Fiscal and Organizational Capacity of States and Sovereignty

by ARGeezer Fri May 24th, 2013 at 11:47:10 AM EST

In their paper Fiscal Systems, Organizational Capacity, and Crisis: A Political Balance of Payments Approach  Nathaniel Cline and Nathan Cedric Tankus illustrate the power of carefully looking at economic history while illuminating some of the limitations of economic and monetary theory, in this case that of MMT, and clarifying factors that affect the abilities of different societies to create a truly sovereign state.

(Warren) Mosler argues that in the mid 1990s he thought, "the theory of the monetary circuit was correct to the point of being entirely beyond dispute". However, he also argues that the theory "could be further enhanced by starting from the beginning". This beginning for Mosler was of course why the workers accepted the units of a currency as payment for their labor services. His answer (which is quite well known among heterodox economists by now) was that imposed debts denominated in that unit of account, give it's units value; in other words taxes. This is an important part of the story, but we would argue it is in fact not the beginning. The true beginning to the circuit is the question of where people and organizations gain the ability to tax.

    In order to impose liabilities onto a population (i.e., build a tax system), an organization or group needs to have the resources to impose a tax, collect a tax, and use the real resources it gains through spending to expand and institutionalize its power. The catch-22 is that all of these tasks take real resources and personnel, which is precisely what the tax system is supposed to get. This brings us to history and why this approach has fruitful insights for understanding growth and development. Western Europe was in many ways set up for the modern period by having a deeply institutionalized system of taxation and tribute (some of it in tally sticks and some of it in real resources) before capitalism started developing. They already had the ability and authority to extract real resources and thus it took minimal institutional change to do this purely through a monetary system run by a nation state rather then city-states and feudal hierarchies.

Quantifying Utopia: A UBI Calculator for the USA

by ARGeezer Thu May 16th, 2013 at 03:10:20 PM EST

Beta: Universal Basic Income Calculator  New Deal 2.0  Mike Konczal

Click here to try a new Universal Basic Income calculator. You can click on which programs you'd like to turn into a UBI, and what taxes you'd be willing to put into motion, and it will tell you how large of a UBI can be supported with those resources. You can also type in your own numbers if you are interested.

[editor's note, by ARGeezer] Inserted blockquotes around first paragraph.

The Road Not Taken - Risk and Uncertainty

by ARGeezer Sun Dec 16th, 2012 at 03:17:30 PM EST

While perusing an INET article on risk, "Choice Under Uncertainty": A Misnomer by Raphaële Chappe, (someone to keep an eye on), I saw another reference to Frank Knight, one of the founders of the Chicago School of economics and his 1921 work on risk. I knew of Knightian uncertainty but decided to find out more about Knight. Wiki to the rescue:

Knight is best known as the author of the book Risk Uncertainty and Profit, (PDF) based on his Ph.D. dissertation at Cornell University. In that book, he carefully distinguished between economic risk and uncertainty. Situations with risk were those where the outcomes were unknown but governed by probability distributions known at the outset. He argued that these situations, where decision making rules such as maximising expected utility can be applied, differ in a deep way from "uncertain" ones, where the outcomes were likewise random, but governed by an unknown probability model. Knight argued that uncertainty gave rise to economic profits that perfect competition could not eliminate.

While most economists now acknowledge Knight's distinction between risk and uncertainty, the distinction has not resulted in much theoretical modelling or empirical work. (emphasis added)

Well, fancy that! Who could'a imagined? Perhaps one of the perks of being the guy who first described a field is the opportunity to systematically ignore the implications when those implications were awkward. I can hear his ghost responding to an accusation that his life's work paved the road to the biggest financial calamity since the Great Depression whilst ignoring Knightian uncertainty: "Don't harangue me about risk! I wrote the book."

This seems to be the focus of Raphaële Chappe's academic work and one her background well equips her to investigate with authority.

