Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Reasons for despair: Zombie Ideas Won (Part II)

by Migeru Sat Jun 5th, 2010 at 04:06:13 PM EST

Seen on IM:

Migeru: In what economic universe does making layoffs cheaper for the employer promote employment?

related question

in what economicpolitical universe does it make sense for Spain to propose cheaper layoffs for troubled firms at a time when everyone is beating the government over the head with the unemployment figures?

JakeS:  well, cheaper layoffs reduce structural unemployment in the universe of rational expectations

Migeru:  right

Part of the Reasons for Despair series.


JakeS: and competitive, liquid labour markets with fungible skills

Migeru: structural unemployment is something you worry about in the growth phase

not at the bottom of the slump

plus

in terms of incentives

JakeS: nonono, structural unemployment is the only kind politicians have to worry about

Migeru: if you want to make hiring cheaper, make hiring cheaper

not firing

JakeS: because cyclical unemployment can be compensated for by monetary policy

Migeru: if you make firing cheaper you increase the firings

JakeS: so the politicians shouldn't bother with it

Migeru: oh, right

no zero lower bound or anything

and the ECB is known for its employment-oriented monetary policy

we're well and truly fucked

JakeS: well, you asked in what theoretical universe current policies make sense

Migeru: okay

JakeS:  and I answered: Pretty much the theoretical universe pushed by econ textbooks

Display:
If I were feeling ironic I might have made this part of the Socratic Economics series.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jun 5th, 2010 at 04:13:14 PM EST
JakeS is some midwife.
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 5th, 2010 at 04:26:30 PM EST
[ Parent ]
My initial question was rhetorical, of course...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jun 5th, 2010 at 04:30:27 PM EST
[ Parent ]
And my appreciation of Jake's suitability for midwifery somewhat tongue-in-cheek...
by afew (afew(a in a circle)eurotrib_dot_com) on Sat Jun 5th, 2010 at 04:56:05 PM EST
[ Parent ]
Sigh.  It seems to me that, more and more the euro, the EU, and the ECB have just become so many more levers for the neolibs to apply the shock doctrine to any nation that still has functioning labor unions or any sign of an independent middle class.

We all bleed the same color.
by budr on Sat Jun 5th, 2010 at 04:31:13 PM EST
Humans as cattle.  What else would you expect? Only going to get worse ... for us.  Feel fortunate you don't live on the Gulf coast.  Here in CA I feel like I live in Rivendell with the rise of Sauron all around me.  Maybe when Jerry Brown becomes Governor again we can start to turn things around.  I remember Jerry as Governor in the late '70s when I was in grad school at Davis.  He was living in a dinky apartment, dating Linda Ronstadt ... the total non-politician.  I don't think he's going to allow his beloved CA to go down without a fight.

How about you folks?  Any signs of hope?  ANYTHING??!!

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Sat Jun 5th, 2010 at 05:06:28 PM EST
[ Parent ]


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jun 5th, 2010 at 05:14:03 PM EST
[ Parent ]
Oh com'on.  You ... WE'RE ... better than that.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat Jun 5th, 2010 at 05:22:09 PM EST
[ Parent ]


By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sat Jun 5th, 2010 at 05:28:31 PM EST
[ Parent ]
Ah, good analogy, but doesn't the bull die in all those stories?  And the guy walks away to stunning applause.  Hmmm.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat Jun 5th, 2010 at 05:33:58 PM EST
[ Parent ]
This guy won't.
by generic on Sat Jun 5th, 2010 at 07:53:52 PM EST
[ Parent ]
That picture belongs with the Aztec recipe for Conquistador stew:

One or more Conquistadors, cut limbs at joints and toss into large caldron.

Add amaranth and peppers.

Season to taste.

