Thank you for inviting me to Accounting class. I enjoyed meeting all of you. You are living in exciting times. I appreciate your curiosity and applaud your enthusiasm, and I am excited to be your professor.
I am looking forward to working with all of you in the Spring semester. In the spirit of being prepared, let us get a little conversation going.
I suggest that you start your journey with me by choosing a guide-- a type of economic world-view, you might say. I posit that your world-view will set the course of where your business career will take you. Watch the video. Do some research, and make a choice.
CHOICE #1: Hayek or Keynes?
Tell us what you think and why?
MSBA511 - Applied Financial Management, exploring our vocations in business with a vision of service to God and community.
The video ROCKS!
ReplyDelete"The boom was a binge, that is a matter of fact. Now it is devaluing capital that makes up the slack." I did not choose the binge, but I lived in it, just as now I have to live in the error of devaluing capital. Months after I graduated with my BA, the crash happened. These past two years have been the my least favorite, to say it politely, and Hayek explains why. In fact, I think that Hayek's economic views have the potential to allow people to live more greatly than Keynes' economic society, in the long term that is. Debt, only allows for so much spending. Whereas Hayek's philosophy allows for continual increasing exponential spending, but with what Keynes would call some "sacrifices" in the beginning.
ReplyDeleteKeep in mind that the word “sacrifice” comes from the Latin for “that which makes holy.” Perhaps, Mr. Hayek is on to something?
ReplyDeleteA) I love the Harvard Sailing Team (these two guys are a part of that comedy group, youtube them!)
ReplyDeleteB)I've been on Hayek's side since I took Econ 201 in 2007. It's all about the LT and less gov't involvement. If our gov't has a stake in every business that is at risk of failure/bankruptcy, that would mean the gov't partially owns (if not mostly owns [bail outs]) every business in our "free market" aka making it Commie Russia -- Not a fan.
Very glad that you are not a fan of Communist Russia Amelia! I definitely agree with Renee that Hayek's economic view, support of a free market system, will allow for greater wealth long term. Keynesian economics, more public sector policies, might solve short term economical problems, creating a short term artificial market equilibrium but an even greater imbalance in the long run, which would most likely lead to more policies being enforced and death to the capitalist society.
ReplyDeleteIn response to Professor Carpenter's comment of "sacrifices" being "that which makes holy", I would say that if holiness means Godliness, then, the sacrifices one makes in Hayek's economic system would more greatly enable a person to prepare for a pursuit in happiness, which not only means enjoying the lovely meal, self-actualizing, and helping others, but also the greatest happiness of having the leisure and time in the long-term to pursue Divine Happiness. Since Keynesian economics will bring about a recession or depression in a matter of time, it is difficult and even impossible to progress in the pursuit of Divine Happiness when one does not even barely have time or the resources to make ends meet and eat as during a recession or depression.
ReplyDeleteContinuing on a theological note, with regards to sacrifices being "holy", it seems that the Gospels are full of examples that promote the basic message of working hard first, and then, reaping and enjoying good fruits of one's labor.
Even without a religious argument, basic human virtues, as promoted by certain ancient, pagan Greek philosophers, dictate that in general, it is a good idea to "work first in order to play later", and to play with means in a responsibly proportionate way to what one has earned through labor. In general, when we do not give the time upfront to work hard and then play, we lose a certain amount of self-possession, or self-rule. As the movie that is out in theaters now, "True Grit" states, "We must pay for everything in this world. Nothing is free accept the Grace of God", and when we do not pay responsibly and have a responsible economic system, we are presented with what is an excellent point Amelia made: a government that is taking over more control, and threatening the role of government as established by the founding fathers. Basically, one is either progressing in being more in control of oneself in a healthy way, or, being more controlled. Control or be controlled. But the control or self-rule comes through a giving of oneself to the refining process of the many human virtues, temperance, wisdom, self-control, knowledge, etc. as indirectly promoted by Hayek.
I also liked what Sara said about how Keynesian economics will create short term artificial market equilibriums, because another problem with Keynesian economics is that when times are artificially good, people may become accustomed to inappropriate spending habits, and then, when the recession or depression happens, without great prior practice of good spending or financing, it will be more difficult for those kinds of people to get out of a personal financial recession or depression. Since the economy is based on a society, if the majority of a society does not have practice in good financial habits and is used to doing things the Keynesian way, it may be more difficult or take a lot longer for a whole society to overcome a recession or depression. In contrast with Keynesian economics, at least Hayek's economic view gives a participant, no matter how difficult the upfront sacrifices may be, due-hope for a better future.
The idea that heavily regulating businesses via a monolithic character such as the government is flawed in that is supposes that the latter can possibly understand the micro levels of the former.
ReplyDeleteFurthermore, in response to Keynesian thought, those things that we do not own, we do not care for. Why would a farmer work as hard as he does if he was not allowed to do with/for his business what he deems to be most prudent for its continued success? Despair is one of the easiest emotional states to slip into and it inhibits us from provocatively pursuing successful ends. The Keynesian model would quickly cause the worker to despair in his labor (due to his inability to affect change in his work structure) and to halt production. Obviously, this would cripple the economy and do the exact opposite of what Keynes said it would.
