Neokeynesians vs. Postkeynesians | 214 comments (214 topical, editorial, 0 hidden)

Re: Seed comment (none / 0)

Loanable funds implies an intertemporal governmental budget constraint. In the presence of an intertemporal government budget constraint, the government must trade off macrostabilization in the present for macrostabilization in the future.

The fact that the paper demonstrates that Japan has been able to maintain stable employment indefinitely argues against the existence of an intertemporal government borrowing constraint, and thereby against loanable funds.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 11th, 2012 at 04:25:50 PM EST
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Re: Seed comment (none / 0)

I see it. But an inter-temporal budget constraint can exist, and I think will exist, with or without loanable funds to cover government deficits, so this makes the case for not limiting government spending without really speaking to the nature of government debt and money. If it is as you say in that paper, then loanable funds are then merely the institutional instrument that groups which advocate for smaller government use to limit government power in general. If loanable funds were taken away from them as a discursive tool, other strategies for limiting government spending would fill the gap because limiting government spending, period, is the goal, not living within one's means (which is merely the discursive argument). We know this is true because when groups that advocate for limiting government power the most are actually in power in government, living within one's means is a lower priority for them, as evidenced by higher deficits and debt generally seen in rightist governments than in leftist or centrist ones.

by santiago on Thu Jul 12th, 2012 at 10:40:32 AM EST
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Re: Seed comment (none / 1)

I see it. But an inter-temporal budget constraint can exist, and I think will exist, with or without loanable funds to cover government deficits,

Not in the government's own currency, no.

The country can run out of real resources. But real resource budgeting is not captured by the loanable funds fallacy, because money is not a veil over barter.

Not-spending money today does not in any way, shape or form secure the country that strategic real resources will be available tomorrow. Spending money today, OTOH, can ensure that the relevant strategic resources are available (or are not-strategic) tomorrow, in a full inversion of the case for a private sector actor.

Less abstractly, the marginal government spending is on labour, which cannot be saved up in its raw state. The real world contains no little gray men running a time-savings bank. That means that at the margin the government has no ability to conserve real resources by not-spending money, because those real resources (man-hours) would simply dissipate into nothingness if they were not used.

If it is as you say in that paper, then loanable funds are then merely the institutional instrument that groups which advocate for smaller government use to limit government power in general.

Merely an institutional instrument that anti-social groups use to reduce government spending (which more often than not includes not-limiting government power in general - very few small governments are also limited governments, and vice versa, for the simple reason that the vote is distributed more evenly than the dollar).

This is an argument for why the loanable funds fallacy (and those groups and research traditions which employ it) is fundamentally dishonest.

If loanable funds were taken away from them as a discursive tool, other strategies for limiting government spending would fill the gap because limiting government spending, period, is the goal, not living within one's means (which is merely the discursive argument).

Yeah, liars gonna lie.

Economists who construct pseudoscientific arguments like loanable funds to aid and abet liars in their lies are dishonest.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 12th, 2012 at 01:03:00 PM EST
[ Parent ]

Re: Seed comment (none / 0)

By inter-temporal budget constraint, such as loanable funds, I mean a political constraint, not a physical constraint. And if you didn't have budgets and debt to define the political discourse to limit government power, other discursive and institutional tools to do the same thing must emerge instead.

There are also real constraints on government power, up to and including physical resources, numbers and skills of people, and time, but political constraints such as budgets, loanable funds, money supplies, etc. should manifest themselves much earlier.

What the paper shows is that, in general, political constraints on spending are not well matched to real, physical constraints on resources so governments should spend more in recessions fearlessly. It doesn't seem to say anything more specific about the nature of money and debt, however, other than that they belong to the set of institutional -- not real -- matters, which is something only contested by the hard-core, goldbug wing of the economics profession. Krugman, for example, is not arguing that there is anything real to money -- just that the institutions in place today allows central banks much more power to control the buying power of money and distribution of that power in society than individuals or private lenders, which is the opposite of what the MMT crowd appears to be saying.

by santiago on Thu Jul 12th, 2012 at 04:17:23 PM EST
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Re: Seed comment (none / 1)

By inter-temporal budget constraint, such as loanable funds, I mean a political constraint, not a physical constraint.

