Keynesian Theory: Fighting a Splash with Water

I’m not a big fan of assigning hard to pronounce proper names to basic concepts. I can only pronounce or even begin to understand either Boson Particles or Schrodinger’s cat thanks to the Big Bang Theory. Theories such as Ekpyrotic Universe, I would be better off trying to properly pronounce after a heavy night of drinking and getting slugged in the jaw a few times. However, as I watch the debate about the role of government in dealing with the countries current economic hardships, I think having a decent understanding of Keynesian theory helps to understand the good intentions of this theories proponents. That way, we can better mock and ridicule them.

Image a pool of water, it could be a swimming pool, perhaps a small fishing pond, it could even be the Pacific Ocean as long as you scale up the other aspects of this analogy accordingly, it doesn't really matter, it just has to be relatively placid. The water represents all the factors of the economy, from jobs, to retail exchange, to investment. When the water is calm, everything is fine, moving along with subtleties and undercurrents. The occasional ripple in the water represents a small adjustment in the markets. Perhaps “Jim’s Liquor, Guns, and Ammo” went out of business when their core demographic met with a sudden spike in suicides. Overall, everything is calm.

Now picture a major disruption to the market. Take the 2007 recession for instance. Too much money getting dumped into retail investments created a huge bubble that finally popped, causing a huge loss of wealth. In our pool of water example, it would be the equivalent of taking a huge stone and tossing it in the middle of our pool. The more money and other factors involved in the disruption, the bigger the stone that is breaking the crest of the water. This water directly underneath the stone is displaced causing strong transfers of water around the stone and throughout the pool, just as the collapse of the retail market disrupted fortunes of people who had money directly tied in with property, then rippled through the rest of the economy.

Some ardent supporters may take offense and argue that true Keynesian would prevent the stone from being dropped in the first place, by establishing government organizations that oversees and regulates the mortgage industry and promotes proper housing development. To which I say, HUD already exists, it spends billions manipulating the market, and it arguably made my proverbial stone much bigger by artificially inflating the housing market with subsidies and tax incentives.

When the Housing market crashed, lots of people with money tied up in real estate, mortgage lenders, and the financial firms that held those mortgages got hit big time. Severe ripples and splashes emanated from the impact spot and hit the construction industry and developers quickly. These ripples continued to spread over the entire pond making the recession hurt with almost no regard to what industry or part of the pool you were in. What the Keynesian theory attempts to do at this point, is to fill the initial hole in such a way that there are no ripples caused by the splash of a stone being dropped in it. A Keynesian would do one of two things to make it better and to fight the splash, supplement the money flow (try to keep the water in our pool flowing the way it did before the rock hit) or refocus demand so that aggregate demand stays the same (pour in water to the pool at the same time it’s splashing out).

The problem with the former idea is that it would require so much interference to so many parts of the pool well before stone hit that the pool would no longer be recognized as a pool. The inherent freedom of the water would instead become a bed of metal pipes with hardly any water actually running through it. This is the communist economic system that if everything is planned and structured then it is impossible for the stone to disrupt anything.

The issue with the latter idea is that even if you replace the water in the hole created by the stones impact, the disruption to the pool is still going to be violent and affect everything and now you are adding another element that could just as easily prolong the effect of the waves since you have to pour the water in, and the water you are pouring in has to come from somewhere, probably scooped up from a quieter part of your pond wasn't being effected by the initial splash as badly to begin with. In short, you are messing up everything else in the pool to make the big splash seem less bad.

This is the approach we took in 2009. Spend a bunch of money that we got from god knows where and start pouring it in the hole that was made by the splash. Financial institutions got hit hard and fast but then were filled up, secondary industries still felt waves and waves of disruption, tons of water splashed out of the pool and will take some time to trickle back in and return things to normal. And the proponents of this approach, when asked why there is still such a mess and turbulence in our pool simply say, “We didn't use enough water.”

