Quote:
Originally Posted by Bdog
In what ways can you run a city using Keynesianism? Keynesianism is about smoothing out the boom and bust cycles of the economy and ensuring full employment. What kinds of monetary policies (ie: lowering interest rates, controlling money supply) can the city enact? Do they have some sort of central bank that I'm not aware of? In terms of fiscal policy, how do you expect the city to control aggregate demand? The city doesn't tax consumption, so are property taxes supposed to increase when times are good (which they don't, at least not right away)? As for spending, municipalities in Canada can't run a deficit on their operating budgets (I assume you would expect the city to control unemployment by hiring a larger workforce during a recession, which wouldn't be possible without an increase in revenues). Cities' main functions are to allocate resources (roads, services, etc). They are not in the domain of stabilization or redistribution (which is for federal and provincial governments), which is why I would argue that cities can't enact keynesian policies. In short, Keynesianism is a set of macroeconomic policies which can't be applied on the city scale. I would like to hear what you mean though, in terms of how cities can implement these policies...
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Sorry I'm being a bit argumentative because i agree that cities aren't well positioned to implement Keynesian theory. You are right that they can't run operating deficits. But they can borrow billions for infrastructure during lean times if they want, and pay it off during good times. And tax rates can be adjusted annually if they so choose.
And doesn't every household go into more debt during bad times and save more during good times?