rate, causing bad investments. When these undertperform, a downturn occurs.
Keynsian explanations revolve around "aggregate demand." When people and businesses are worried, they borrow/spend less and save more. This leads to less stuff being made, the definition of economic contraction.
The Austrian explanations are a little more straightforward to understand in a simple form. Keynesian is s bit harder. I recommend starting from the "paradox of thrift" concept, if you're interested in Keynesian.