Here's @sjwrenlewis pondering what might be the fallout from the bursting of the (putative) AI bubble... the key Q.is will Govt.s utilise the insights of Keynes or miss-respond as the post-keynesian 'consensus' might imply....
Interesting stuff & worth reading if you have the time...
#politics #Keynes #AI #FinancialCrisis
https://mainlymacro.blogspot.com/2026/01/what-kind-of-crisis-would-bursting-ai.html
@ChrisMayLA6 @sjwrenlewis What would the keynesian response be? To my libertarian I, I'd say the proper response is to do nothing and let the markets sort themselves out.
Keynes was alway counter-cyclical in his recommendations for Govt. action - so where markets were falling (and negative impact spreading) his repose would be to raise public spending to strike 'effective demand'... the bit that is often forgotten is that when markets are booming, Keynes would (counter-cyclically) be arguing for Govt. to raise taxes to take money out of a potentially overheating economy - the Govt. as thermostat, in a sense
@ChrisMayLA6 @sjwrenlewis But! How would this reasoning apply to a situation when a limited number of tech bros are causing the book, and not society at large? In that case, regular companies not involved in the boom will be "punished" when things go well for the boomers.
When the boomers crash, they will get a "cushion" from the government in the form of subsidies and low taxes, while some of the regular companies that were punished with high taxes during the boom, while not being affected by it, are by then, most likely no longer present.
I think that's a really interesting point, because as we know (and as you have stressed before) large corporations do a good job at capturing business (corporate) welfare from the state... I think the answer would be for a more discerning Keynsian counter-cycle stimulus, but that would require some deft political leadership (which I see little evidence of in our current political class).
This in turn, I think highlights how complex the instrument of "artificial" economic manipulation (as opposed to the natural version where no one intervenes in the market) is. It is very easy that you end up not taking all information into account, and that that in turn, makes things worse.
It is the same situation that the government banking chiefs face when trying to second guess the market by setting what they believe is the correct interest rate.
I guess, in theory, if you assume an all knowing person, with access to all current information about the current state of the economy, Keyenes might work, but what many libertarians think is that the market is so complex that no group of people will be able to gather the information required for a fully balanced and optimized policy.
Yes, certainly all economic policy (and associated interventions) are imperfect, but that is in some sense a straw man - we should not compare actual policies to some modelled 'perfect market' or 'perfect intervention'.... this is why (as I said a week or so back I think) economic history is so important - we can learn and shift policy based on what has & hasn't worked before, but we also have to accept that nothing works as well as we hope (especially not the market)
@ChrisMayLA6 @sjwrenlewis I don't carechow it goes down as long as the worst people lose everything.
Of course they won't. It will be the rest of us who will suffer.