Hayek argues in favor of keeping lower-level issues regulated by those with an invested interest in the outcome. His theory is more plausible because it takes into account human nature as well as the micro portions of the economy that make up the macro. Whereas Keynes believed that it should be top-down, Hayek argues that it's bottom-up. This seems to make sense.
We ask ourselves, "Where do these governments derive the power to make these types of economic decisions?” We keep asking, “By what right do they regulate?” until we get down to the very bottom where we find that, if not for the micro portions of the social structure, they would have no power. Trade develops from necessity, cities spring from trade, and the body politic springs from the cities. To reverse the order and to claim that the farmer exists to work his way towards the body politic, would be unnatural and would force an untenable position.
Finally, the government lacks two things that are necessary for the ongoing success of an enterprise: total knowledge and genuine concern. The government hardly possesses the first and is devoid of the second. With limited knowledge, they will be slower to correct failures and without genuine concern, there is little fear of loss.
I have some deep thinkers. This is good. However, someone tell me why so many highly influential leaders do not share Hayek's view.
ReplyDeleteA reason why highly influential leaders do not share Hayek's view could be due to his focus on the long-run. When there is a crisis like an economic crash, people look to their leaders to make everything better immediately. To gain the public's trust and support, leaders would choose a method that shows progress in the short run. Acting impulsively to cover current problems will lead you into a vicious cycle that won't be corrected until the underlying problem can be corrected.
ReplyDeleteThat is a great point Ann. Thank you. Moreover, these types of highly influential leaders then gain more control over the people in the process and the society becomes less like the democratic society the founding fathers had and envisioned. Therefore, certain highly influential leaders who seek more power and influence over a society may choose this Keynesian means. Unfortunately, this leaves the next generation in a state of debt before they are even born, so they may come into the world in a slavish-state already controlled to some extent by these types of leaders.
ReplyDeleteI agree with Ann in the sense that leaders or government are almost expected to intervene during a crisis, therefore following Keynes' point of view. That said, I believe government should focus on issues such as education and national defense; letting FREE markets self-manage. Also, we should learn to keep some money in our pockets instead of spending what has not been earned yet. The economic slump did start with people buying in what they could not afford, helped along by scrupulous "business" people.
ReplyDeleteI agree wholehearted with Hayek's viewpoint. "I want them (the markets) set free." With free markets, people are the ones who set the 'value' of items sold, the items that they themselves will be paying for. I do believe that government interferes with good intentions though (Call me naive) like with rent caps and minimum wage. Instead of having affordable rent for everyone, rent caps actually give no motivation to land owners to keep up their property maintained and the number of homes decrease because no one sees a profit in building or renting homes. So in effect rent caps actually decrease the number of homes available and result in more homeless. Thanks econ!
ReplyDeleteIt's valuable to keep in mind that Keynesian economics proposes a mixed economy, not one that suggests total government control/intervention. In this type of economy, qualities of both capitalism and socialism are used, rather than it being merely socialist, or Communist, as suggested.
ReplyDeleteWhile I support a free market, there have been instances (i.e. the financial crisis of 2008) that have called for government intervention. It is the responsibility of the country's leaders to protect the livelihoods of Americans. To do that in some cases, leaders must decide to act in the form of bail outs or reduction of interest rates, for example. Hayek's response to this, however, would be that these socialist tendencies could in fact lead to a totalitarian state (however unlikely), which obviously would be desirable by few.
Since I must choose a contender for the purposes of this blog, I would choose Keynes, however I am interested in learning more about both both Hayek and Keynes.
Hello, all,
ReplyDeleteYesterday I watched the documentary, Inside Job, which takes a critical view of the 2008 financial crisis, and the people and institutions that aided in the crash. Regulation vs. deregulation was a theme throughout the film which helped me to further reflect on the Hayek/Keynes debate.
It's clear to me that because of such lenient, deregulated measures that financial institutions had the autonomy to exist freely. The more freedom they had, the more they could grow (through acquisitions that were once deemed illegal) until it came to the point where many were too big and too powerful--And we all know what happened when that bubble burst.
There needs to be controls put in place so avoid such disaster. Ironically, it were these institutions that fought for their deregulated status that pleaded for help from you and I--the taxpayers, when they were in crisis.
Has anyone seen the film?
Just a few questions Meredith:
ReplyDelete1) By what power does a government derive its power to intervene (whether through laws or financial aid)?
2) How do we decide which situations are worthy of intervention?
3) Who regulates the government?
Mr. Hasnas brings an important point regarding corporate justice. How can a corporation be guilty of an act committed by one or a few individual(s)? I thought it was interesting to hear the speaker claim that the department of justice is in a way outsourcing the cost of law enforcement by shifting the liability to corporations.
ReplyDeleteThe truth is "someone" has to pay to right a wrong; most likely it will be the shareholders who are unfairly being penalized. Although, fines can motivate firms to improve some of their processes, most prefer to face the one-time penalty after having enjoyed reductions in overhead costs.