Quite. And economists who model as if it were the latter are Lysenkoist hacks, not scientists.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 12th, 2012 at 04:50:24 PM EST
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Re: Seed comment (none / 0)

You made me google "Lysenkoist."

by santiago on Thu Jul 12th, 2012 at 05:27:45 PM EST
[ Parent ]

Re: Seed comment (4.00 / 2)

Economics is a poitical onstraint.

As I keep pointing out, the models don't work because they don't have to. They exist as propaganda for decisions that benefit one tiny caste at the expense of all other castes.

There's nothing more complicated happening here.

See e.g. Spain, Greece Ireland, etc.

Or are you seriously going to argue that the decisions being made are somehow genuinely for the benefit of the majority of the population?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jul 12th, 2012 at 05:21:06 PM EST
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Re: Seed comment (none / 0)

Economics is a form of policy discourse. Whether it is a constraint or not, or honest or not, depends on context.

by santiago on Thu Jul 12th, 2012 at 05:33:00 PM EST
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Re: Seed comment (4.00 / 3)

Can a policy discourse be scientific unless it models reality accurately?

Er - no.

So any pretence at science when a discourse has been repeatedly falsified is clearly dishonest.

As for constraints - as I said, ask the Spanish, the Greeks, the Irish, and the German workers if they feel their rights to a reasonable livelihood and a lack of nonsensical financial drama are being politically constrained.

If that's not clear enough, I'll put it more bluntly - economics as used in contemporary statecraft is simply a barefaced lie used by one class to justify the theft of time, creativity and resources from the other classes.

It has no scientific or empirical basis whatsoever. It's simply a blunt stick used to beat working people and bring them to heel for nakedly self-interested political reasons that have no connection whatsoever with their immediate or future prosperity or welfare.

And if the working people ever work this out, they're going to be really, really angry.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jul 12th, 2012 at 06:19:36 PM EST
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Re: Seed comment (3.00 / 2)

Social science is not "science." Rather it uses scientific methods to organize thinking, so that participants in its discourse can keep track of the veracity of claims, warrants, and reasoning being made. It is a way of improving the honesty of political discourse precisely because it allows a method for pointing out when people are lying or mistaken about things. It does this through forcing arguments into falsifiable hypotheses that allow for evidence to be presented.

Scientific methods are naturally very limited in policy discourse because so many of the parameters that matter most for deciding things in social life are unobservable by their nature, such as values, aesthetics, and the meaning of life -- the things which Ludwig Wittgenstein famously said that science must remain silent about.

by santiago on Thu Jul 12th, 2012 at 08:15:35 PM EST
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Re: Seed comment (4.00 / 2)

Social science is not "science." Rather it uses scientific methods to organize thinking, so that participants in its discourse can keep track of the veracity of claims, warrants, and reasoning being made. It is a way of improving the honesty of political discourse precisely because it allows a method for pointing out when people are lying or mistaken about things. It does this through forcing arguments into falsifiable hypotheses that allow for evidence to be presented.

Even by this standard neoclassical economics is unfit for purpose, because it intentionally obfuscates when people are lying or mistaken about things, and systematically refuses to acknowledge when its falsifiable hypotheses are falsified.

Really existing neoclassical economics is a systematically dishonest enterprise.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 13th, 2012 at 05:57:54 AM EST
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Re: Seed comment (none / 1)

JakeS:

Really existing neoclassical economics is a systematically dishonest enterprise.
- Jake

word...

it is the legal waterboarding of whole societies.

"It's very hard to see what is kept invisible" Roseanne Barr

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:55:56 AM EST
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Re: Seed comment (none / 0)

I don't see any systematic attempt to obfuscate or refuse to acknowledge when hypotheses have been proven false. The papers and the data to check them are all there for everyone to see after all.

Rather, I do see an unfortunately high number of idiosyncratic cases where individual economists refuse to admit when their hypotheses have been proven lacking, but there is nothing in the methods themselves which cause this. If there was a problem with the methods, it could be labeled systematic, but this is a case of individual faults, not system faults, and it is prevalent in all social sciences. The heavy use of math in economics is what allows us to point it out more easily in economics, which is exactly how it should be and why math is so useful in economics.

by santiago on Fri Jul 13th, 2012 at 12:31:50 PM EST
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Re: Seed comment (none / 1)

I don't see any systematic attempt to obfuscate or refuse to acknowledge when hypotheses have been proven false.

