JKJ,

No, my name isn't Saltpetre, but my first name is Peter, and my surname, in part, contains 'salt'. (I am also a target rifle shooter, and you may be aware that saltpetre was a component in early gunpowder formulations - hence my choice of pseudonym.)

So, is your name really Jardine K. Jardine? (You don't really have to answer this.)

I think Alan Austin makes some good sense, and, to use your own suggestion, perhaps Keynesian economic theory can be supported by logical evaluation - as I think Alan has suggested. All the same, the many factors involved in evaluating any economic theory are such, as you have suggested, that empirical 'proof' is likely always to be elusive. A bit like evaluating climate change?

As someone once asked "how long is a piece of string?" To which the reply was "a banana of this colour" - stated whilst holding hands aloft and separated. Makes just about as much sense as trying to understand the workings of international banking, or what the perfect formula might be for 'good government'. Nothing is static.

Now listen up, Julie Bishop included.
All these problems in Europe and the US were predicted back in 1995
by Colin Campbell & Kenneth Deffeyes.
In fact as far back as 1956 Hubbard made some warning but not as
detailed as the first two.
Some say that GDP is a very poor measure of economic activity, but
never the less the cost of energy is eating our GDP out of house & home.
WE have been stupid enough to let ourselves get into debt when we were
about to be assaulted by rapidly rising energy prices.

Sure as many Labour supporters will tell you our debt to GDP ratio is
low compared to others.
If you say that then you do not understand what is happening !
You are stoney broke if you owe $1000 just as you are broke if you owe $1,000,000 !
The GDP has been eaten and you have nothing with which to repay your debt !

Goodness me Alan Austin, Saltpetre, Arjay etc etc;
Have none of you woken up to realise it has nothing to do with money ?

Even some of the economists are wondering why neither inflation or austerity work any more.

It is ENERGY stupid ! (to coin a phrase)

Hi Alan
Well I think you’re doing the best you can with what you’ve got!

The issue indeed is which theory best explains the evidence; Whether the stimulus policies create net wealth for society considered as a whole, or merely rob Peter to pay Paul in a process that makes society as a whole worse off.

Now it’s common ground that, logically speaking, the best that can be said of your empirical argument is that it is “not necessarily” a fallacy, while the best that can be said of my critique of it is that your argument may be fallacious but not necessarily.

Therefore the empirical evidence, of itself, is not capable of concluding the issue for that reason, and two reasons more. Firstly to resolve it further on the basis of empirical evidence, we would have to examine all the different statutes, regulations and policies of the countries you compare on all the headings you mention, for example personal tax rates, company tax rate, superannuation and health care and so on; and then analyse the economic effect of all those differences because it is simply invalid to assume that all these other things are equal when we know they’re not.

Secondly we would need to account for the unknown contingent variables that might affect the result, for example the difference in their informal economies, and cultural differences as to time preference on returns and so on.

Obviously many of these data are unknown or unknowable and it is false to pretend otherwise. The fact is, you have not taken them into account, have you? On the other hand, your appeal to empirical evidence cannot be unfalsifiable or it’s not rational. If it turns on mere bare assertion it assumes what is in issue and is therefore fallacious. You need to be able to say what empirical evidence would prove it wrong at the same time as take into account the unknown contingent variables which, correct me if I’m wrong, you can’t do. If percentage of GDP spent is the criterion, why not 100%?

This means that the empirical evidence, of itself, is not enough. We must fall back, as you said, to “sound data, careful analysis and clear thinking”.

Now the data sets aren’t sound for the reasons I have given. This leaves clear thinking. Your conclusion must make sense in its own right as a matter of pure theory, because you’re using theory to interpret the data. To show which theory best explains the evidence, you have to eliminate the obvious logical possibility that the stimulus policy was a mere wealth redistribution, that it was made a net loss not a net benefit, and that any increase in prosperity came from the extent to which government did *not* interfere, rather than from the stimulus policy.

“Destruction and rebuilding provides short term employment, but does not build the nation’s wealth.”

Looks like you’ve abandoned the central tenet of Keynesian theory that aggregate demand is the criterion whether a stimulus policy is justified, and just parted company from all the authorities you mentioned as well as Keynes. But if not, why not?

The obvious question is, by what rational principle do you distinguish stimulus spendings that are destructive and wasteful mere political wealth redistributions, from those that build the nation’s wealth? Please don’t answer by examples. We need to know the defining criterion. It can’t be profit and loss, or you’ve just lost the argument. And it can’t be aggregate demand, or you’ve just lost the argument.

So what is that rational principle please?

Just listen to them, waffle waffle waffle.
They just do not understand what has been happening under their feet.
Stimulation, ie money printing, is not working.
Austerity, cutting back pensions & other similar acts are not working.

Those old time economists from an era of plentiful cheap energy never
had to face the questions that are here now.
The ones both professional and amateur that we see arguing here are as
about as relevant as a pair of retired generals arguing that Napoleon
should have won at Waterloo.

They seem to be unaware that energy prices have been increasing at 7%
a year since about 2000. The rate is only likely to increase.

Our big problem is that the only minister that knew what is going on
is no longer in government.
The only opposition member that knows is Barnaby Joyce and he probably has been told to shut up.

Every day you see on your TV that oil is $95 a barrel, well it is not,
we pay about $118 a barrel and soon we will be importing one million
barrels a day of refined product.
Work that out for the year !