tag:blogger.com,1999:blog-9208928.post468085053753262171..comments2024-03-28T14:03:55.912-04:00Comments on Start Making Sense: A collective action / externalities rationale for Keynesian stimulusDaniel Shavirohttp://www.blogger.com/profile/14710628584922961682noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-9208928.post-79155716297851085692011-09-06T18:02:12.099-04:002011-09-06T18:02:12.099-04:00I wouldn't gloss over the cash constrained as ...I wouldn't gloss over the cash constrained as an initial part and sustainer of collective action. If wealth is substracted (fall in housing prices) and/or no cash (10% or more loose their jobs), belt tightening would seem to be more rational.Paulhttps://www.blogger.com/profile/15295111868258902415noreply@blogger.comtag:blogger.com,1999:blog-9208928.post-80770928615681342482011-09-03T16:37:07.826-04:002011-09-03T16:37:07.826-04:00Copying isn't necessarily irrational. In belt...Copying isn't necessarily irrational. In belt-tightening you might either observe that people aren't spending, or trust the wisdom of crowds re. what to expect. And on wide versus thin lapels you may want to fit in with the crowd for reasons that make sense.<br /><br />Agreed that in principle advertising can solve the Keynesian problem. E.g., if Obama gave a speech that actually motivated millions of people to start spending more, it would do the job. Unfortunately (even leaving aside his inadequacies) decades of presidential cheap talk have degraded this tool if indeed it ever had any weight (which I suppose is itself unlikely).Daniel Shavirohttps://www.blogger.com/profile/14710628584922961682noreply@blogger.comtag:blogger.com,1999:blog-9208928.post-63510900909757893792011-08-29T12:18:38.668-04:002011-08-29T12:18:38.668-04:00Great write up on the issue. The theory that colle...Great write up on the issue. The theory that collective action magnifies the externalities from individual belt tightening seems to reject the rational economic participant. We are not belt tightening because of our own individual application of economic principles to empirical evidence, rather we are simply copying each other and doing what is fashionable. I have long thought that the same phenomenon that explains whether suits have wide or thin lapels explains most peoples’ economic outlook. <br /><br />It is essential to understand that this is the problem because it will lead us to our solution. We are currently using rational solutions to an assumed rational problem, like unadvertised payroll tax cuts and quantitative easing’s complex increase of the money supply. Suits are sold by advertising. Maybe we should try a different approach.cap441https://www.blogger.com/profile/15744392242390003399noreply@blogger.com