Excellent analysis Bob, that was a great breakdown on the problems with the economic contributions of Adam Smith.
I do have another question if you're still taking them. Why is it that both the Chicago and Keynesian schools of economics continue to site deflation as a major contributor to an economic downturn? Economists like Krugman site deflationary spirals as the main cause of the chronic depressions that persisted from the 19th century up to the Great Depression. Even Milton Friedman sited that it was the inaction of Eugene Meyer to increase the money supply during the initial stages of the depression that led to further fallout in the economy. There seems to be a consensus among most economists that the presence of deflation is causative of chronic periods of depression. However, as we saw during the long depression as well as during the years preceding the 1929 crash, the money supply continued to grow. This is also true during the depression of the early 1920s. Despite Harding's role in decreasing the expenditures of the federal government, the federal reserve was increasing the money supply. Which is what economists like Krugman site to it only lasting 18 months. So what is it that most economists miss in their points to stave off a deflationary spiral by increasing the money supply, since deflation by itself does not appear to be causative of chronic depressions?
Sorry if that was a little to long, feel free just to paraphrase it.
Excellent analysis Bob, that was a great breakdown on the problems with the economic contributions of Adam Smith.
ReplyDeleteI do have another question if you're still taking them. Why is it that both the Chicago and Keynesian schools of economics continue to site deflation as a major contributor to an economic downturn? Economists like Krugman site deflationary spirals as the main cause of the chronic depressions that persisted from the 19th century up to the Great Depression. Even Milton Friedman sited that it was the inaction of Eugene Meyer to increase the money supply during the initial stages of the depression that led to further fallout in the economy. There seems to be a consensus among most economists that the presence of deflation is causative of chronic periods of depression. However, as we saw during the long depression as well as during the years preceding the 1929 crash, the money supply continued to grow. This is also true during the depression of the early 1920s. Despite Harding's role in decreasing the expenditures of the federal government, the federal reserve was increasing the money supply. Which is what economists like Krugman site to it only lasting 18 months. So what is it that most economists miss in their points to stave off a deflationary spiral by increasing the money supply, since deflation by itself does not appear to be causative of chronic depressions?
Sorry if that was a little to long, feel free just to paraphrase it.
Jake T. San Antonio, TX
Adam Smith or Luther?
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