'The Multiplier is at Least Two'

by ARGeezer Thu Nov 29th, 2012 at 05:38:35 AM EST

From The Federal Reserve Bank of San Francisco Economic Letter #2012-35 of November 26, 2012:

(Cascading Hat Tips to Migeru Shimbun and Economist's View)

Highway Grants: Roads to Prosperity?

By Sylvain Leduc and Daniel Wilson

Federal highway grants to states appear to boost economic activity in the short and medium term. The short-term effects appear to be due largely to increases in aggregate demand. Medium-term effects apparently reflect the increased productive capacity brought by improved roads. Overall, each dollar of federal highway grants received by a state raises that state's annual economic output by at least two dollars, a relatively large multiplier.

Increasing government spending during periods of economic weakness to offset slower private-sector spending has long been an important policy tool. In particular, during the recent recession and slow recovery, federal officials put in place fiscal measures, including increased government spending, to boost economic growth and lower unemployment. One form of government spending that has received a lot of attention is public investment in infrastructure projects. The 2009 American Recovery and Reinvestment Act (ARRA) allocated $40 billion to the Department of Transportation for spending on the nation's roads and other public infrastructure. Such public infrastructure investment harks back to the Great Depression, when programs such as the Works Progress Administration and the Tennessee Valley Authority were inaugurated.

Nuclear Power Plants and Superstorm Sandy.

by ARGeezer Thu Nov 1st, 2012 at 02:08:25 AM EST

It is hardly surprising that we have heard so little about this in the media.

Here is a transcript of Arny Gunderson on Democracy Now on the concerns about nuclear plant safety in the storm:

AMY GOODMAN: Can you talk about what you feel needs to happen right now? And talk about nuclear power plants in Connecticut, in Vermont, your main concern.

ARNIE GUNDERSEN: Yeah. The biggest problem, as I see it right now, is the Oyster Creek plant, which is on Barnegat Bay in New Jersey. That appears to be right about the center of the storm. Oyster Creek is the same design, but even older than Fukushima Daiichi unit 1. It's in a refueling outage. That means that all the nuclear fuel is not in the nuclear reactor, but it's over in the spent fuel pool. And in that condition, there's no backup power for the spent fuel pools. So, if Oyster Creek were to lose its offsite power--and, frankly, that's really likely--there would be no way cool that nuclear fuel that's in the fuel pool until they get the power reestablished. Nuclear fuel pools don't have to be cooled by diesels per the old Nuclear Regulatory Commission regulations. I hope the Nuclear Regulatory Commission changes that and forces the industry to cool its nuclear fuel pools, as well.

This time of year, there's a lot of power plants in refueling outages. And all of those plants will be in a situation where there's no fuel in the nuclear reactor; it's all in the fuel pool. Systems have been shut down to be maintained, including diesels, perhaps even completely dismantled. And in the event that there's a loss of offsite power from the high winds from this hurricane, we will see the water in the fuel pools begin to heat up.

Austerity for the USA? Obama's 'backgrounder'

by ARGeezer Wed Oct 24th, 2012 at 12:06:56 PM EST

The president vows debt-cutting "grand bargain, immigration reform in 2013"

The conversation had initially been off-the-record, but the White House gave the daily permission to publish it after editor Rick Green penned an unusual public complaint.

"It will probably be messy. It won't be pleasant. But I am absolutely confident that we can get what is the equivalent of the grand bargain that essentially I've been offering to the Republicans for a very long time, which is $2.50 worth of cuts for every dollar in spending, and work to reduce the costs of our health care programs," Obama said.

"
And we can easily meet -- 'easily' is the wrong word -- we can credibly meet the target that the Bowles-Simpson Commission established of $4 trillion in deficit reduction, and even more in the out-years, and we can stabilize our deficit-to-GDP ratio in a way that is really going to be a good foundation for long-term growth. Now, once we get that done, that takes a huge piece of business off the table," he went on to say.

Does Obama really believe debt reduction will work? (I don't think he is talking about credit writedowns.) Or is he counting on, say, 'debt reduction' of $1 trillion over ten years as a justification for $400 billion of stimulus now? Nor, given his record, do I think he is counting on additional savings at the expense of the health insurance industry - or any other part of the financial sector for that matter, and that is where most of the savings could be made that would not impact the quality of delivery of health care to the public. Update [2012-10-24 12:22:13 by ARGeezer]: Edited portion in the blockquote.

The Change They Believe In

by ARGeezer Sat May 5th, 2012 at 01:22:56 AM EST

Speech for Harlem Tenants Association, November 14, 2008  By Robert Fitch

Michael Hudson apparently has a copy of Robert Fitche's speech which he provided to Yves Smith. This was the basis for an article in naked capitalism.

"What's President-elect Obama's prescription for urban pains?.... Obama himself is not easy to read. In my lifetime, we haven't had a politician with his gifts: his writing talent; his eloquence; his charisma; his mastery of public policy; his ability to run a national campaign against formidable rivals. Obama projects so brilliant an aura that it's almost blinding. He's become the bearer of pride for forty-five million African Americans who want to be judged by the content of their character. He's the prophet of hope; the apostle of change and the organizer of "Yes We Can."

All this makes Obama's actual politics very hard to put in any critical perspective. By actual politics I mean above all, the principal interests he represents; his authentic political philosophy. Where he fits on the on the Left-Right political spectrum. Obama resists being identified with either the Right or the Left. Even when he talks about his mom's liberalism, it's with a certain irony. "A lonely witness for secular humanism, a soldier for the New Deal, Peace Corps, position-paper liberalism."

Obama is a partisan of the Third Way. In Europe, the Third Way means you're neither socialist nor capitalist. In the U.S. it means you're neither for liberalism nor conservatism.....Are traditional political vocations now obsolete? The Left stands for the interests of those who have to work for a living; for the tenants and the poor. For the victims of discrimination. The Right in America stands for the interests of the employers and the investing class. For those who own the land, the houses, the banks and the hedge funds.For Joe the plumber who was really Joe the plumbing contractor. And for those who see themselves as the victims of affirmative action.

In a way, though, the Left and the Right have more in common with each other than they do with the advocates of the Third Way. The Left and the Right argue that different interests matter. The Third Way says they don't. According to them, the oppressed and the oppressors, the lions and the lambs should set down together and celebrate their unity in one great post-partisan, multi-cultural 4th of July picnic. One of Obama's most repeated mantras resonates here: "a common good and a higher interest," he says. "That's the change I'm looking for."

  Update [2012-5-5 14:50:0 by ARGeezer]: added blockquotes, links and paragraph divisions.

LQD: Depression Is A Choice

by ARGeezer Thu Apr 26th, 2012 at 04:51:32 AM EST

So says Steve Randy Waldman in his current post on his blog, interfluidity:

We are in a depression, but not because we don't know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives.

Usually, economists are admirably catholic about the preferences of the objects they study. They infer desire by observing behavior, listening to what people do more than to what they say. But with respect to national polities, macroeconomists presume the existence of an overwhelming preference for GDP growth and full employment that simply does not exist. They act as though any other set of preferences would be unreasonable, unthinkable. (Emphasis added.)

I can think of reasons macroeconomists might want to pretend that there is a general preference for GDP growth and full employment, but there are many macroeconomists who certainly do not presume such preferences exist. Most are just not amongst "The Serious People".

Debt Does Matter

by ARGeezer Sat Mar 17th, 2012 at 11:30:48 PM EST

Economics without a blind spot on debt   Steve Keen

Steve Keen is being interviewed in front of a live audience at the London School of Economics on April 3. The topic will be Banks vs. the Economy. The following was excerpted from a post he prepared for the LSE blog British Politics and Policy at LSE and which he reproduced on his blog Debtwatch.

The LSE and the BBC are to be applauded for this contribution to the discussion of what needs to be done to resolve the ongoing financial, social, political and economic crisis gripping the world.

As a car driver, you have surely had the experience of changing lanes and being beeped by a car with which you were about to collide--but which you didn't see before the lane change. It's because the car was clearly visible in your rear-view mirror, but that part of the image fell on your retina's blind-spot--so you didn't see it. Fortunately most of us learn that we have a blind spot, and so we check carefully to avoid being fooled by it again--and causing an avoidable accident.

If only economists could learn the same way, we might not now be in the accident of this never-ending economic crisis. "Neoclassical" economists (who dominate both academic economics and policy advice to governments) have a blind-spot about the role of private debt in macroeconomics, yet despite the economy crashing once before because of it during the Great Depression, they continue to argue that it's irrelevant now--during this latest crash.

Will Germany Oust Peripheral Countries from EMU?

by ARGeezer Wed Feb 15th, 2012 at 12:16:06 PM EST

CAUTERISE AND PRINT: GERMANY'S NEWEST PLAN A  Yanis Varoufakis

While Greece burnt, and the Parliament of the Hellenic Republic was insincerely accepting impossible conditions for implementing yet another unworkable fiscal adjustment plan, the buzz in Frankfurt's financial district was an exciting, fresh German Plan A.[1] For the first time in two years, since the euro Crisis began, Germany's captains of finance could be seen to have re-discovered a spring in their step. The new optimism stems from a new Plan which is predicated upon a long delayed recognition and two strategic choices:

Germany's belated epiphany is that, without a major redesign of the euro architecture, a number (>1) of eurozone member states are irretrievably insolvent. As for the two strategic choices, the first is Berlin's conclusion that German politics have no stomach for, or interest in, a structural redesign of the euro system.[2] The second choice involves a massive bet in attempting to save the eurozone by shrinking it forcefully while, at the same time, authorising the ECB to print trillions of euros to cauterise the stumps left when the states earmarked for the chop are severed.

The detail not yet `worked out' concerns the identity of the countries to be shown the door. The consensus opinion in Frankfurt was that Greece and Portugal are certainties. Few expressed the view that Portugal is too close to Spain to cauterise effectively while others went against the grain of majority opinion suggesting that Ireland ought to be liberated too. My impression is that, current thinking, has settled on Greece and Portugal, with a questionmark over Ireland. (Emphasis from original.)

The Future of Economics

by ARGeezer Thu Feb 2nd, 2012 at 03:40:15 AM EST

Bloomberg invited Steve Keen to write an 800-word feature on "The Future of Economics" for the World Economic Forum, which started on Wednesday, January 25 2012 in Davos. Perhaps the senior editor thought this paper was too challenging. I haven't been able to find this paper either at Bloomberg News' site or the World Economic Forum web site to confirm that it was distributed to participants, but it would be a high profile appearance for TARA if it were. The challenge is to the orthodoxy rather than to the intellect.

For its entire history, macroeconomics has been dominated by mathematical models that ignore the existence of money, debt and banking, and that perceive the economy's movement through time as transitions from one state of equilibrium to another.

At any point in history, these would be heroic assumptions. Could it really be true that models without either money or instability are provably superior at predicting the economy's future course than models in which money and banking exist, and in which the model economy can be out of equilibrium? If not, is it the case then that such models are simply too difficult to construct--that the best we can do is pretend that the economy doesn't have banks or money, and that it's always in equilibrium, even if we know these assumptions are false?

Denkverbot

by ARGeezer Sat Sep 17th, 2011 at 11:35:29 PM EST

From: Bailout Rebellion in Germany Heats Up  zero hedge

"There cannot be any prohibition to think" just so that the euro can be stabilized, wrote Philipp Rösler, Minister of Economics and Technology, in a commentary published on September 9 (Welt, article in German). "And the orderly default of Greece is part of that," he added. Instantly, all hell broke loose, and Denkverbot (prohibition to think) became a rallying cry against the onslaught of criticism that his remarks engendered.

I have always believed: "when you are right you are right!" In this case Philipp Rösler is definitely right about Denkverbot. But there is a more fundamental Denkverbot than the one to which he referred which should also be rejected: That the current financial crisis could better be resolved by writing down unpayable debt, as opposed to bankrupting governments trying to pay the unpayable.

Liquidity, Bank Capital and Market Reform

by ARGeezer Sun Sep 4th, 2011 at 01:12:09 PM EST

Liquidity has almost been given a bad name by all of the officials who have claimed that the problem with the economy from 2008 to today is lack of liquidity. Critics have vociferously asserted that the bigger problem is solvency. Given the price history of US residential real estate since 2008 and the size of the class of US RMBS financial assets from 2002 to 2006 the solvency of institutions holding these RMBSs certainly seems questionable. But looked as on its own merits, as opposed to the camouflage uses to which it has been put, liquidity is an important and neglected factor in our financial markets.

London Banker has a new post on this subject: Liquidity, Liquidity, Bank Capital and Market Reform. After all, there was a time when central banks were not the chief source of liquidity and it would seem desirable to find a way to return to that situation, especially seeing that re-inflating the bubble doesn't seem to be working so well. His post consists of a series of comments from a friend's e-mail, shown here in orange, to which London Banker responds.  

Central bankers and securities regulators lost sight of liquidity over the past decade or two in permitting reforms which compromised the health of the financial system. Thanks to the Greenspan and Bernanke puts, and to surplus recycling by Asian economies, many took liquidity - like oxygen - for granted. Like oxygen, you only realise how critical liquidity is when its absence becomes noticeable.

Now that bank regulators have rediscovered liquidity as an essential attribute of healthy banks and healthy markets, it is important to reinforce some key qualities.

   Liquidity means you can generate cash from a physical asset or paper claim.

If you can't exchange the asset for a major currency to meet a sudden funding need, then the asset shouldn't be permitted as regulatory capital. Basel II and Basel III have generated hundreds of pages around credit scoring and asset type while ignoring the fact that most of what banks are attributing as capital cannot be turned into cash on demand.

But, effectively, the criteria came to be having a AAA rating on the asset. But that was like Kansas before the tornado of 2008. The tornado exposed the fraud of the AAA ratings and "We ain't in Kansas anymore!"

The Modest Proposal of Yanis Varoufakis

by ARGeezer Tue Jun 7th, 2011 at 01:32:34 AM EST

Saviour of Last Resort

Over the last few weeks Yanis Varoufakis and Tasos Patokos "have carried out a series of simulations regarding the Greek debt-to-GDP ratio under different scenaria." The graph below represents four scenarios that have been modeled:

To Save the Euro, Germany Has To Quit the Eurozone

by ARGeezer Thu May 26th, 2011 at 09:27:59 PM EST

Marshall Auerback has a post in New Economic Perspectives with the above title. He makes an interesting case. I know that similar observations have been made on ET in the last year. At the very least, his article pushes a re-framing of the existing debate over debt in Euro-zone countries.

When the euro was launched, leading German politicians used to argue, with evident relish (and much to the chagrin of the British in particular), that monetary union would eventually require political union. The Greek crisis was precisely the sort of event that was expected to force the pace. But, faced with a defining crisis, Ms Merkel's government is avoiding airy talk of political union - preferring instead to force harsh economic medicine down the throats of the reluctant Greeks, Irish, Portuguese and Spanish electorates. This is becoming both economically and politically unsustainable. If the objective is to save the currency union, perhaps policy makers are looking at this the wrong way around. In the end, paradoxically, to save the European Monetary Union, the least disruptive way forward would be for the Germans, not the periphery countries, to leave.

Will Chinese bubble(?) pop or deflate?

by ARGeezer Mon Jan 24th, 2011 at 11:45:43 PM EST

China has seemed to avoid the worst of the global financial crisis, but critics claim that they have done so by inflating a domestic real estate bubble. ET readers have probably heard of Ordos. But how will it end? Hard or soft landing? Here are some views:

Strong China growth boosted by $1.5 trillion in loans  by Malcolm Moore - Telegraph (H/T to Automatic Earth for the Telegraph links.)

   For the second year running, Chinese banks loaned out more money than the UK's entire public debt. Their extraordinary largesse helped the Chinese economy maintain the 10pc growth level it has recorded each year, on average, for the last two decades.

    Despite a global economic malaise, the National Bureau of Statistics said China's gross domestic product (GDP) had expanded by 10.3pc compared with the 9.2pc it grew in 2009. "It is not difficult to grow at double digits if you are pumping money into the economy like there is no tomorrow," said Alistair Thornton, an economist at IHS Global Insight in Beijing. "The banks are lending more than twice as much as they were before the financial crisis and they are also printing new money - money supply is up 50pc from a couple of years ago."

The Tunisian Revolution

by ARGeezer Sat Jan 15th, 2011 at 02:07:04 AM EST

Migeru noted:

I would expect some gray regime insider to be installed as caretaker to organize 'free' elections. Might well be from the military.

The Prime Minister, Mohamed Ghannouchi, an economist, fills the bill for now. The other thing that must be done to have a chance of being successful is to satisfactorily reassure Paris and Washington that their "vital interests" are being protected. At a minimum this probably has to be plausible.

In any case the US is preoccupied with Lebanon, along with all its other ongoing disasters and doesn't really need a new adventure in North Africa. It appears that Mohamed Ghannouchi may fill the bill re US concerns and it helps that he is reasonably popular in Tunisia, if not viewed as full time leadership material.

EROI, ROIIC and The Collapse of Complex Societies

by ARGeezer Sun Dec 12th, 2010 at 11:46:41 PM EST

EROI = Energy Return On Investment.   ROIIC = Return On Investment In Complexity†.  The Collapse of Complex Societies by Joseph Tainter.

†See excerpts from Tainter quoted below the fold.

In a thread in a previous diary while discussing growth vs. sustainability question arose as to whether an argument being used conflated the issue of economic growth with that of social equity. This issue goes to the heart of the different approaches currently employed in "mainstream economics" and that employed in other social sciences, especially anthropology, archeology and sociology. My response outgrew the bounds I thought proper for a comment and that diary was already unwieldy, so I have made it into another diary, if somewhat belatedly.

Julian Simon had made the argument, cited by santiago:

-- that there is no reason to presume that human population growth actually be limited by merely linear projections of resource use and availability into the future because people can adapt to scarcity.

I responded:

....

The problems for the next two decades are likely to be learning to deal with declining marginal returns on the investments required to provide the energy to drive our cultures. Renewable energy sources provide positive marginal returns. I have seen figures of up to 20:1 for wind. But that may be inadequate to support systems that were built up during times of 50:1 returns.

My fear is that by denying the existence of foreseeable constraints we will run into them very hard and, instead of moving gracefully to a scenario in which we rely on 20:1 returns from renewables, we end up in a near total collapse of the culture. We have to consider that, by blindly following hopeful scenarios and denying the possibility of negative scenarios we could end up needing to rebuild all of our coastal cities on higher ground in a world in which 20:1 returns on investment are the best obtainable. And we could end up having to do that in a social context where a tiny minority possesses almost all disposable wealth and control of the apparatuses of government and has no interest in the survival of the bottom 90% of income earners in the society. But that might get us back to a population less than 10% of what we have today.

To this santiago responded:

There are two arguments being conflated here (and I don't mean just your comment).  One is an efficiency (or growth) argument, and one is an equity argument.

My eventual response is that there are two arguments but they are not so much conflated as co-existent. The Growth/Sustainability argument is not dependent on maintaining equity. In fact decreasing equity would seem to go nicely with decline and collapse, and that certainly was the case with the Western Roman Empire.  But then I paused to wonder if perhaps sustainability IS dependent on social equity And on the question of if and how it is reasonable to attempt to separate the economy from the society in which it operates and to disregard the effects of the operation of that economy on the society in which it is actually embedded. Julian Simon, meet Karl Polanyi.

 

EROI, ROIIC and The Collapse of Complex Societies

by ARGeezer Sun Dec 12th, 2010 at 10:14:02 PM EST

EROI = Energy Return On Investment. ROIIC = Return On Investment In Complexity†. The Collapse of Complex Societies by Joseph Tainter.

†See excerpts from Tainter quoted below the fold.

In a thread in a previous diary while discussing growth vs. sustainability question arose as to whether an argument being used conflated the issue of economic growth with that of social equity. This issue goes to the heart of the different approaches currently employed in "mainstream economics" and that employed in other social sciences, especially anthropology, archeology and sociology. My response outgrew the bounds I thought proper for a comment and that diary was already unwieldy, so I have made it into another diary somewhat belatedly.

Julian Simon had made the argument, cited by santiago:

-- that there is no reason to presume that human population growth actually be limited by merely linear projections of resource use and availability into the future because people can adapt to scarcity.

I responded:

This apparently makes sense to adherents of Neo-Classical Economics. Perhaps that explains why they deny that financial bubbles occur, that they can be seen as they inflate and that they can be managed in the long term interest of society. A better question just now seems to be if the world economy can successfully recover from the most recently burst bubble.

To others, this "insight" seems more like folly and wishful thinking. Prudence would seem to dictate that we take seriously the pending depletion of the fossil energy resources on which the increasingly complex societies of the last two hundred years have been built. Without access to the highly favorable EROIs that were available until the 1970s, much, if not all, of that complexity could undergo a dramatic collapse in the not too distant future.

The problems for the next two decades are likely to be learning to deal with declining marginal returns on the investments required to provide the energy to drive our cultures. Renewable energy sources provide positive marginal returns. I have seen figures of up to 20:1 for wind. But that may be inadequate to support systems that were built up during times of 50:1 returns.

My fear is that by denying the existence of foreseeable constraints we will run into them very hard and, instead of moving gracefully to a scenario in which we rely on 20:1 returns from renewables, we end up in a near total collapse of the culture. We have to consider that, by blindly following hopeful scenarios and denying the possibility of negative scenarios we could end up needing to rebuild all of our coastal cities on higher ground in a world in which 20:1 returns on investment are the best obtainable. And we could end up having to do that in a social context where a tiny minority possesses almost all disposable wealth and control of the apparatuses of government and has no interest in the survival of the bottom 90% of income earners in the society. But that might get us back to a population less than 10% of what we have today.

To this santiago responded:

There are two arguments being conflated here (and I don't mean just your comment).  One is an efficiency (or growth) argument, and one is an equity argument.

My eventual response is that there are two arguments but they are not so much conflated as co-existent. The Growth/Sustainability argument is not dependent on maintaining equity. In fact decreasing equity would seem to go nicely with decline and collapse, and that certainly was the case with the Western Roman Empire. But then I paused to wonder if perhaps sustainability IS dependent on social equity And on the question of if and how it is reasonable to attempt to separate the economy from the society in which it operates and to disregard the effects of the operation of that economy on the society in which it is actually embedded. Julian Simon, meet Karl Polanyi.

Actual Monetary Practice, aka Modern Monetary Theory

by ARGeezer Sun Oct 31st, 2010 at 05:58:00 PM EST

As noted below, Modern Monetary Theory, MMT, is neither "Modern" nor a "Theory". It is based on observation of how our monetary system works, as Stephanie Kelton notes. Prominent Mainstream Economists will, of course, acknowledge that the USA went off the Gold Standard totally in 1971. Yet they continue to frame economic policy and the public discussion of that policy as though we were still on the Gold Standard. Perhaps that is because pretending we are on the Gold Standard for purposes of framing and discussing economic policies gives all of the policy advantages of a Gold Standard without the practical awkwardness of an actual Gold Standard. This practice provides a compelling, if bogus, argument for ideologically favored policies, especially "Austerity". But insisting on presenting monetary policy options in terms of a monetary approach that is, in fact, not being used is about as helpful as following a false to fact map.

There are now available several good presentations focused on policy and based on "Modern Monetary Theory" from an April 28, 2010 Fiscal Sustainability Teach-In And Counter-Conference that was staged to run counter to the Peterson sponsored "fiscal responsibility" propaganda blitz last spring. Transcripts slides and videos are available for all presentations. Presentations are aimed at a more general, yet economically aware audience. Introductions and samples of each presentation follow:

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