What is the alternative? The prominent counter is the Austrian Economic theory. This theory takes a “S#*% happens” approach. Stones will come and go, waves and ripples will be felt, as long as your water is well educated and free to pursue a new current you will have less of a manufactured swimming pool regulated by a bunch of idiots running around with buckets trying to change the tide as they lose track of splashes caused by a stone dropping by accident and when a bucket is dipped in on purpose. Rather, you would have a beautiful lake were a splash may instead be caused by a fish, revealing that over time our pool of water may bring more to offer then just a drink.

The Motivations of Bigotry

In politics, bigotry isn't always connected to ideology; sometimes it simply stems from opportunism.

Last week, in a year in review segment, a hearty laugh was shared among a group of comedic commentators over a family photo of the Romney's in which one of Romney's grandchildren is an adopted African American child. Taunts of "One of these things is not like the other..." and "Look, it's a Republican convention and you have to find the one black person." Melissa Harris-Perry did take time from her show weekend yesterday to apologize for the insensitivity of the remarks, and Gov. Romney has accepted the apology. This instance of poor judgement when it comes to addressing race is closed, but it once again spurs the discussion of how political commentary addresses race in today's political climate.

During the 2012 election, and even in 2008, I tried to veer away from the issue of race when discussing politics with friends and family. I thought it shouldn't make a difference the color of skin for a candidate to public office. There is no color in the words a candidate speaks. Today, however, it is getting harder and harder to not address the issue of race in American politics. The reason that we seem to be forced into acknowledging the color of someones skin is simple: the Republican Party is getting more diverse, and liberal and democrat's are gaining more and more by mocking it.

Commentary is becoming less and less to do with stances on issues or personal integrity when it comes to political leaders of color. Individuals are so often branded simply based on this attribute that it can be frustratingly difficult to hold a serious discussion. Especially when it comes to riddicule of members of the Democratic Party. Now, the Republican party has is duly electing people who are members of minorities. An African-American senator from South Carolina, Cuban-American senators from Florida and Texas, Indian-American governors in South Carolina and Louisiana, and Mexican-American governors in Nevada and New Mexico. A whole generation of prominent conservatives is also forming with the likes of Rep. Allen West, Herman Cain, Rep. Arthur Davis, Thomas Sowell, and Micheal Steel.

In the early sixties of America, southern white voters who opposed the Civil Rights act voted strongly in favor of Democrats, not because their views coincided with a large central government and progressive tax system that was favored by the national democratic party, but because democrats from the south, frequently referred to as 'Dixie-crats' were the strongest voting block against Civil Rights. It is because of these Democrats that Civil Rights passed with a larger margin of Republican support (80%) then Democrat support (63%). Republicans saw an opportunity to gain the votes of disenfranchised voters not because they wanted to repeal the Civil Rights act (though listening to left wing commentators today you would think that), but by appealing to them with a personal liberty and states rights-centric view that was the ideological core of the Republican party, that also appealed to these citizens.

Today, faced with increasing GOP diversity, the Democratic Party will be tempted by bigotry for the same reason Republicans sought out their support in the post 'Dixie-Crat' era, because bigots have votes too. In 2012, for instance, the Obama campaign never directly attacked Mitt Romney’s Mormonism. Still, Montana’s Democratic governor, Brian Schweitzer,suggested that women would not back Romney because his father was “born on a polygamy commune in Mexico.” A group named Catholics for Obama was accused of calling Pennsylvania voters asking, “How can you support a Mormon who does not believe in Jesus Christ?”. South Carolina Governor Nikki Haley has also had to deal with comments from state Democratic Chairman Dick Harpootlian about both her origins and she had been compared to Adolf Hitler's mistress, she also had to field questions about tipping Sikh taxi drivers better. Try picturing a reporter asking President Obama if he tips African-American waiters more.

Given the increasing diversity of the American political scene, future race, religion, and ethnicity based baiting may come in unusual forms. Imagine, for instance, a Democrat linking Marco Rubio’s lack of support for programs that benefit African-Americans to white Cuban prejudice against their darker skinned co-islanders. Or a group of South Asian Americans slamming Bobby Jindal for abandoning his Hindu heritage. Or, as in my opening to this post, the belated attack on a Mormon for having an adopted African-American grandchild.

The point is that progressives and liberals need to realize that Democrats aren't immune from racism. In politics, bigotry isn't always connected to ideology, and is not limited to one demographic's oppression of another. Sometimes, it stems simply from an opportunity that is too good to pass up. Melissa Harris-Perry is in a constant ratings foray, putting up a picture of a Republican's family and mocking it appeals to people that she is trying to court for an audience. This is not to say that Melissa is targeting people who think Mormons adopting black kids is funny specifically, just that there are similarities in the audience she is courting, and people who do find it funny. Not unlike politicians who are trying to score political points in certain demographics in hopes that it translates to votes. It's an attention-getter. And, with more minority Republicans seeking high office, Democrats will have more opportunities to get people's attention using this method in the years to come.

Melissa Harris-Perry admitted she crossed a line, her apology was sincere and Gov. Romney accepted it. However, until we delve more into the motivations behind the segment in the first place, this is a mistake we are doomed to see repeated again.

Personal Top 10 for 2014

A list of the ten things that I am personally excited about in the coming year;

10. Business Traveling - For the first time I get to leave the state on someone else's dime. Well, not counting that time I got married and my parents sent me away with the new misses to Florida. That was pretty awesome also. Hopefully it will just as much fun when you are expected to work every day and your wife is alone back at home.

9. The next season on The Walking Dead - Or more precisely the second half of the current season. Having read most of the published comics I have a pretty good idea of where the story may be going, but the show deviates enough to keep you guessing what it's going to do next.

8. Getting out onto the golf course - I feel like for the first time in a long time, my overall game took a step forward last summer after sporting some new clubs. Hoping to build off that so I can stop using my toes to tally up my score on every hole.

7. Midterm Elections - I'll call up Vegas and place some heavy bets that not a lot is going to change in congress, probably retain 95% of them. Also, what margin will Branstad win his seemingly millionth re-election bid. Who doesn't love to see Democracy in action?

6. Whatever movie Marvel comes out with - Not since Star Wars do I believe a movie franchise raised expectations and engrossed so many geeks then what Disney/Marvel have been able to do with the Avengers universe. Captain America and Guardians of the Galaxy both look pretty epic!

5. My wellness test scores in the spring - As is the trend in many places, my place of work has hired a bunch of people that are not doctors to come in and tell us how unhealthy we are under the threat of higher insurance premiums and having to sit through a full year of 'life coaching' if we do not hit certain metrics. For the most part I pass these tests, but last year, despite my overall scare clearing the level where I could be classified as 'healthy' They decided my cholesterol was too high and stuck me in their program anyway. I'm hoping some subtle changes this year lowered that number just enough to get me out of these awkward, borderline harassing meetings each month with a non-doctor about how I'm living my life.

4. Jacobson Family Vacation - Sounds like we are spending a weekend in Chicago again this year with the In-Laws. Hoping the Cubs don;t suddenly get good as to keep ticket prices nice and low, but then miraculously become epic-y awesome the day we catch a game.

3. Watching lots of Kernels Games - My hometown professional baseball team. The Low-A Minnesota Twins affiliate Cedar Rapids Kernels. Last year we saw Byron Buxton and Javier Baez, both of whom appear to be on pace to be huge names in 2-5 years. Can't wait to see who takes the field this year.

2. Summer - Maybe only because it's 8 below outside right now, and next week they are talking about it being 25 to 30 below before windchill with snow, but something is making me long for warmer days.

1. 5 Year Anniversary - Still don't have any plans for what we are going to do come September (and am very receptive to suggestions) It will be hard to top last years trip to Denver. I still can't believe it's been 5 years already.