Feeds large assemblage of notables.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 5th, 2010 at 10:12:32 PM EST
[ Parent ]
Neither did the bull...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 6th, 2010 at 05:13:36 AM EST
[ Parent ]
Well, he lived. The bull presumably did not.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Sun Jun 6th, 2010 at 01:06:19 PM EST
[ Parent ]
  1. Things now can't be all bad since they are clearly getting worse.
  2. At some point there was nothing worth breaking. I mean primordial soup?
Conclusion: The overall situation has improved in the past so it could happen again.
by generic on Sat Jun 5th, 2010 at 08:09:19 PM EST
[ Parent ]
no zero lower bound or anything

<economist>But the central bank targets a monetary mass, not an interest rate. When you increase liquidity supply, real economic activity automatically happens when prices are taken to be exogenous.</economist>

(Identifying the nonsense in the above statement is left as an exercise for the reader.)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jun 5th, 2010 at 05:00:07 PM EST
Keynes was banished to outer darkness to that ideas such as these could hold the field uncontested.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jun 5th, 2010 at 10:16:05 PM EST
Except we're all Keynesians now.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jun 6th, 2010 at 05:17:08 AM EST
[ Parent ]
I was talking about Keynes' version of Keynesianism, not Samuelson's.  If you can't shout him down, re-define and "improve" him into oblivion.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 6th, 2010 at 01:51:13 PM EST
[ Parent ]
That's actually unfair to both Samuelson and to Keynes.  I know that it has been a popular talking point here to attack Samuelson for putting so much deterministic math around Keynes, but that comes without really looking at everything Samuelson, who really was a much better economist than Keynes or anyone else who has entered that profession or likely ever will.  Without Samuelson, few of us would ever know anything about Keynes today, and the fact that he was threatened, as a young recent graduate, by his peers and current and potential employers at the time for taking Keynes seriously instead of as a gadfly is a testament to both Samuelson's intellectual integrity and personal courage.
by santiago on Mon Jun 7th, 2010 at 05:28:41 PM EST
[ Parent ]
It was a bit snarky, you are certainly better academically qualified than I to judge in this matter, and I have seen some very impressive stuff from Samuelson circa 1946-1960. The idea that assistance should be given to the poor in order to stimulate the economy was clearly understood in the early '60s, as it came up in my roommate's Intro Econ class, which was taught out of Samuelson.

Certainly Samuelson is not responsible for the The Hicks-Hansen IS-LM Model, which is how much of what passes for Keynes is presented today, from what I have read. But Keynes was careful not to use complex mathematics so as to clarify the assumptions, in part. Nor did he use equilibrium analysis, rather criticizing the economics of his day for being useless in a crash precisely due to being based on equilibrium analysis.

My understanding, based on my reading and on clarifications by Bruce McF, is that in bringing Keynes to US audiences, Samuelson rebuilt his work so as to make it more compatible with US Mainstream Economics, devoted as it was and is to equilibrium analysis. From that point of view US economists who are familiar with Keynes are likely to have a different view of him than would his Cambridge, England intellectual descendants, such as Joan Robinson.

I am coming more and more to the view that the reason Keynes was so thoroughly abandoned in the 1970s is that allegiance to the Friedman approach was, to a large extent, purchased by elites operating through think tanks, through academia and through institutions that handled their money because they did not like the implications of Keynes nearly so much as they liked Friedman and Hayek. Given that bias, any defect in Keynes would suffice to throw him out. Justification of their activities was vastly more important than explanatory power. This possibly overstates the foresight and planing that was involved, at least in-so-far as what can or has been clearly shown, but I still have a lot of reading to do on this subject.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jun 13th, 2010 at 11:43:35 PM EST
[ Parent ]
No, I think it's clear that that's exactly what happened. And it was planned, deliberate and intentional.

Economics post-Friedmann has become entirely Sovietised, with apparatchiks paid to parrot the party line.

More than that, the oil-based inflation of the 70s was used as an excuse to 'prove' that state funding and income redistribution were destructive of the real economy.

Which of course they are, if you assume that the real economy is what traders do, and everything else is noise.

Although interestingly if you look at some of the latest noises from somewhere nominally conservative like Brookings, the serious wisdom has more in common with ET now than it does with Chicago c. 1980 or with Mises.

This is a good thing, because it's almost literally impossible to overstate the scale of the disaster that the apparatchiks have created - economically, culturally, morally, ecologically and politically.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jun 14th, 2010 at 12:10:54 AM EST
[ Parent ]
That is my sense of it as well, but I am not now really able to demonstrate intentionality. It is not something I should really be doing, so I hope someone steps up big time. I am planning to buy Yves Smith book Econned, as I think she has done a lot of the leg work here.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jun 14th, 2010 at 01:40:21 AM EST
[ Parent ]
Except when we're not.

We all bleed the same color.
by budr on Sun Jun 6th, 2010 at 02:49:51 PM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries