Basic question for Keynesian economists on inequality
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25-02-2014, 03:34 PM
Basic question for Keynesian economists on inequality
To illustrate the point I made to CJLR in the 'fair tax' thread that my criticism of Keynesian economics is that they are stumped by even the most basic questions, here's one for Cathy and any "professional economists":

Let's say it's medieval Spain, when gold is money. There are 10 tonnes of gold in the whole country, 5 of it belonging to the King, and the other 5 to the common folks. Now the King sends out his conquistadors who bring back another 5 tonnes of gold from the New World which gets added to the King's stash.

How did that change affect the inequality between the King and everybody else?

a) they became more unequal with the King having a bigger % of the nation's wealth.

b) they became more equal with the common folks having a bigger % of the nation's wealth.

c) The rate of inequality stayed the same.

Now, say it's 2014, and instead of money being a barbarous relic, it's the fiat paper money Keynesians prefer, so instead of the new money getting added to the King's stash, it's added to the big banks' reserve accounts. Same question as above, how does that change affect inequality?
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25-02-2014, 09:06 PM
RE: Basic question for Keynesian economists on inequality
If randy leaves on the number 5 train, traveling at approximately 65 mph, with 37 candy bars, but eats 18 apples, what color are his unicorns?

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25-02-2014, 09:37 PM
RE: Basic question for Keynesian economists on inequality
(25-02-2014 09:06 PM)Cathym112 Wrote:  If randy leaves on the number 5 train, traveling at approximately 65 mph, with 37 candy bars, but eats 18 apples, what color are his unicorns?

See, Cjlr. Just like I said. A "professional economist" unable to answer such a basic question that comes naturally to your average 10 year old.
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25-02-2014, 10:46 PM
RE: Basic question for Keynesian economists on inequality
(25-02-2014 09:37 PM)frankksj Wrote:  
(25-02-2014 09:06 PM)Cathym112 Wrote:  If randy leaves on the number 5 train, traveling at approximately 65 mph, with 37 candy bars, but eats 18 apples, what color are his unicorns?

See, Cjlr. Just like I said. A "professional economist" unable to answer such a basic question that comes naturally to your average 10 year old.

I'm not a professional economist, but I play one on TV.
You didn't define your terms.
If the marginal utility of another ounce of gold to kingsy wingsy is, or approaches, zero, then there is no change.
You have not demonstrated that relative inequality rests in the amount of gold held.
Nice try. Please try harder.

Insufferable know-it-all.Einstein
Those who were seen dancing were thought to be insane by those who could not hear the music - Friedrich Nietzsche
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25-02-2014, 10:54 PM
RE: Basic question for Keynesian economists on inequality
(25-02-2014 09:37 PM)frankksj Wrote:  
(25-02-2014 09:06 PM)Cathym112 Wrote:  If randy leaves on the number 5 train, traveling at approximately 65 mph, with 37 candy bars, but eats 18 apples, what color are his unicorns?

See, Cjlr. Just like I said. A "professional economist" unable to answer such a basic question that comes naturally to your average 10 year old.

Cathym112 is not a "professional economist".
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25-02-2014, 11:12 PM
RE: Basic question for Keynesian economists on inequality
...double post..oops

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25-02-2014, 11:13 PM
RE: Basic question for Keynesian economists on inequality
(25-02-2014 11:12 PM)toadaly Wrote:  I'm not a professional economist, but I play one on TV.
You didn't define your terms.
If the marginal utility of another ounce of gold to kingsy wingsy is, or approaches, zero, then there is no change.
You have not demonstrated that relative inequality rests in the amount of gold held.
Nice try. Please try harder.

I find it odd that you don't consider the king to now have more relative wealth as a result of the new accumulation.

The king started with half the gold wealth of the kingdom, and ended up with 2/3rds. The king now has a greater share of the nation's wealth, as long as you make the ordinary assumption that marginal utility is greater than zero. It doens't matter how much greater than zero it is.


edit: one has to wonder why the actual kings of spain went on conquests for gold in the new world without first defining their terms. Tongue

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25-02-2014, 11:15 PM
RE: Basic question for Keynesian economists on inequality
(25-02-2014 11:12 PM)toadaly Wrote:  
(25-02-2014 10:46 PM)Bucky Ball Wrote:  I'm not a professional economist, but I play one on TV.
You didn't define your terms.
If the marginal utility of another ounce of gold to kingsy wingsy is, or approaches, zero, then there is no change.
You have not demonstrated that relative inequality rests in the amount of gold held.
Nice try. Please try harder.

I find it odd that you don't consider the king to now have more relative wealth as a result of the new accumulation.

The king started with half the gold wealth of the kingdom, and ended up with 2/3rds. The king now has a greater share of the nation's wealth, as long as you make the ordinary assumption that marginal utility is greater than zero. It doens't matter how much greater than zero it is.

Why would more gold have any value to someone who already held 1/2 the nation's gold. The point is, we don't have enough information to answer the stupid question.

Insufferable know-it-all.Einstein
Those who were seen dancing were thought to be insane by those who could not hear the music - Friedrich Nietzsche
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25-02-2014, 11:27 PM
RE: Basic question for Keynesian economists on inequality
I don't think the point of the thought experiment is to make a point about marginal utility, I believe it is about inflation.

With the gold, the king comes to have 2/3 of the nations wealth (versus 1/2).

With the fiat currency the money supply has arbitrarily been expanded by 50% and since the amount of goods and services in the economy has not changed the purchasing power of the money supply has also diminished by 50% so the initial inequality is preserved.

As I understand it, the point is that expanding the money supply produces illusory wealth because it is inflationary.
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25-02-2014, 11:42 PM (This post was last modified: 25-02-2014 11:45 PM by Bucky Ball.)
RE: Basic question for Keynesian economists on inequality
(25-02-2014 11:27 PM)Chippy Wrote:  I don't think the point of the thought experiment is to make a point about marginal utility,

I didn't think it was about marginal utility either. But he didn't consider that, or define how total wealth is measured, or even what that means. Maybe the king thought his wealth lay in his paintings, castles, and other art. If the gold just sits in the king's storehouse and he doesn't spend it, it's not inflationary. The analogy to the big banks is not necessarily valid. It depends what they do with it.

Insufferable know-it-all.Einstein
Those who were seen dancing were thought to be insane by those who could not hear the music - Friedrich Nietzsche
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