You can get equilibrium-based macroeconomic models published in purportedly respectable journals.

It has been a full century since the Walrasian approach to economics was conclusively demonstrated to be intellectually and practically sterile. Persisting in promulgating it is systemic obfuscation and refusal to acknowledge falsification.

Rather, I do see an unfortunately high number of idiosyncratic cases where individual economists refuse to admit when their hypotheses have been proven lacking, but there is nothing in the methods themselves which cause this. If there was a problem with the methods, it could be labeled systematic, but this is a case of individual faults, not system faults,

The fact that falsification of economic equilibrium, model-consistent expectations, Say's Postulate, loanable funds, long-run money neutrality (and indeed the whole of the neoclassical long run) is not assimilated by the peer review process is a systemic fault, and a systemic dishonesty.

Publishing things you know or should know are nonsense is not honest just because it is possible for outside observes to take the time to dismantle the farrago of lies. In fact, this particular dishonest tactic has a name: The Gish Gallop.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 13th, 2012 at 04:41:28 PM EST
[ Parent ]

Re: Seed comment (none / 1)

things which Ludwig Wittgenstein famously said that science must remain silent about.

Wittgenstein wasn't talking about science, he was talking about philosophy.

Wittgenstein to neoclassical economics: just just up.

Then again, famously Piero Sraffa managed to change Wittgenstein's mind about language and logic.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Fri Jul 13th, 2012 at 05:59:33 AM EST
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Re: Seed comment (none / 0)

Wittgenstein was talking about philosophy in the most general sense, including natural philosophy, i.e., science, and its uniquely helpful language for making and warranting truth proposition statements -- mathematics. Specifically he argued, and remained convinced for the most part, that the most important parts of questions about morality and God, like aesthetics, were not amenable to truth proposition language because truth proposition statements about such matters were nonsensical. (E.g., "Does beauty exist?" is a nonsensical question.) While the language of math and the methods of science might be illuminating (and they might be confounding as well), they can never be decisive in determining truth from falsehood in such matters, so the implication for economics and other social sciences is that, unlike in the natural sciences, you can't rely on mathematical models and observation alone to make what are essentially moral arguments. The sin of the neoclassical approach is that its practitioners too often use math to claim they have discovered right from wrong, when such a use of mathematical language is nonsensical.

by santiago on Fri Jul 13th, 2012 at 11:50:44 AM EST
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Re: Seed comment (none / 0)

On the other hand, I'm just now finishing reading Keynes' treatise on probability and it's a wonderful development of the idea that probability is a branch of logic... And of course he does apply it to moral philosophy (haven't read that bit yet).

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Fri Jul 13th, 2012 at 12:44:18 PM EST
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Re: Seed comment (none / 0)

Did you actually work through all the math? I decided that it probably wasn't worth the effort to figure out a nonstandard notation that I'd never see anywhere else. Was I wrong?

by gk (g k quattro due due sette "at" gmail.com) on Fri Jul 13th, 2012 at 01:45:29 PM EST
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Re: Seed comment (none / 1)

Well, he uses

x|h

for the usual

P(x|h)

I've been skipping most of the algebra anyway, the book is more about the philosophy of probability as far as I'm concerned.

But I like reading historical works. The book could be written in half the length today - you could delete an entire chapter just by saying "probabilities are partially ordered".

I haven't given much thought to what his non-numerical probabilities are, that are in < and > relations with numerical probabilities nonetheless...

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Fri Jul 13th, 2012 at 01:50:19 PM EST
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Re: Seed comment (none / 0)

Policy economics is propaganda, not social science.

Rather it uses scientific methods to organize thinking

Quite.

so many of the parameters that matter most for deciding things in social life are unobservable by their nature, such as values, aesthetics, and the meaning of life

And power. Especially power. Except when it becomes visible after people stop believing the lies about it.

Incidentally, there are scientific theories of personal and social values and aesthetics, with falsifiable premises.

(But I wouldn't expect someone who works on the management board of a bank to know that.)

Oh - and did you just attempt to imply that economics is about the meaning the life?

Really? How interesting.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jul 13th, 2012 at 06:33:25 AM EST
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Re: Seed comment (none / 0)

ThatBritGuy:

Oh - and did you just attempt to imply that economics is about the meaning of life?

with your usual unerring accuracy, you have lasered in on the nub.

it damn well should be, as we have given it the power to be so destructive.

"It's very hard to see what is kept invisible" Roseanne Barr

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:36:52 AM EST
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Re: Seed comment (none / 1)

Yes, economics is, first and foremost, a branch of moral philosophy, which, unlike natural philosophy -- science -- which attempts to describe what can be observed about the world, moral philosophy is ultimately about discerning the meaning of life and its implications for how to create a just society.

by santiago on Fri Jul 13th, 2012 at 12:34:39 PM EST
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Re: Seed comment (4.00 / 3)

Actually economics is equally dishonest when it pretends to be a branch of moral philosophy.

Firstly, moral philosophy is only tangentially related to meaning. The only honest position on the meaning of life is that no one knows and it's impossible to know in principle. Anyone who claims otherwise is lying.

So morality becomes a political and utilitarian issue - which it always is.

But you cannot go from there to claiming that economics - which even at its broadest is about one small subset of all possible human relationships - can ever provide a complete moral picture.

In practice of course economics claims to be moral - as in discussions of moral hazard, etc.

But in fact it's simply political misdirection. It attempts to frame the discussion of human relations in one specific way, while denying validity to other kinds of human relation.

The concept of 'rational self-interest' is immensely poisonous. It's also easily falsifiable behaviourally.

Non-sociopaths relate to others with mutuality and reciprocity. As a moral theory, economics has no useful concept of either.

So where is your morality now?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jul 13th, 2012 at 12:51:16 PM EST
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Re: Seed comment (none / 1)

Nothing in economics, whether it's Marxian, neoclassical, or whatever other approach, denies the validity of other kinds of human relations. Rather, economics is the study of the material aspects of human society, which is a very important part of the overall question of the meaning of life of how to go about creating a just society. Mutuality, reciprocity and rational self interest are entirely consistent concepts.

by santiago on Mon Jul 16th, 2012 at 09:17:49 AM EST
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Re: Seed comment (4.00 / 3)

And naturally you will have no trouble pointing to the many examples of the IMF, the ECB, of the dictators installed and propped by Wall St, and of the entire financial industry using their fine understanding of mutuality and reciprocity to better the lives of working populations across the world.

A revised and empirical version of economics might - one day - be a useful tool for equitable democracy.

Currently it's nothing of the sort, in much the same way that a black widow spider bite isn't a good cure for indigestion.

Pretending that it is is dishonest and utterly shameful.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jul 16th, 2012 at 09:29:43 AM EST
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Re: Seed comment (none / 1)

Right. Just like I won't have any trouble finding moral failings in the history of Roman Catholic Church or any other school of thought dealing with the study of morality, social justice, and the meaning of life.

by santiago on Mon Jul 16th, 2012 at 09:36:04 AM EST
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Re: Seed comment (none / 0)

Some of those schools of thought have useful and relevant things to contribute to society.

The insights of neo-classical economics which are both true and interesting can be counted on one hand. With fingers left over.

- Jake

If you only spend 20 minutes of the rest of your life on economics, go spend them here.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 23rd, 2012 at 10:26:00 AM EST
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Re: Seed comment (none / 0)

ThatBritGuy:

they're going to be really, really angry.

they already are... so far there still lacks the channels to express it.

the dam's still holding, but the riots last year were the tip of that rage's iceberg.

"It's very hard to see what is kept invisible" Roseanne Barr

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:54:03 AM EST
[ Parent ]

Re: Seed comment (none / 0)

ThatBritGuy:

Or are you seriously going to argue that the decisions being made are somehow genuinely for the benefit of the majority of the population?

roflmao

that's the pols' job, to explain patiently to the plebes how up is down and black is white.

damned if they don't pull it off surprisingly effectively, but rather than just lauding their talents for deviance, we need to take responsibility for our part in the bargain.

exactly how, remains the existential question...

i foresee 'unforeseen events' will play an increasingly decisive role in guiding change, since we seem transparently incapable of doing so under our own tutelage, proactively.

more wu-wei dammit!

"It's very hard to see what is kept invisible" Roseanne Barr

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:51:28 AM EST
[ Parent ]

Neokeynesians vs. Postkeynesians | 214 comments (214 topical, 0 editorial, 0 hidden)

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