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Neokeynesians vs. Postkeynesians

by Migeru Mon Jul 2nd, 2012 at 05:31:02 AM EST

A few days ago, Brad DeLong wrote a piece on Project Syndicate complaining about freshwater economists' refusal to admit that the last five years of economic history run counter to "new classical" economic theory: The Perils of Prophecy (Project Syndicate, 27 June 2012)

Of course, we historically-minded economists are not surprised that they were wrong. We are, however, surprised at how few of them have marked their beliefs to market in any sense. On the contrary, many of them, their reputations under water, have doubled down on those beliefs, apparently in the hope that events will, for once, break their way, and that people might thus be induced to forget their abysmal forecasting track record.
It is commendable that Brad DeLong has been honest about "marking his beliefs to market"
But we - or at least I - have gotten significant components of the last four years wrong. Three things surprised me (and still do). The first is the failure of central banks to adopt a rule like nominal GDP targeting or its equivalent. Second, I expected wage inflation in the North Atlantic to fall even farther than it has - toward, even if not to, zero. Finally, the yield curve did not steepen sharply for the United States: federal funds rates at zero I expected, but 30-Year US Treasury bonds at a nominal rate of 2.7% I did not.
However, the following paragraph where he enumerates representatives of "we historically-minded economists"
So the big lesson is simple: trust those who work in the tradition of Walter Bagehot, Hyman Minsky, and Charles Kindleberger. That means trusting economists like Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers. Just as they got the recent past right, so they are the ones most likely to get the distribution of possible futures right.
prompted Steve Keen to cry What utter self-serving drivel, Brad Delong! (June 30th, 2012)
Where to begin? For starters, "the last five years" includes June 2007-just before the commencement of the financial crisis. But this time, people like Wynne Godley, Ann Pettifors, Randall Wray, Nouriel Roubini, Dean Baker, Peter Schiff and I had spent years warning that a huge crisis was coming, and had a variety of debt-based explanations as to why it was inevitable. By then, Godley, Wray and I and many other Post Keynesian economists had spent decades imbibing and developing the work of Hyman Minsky.
(Keen continued after the fold)


The only excuse for the cant Delong has spewed forth today is that, as with Krugman and others in the self-described "New Keynesian" camp, he perceives himself as being at the left end of the economic spectrum, with the only competition being from the far right represented by the purist Chicago version of Neoclassical economics. Since the Neoclassical left supports deficit spending during a Depression, while the right supports austerity, to Delong it's game over, and the Neoclassical left is right.

The reality is that there is an entire other dimension of economists who have known for decades that both extremes of the Neoclassical economic axis were neither left nor right, but plain bloody wrong. We also knew that our criticisms of the Neoclassicals had no chance of being listened to by the public until a major crisis hit, and we also expected that this crisis would do nothing to alter their own beliefs. Delong's delusional mutterings today confirm it.

De Long's reference to "us historically-minded economists" is really about claiming intellectual descent form Charles Kindleberger's The World in Depression, as opposed to Milton Friedman's (and the recently deceased Anna Schwatz's) A Monetary History of the United States which is known for a monetary interpretation of the Great Depression blaming the Fed specifically for its tight monetary policy. I suppose what irked Keen was the claim of intellectual descent from Minsky. Keen's argument that there is a third leg of current economics to the left of "saltwater" neoclassical economics was give mainstream currency in a recent Washington Post story, Modern Monetary Theory, an unconventional take on economic strategy (February 19, 2012) which included the following family tree:
Unfortunately, Keen's diatribe has led to some acrimonious exchanges on twitter, where deLong is active. Since Krugman only blogs, it was in the blogosphere that Krugman had his own ugly debate with Keen back in April, which Krugman ended on this note: Oh My, Steve Keen Edition (April 2, 2012)
I'm all for listening to heretics when they offer insights I can use, but I'm not finding that at all in this conversation, just word games and continual insistence that the members of the sect have insights denied to us lesser mortals. Time to move on.
@delong pretty much ended his own debate with
@edwardnh So do you have any complaint other than the absence of two names from a non-exclusive list? That was what made my column drivel?
<sigh> I don't know that it's good for economics if neokeynesians and postkeynesians start bickering rather than focusing on countering the political influence of the Real Business Cycle or "new classical" theorist, or the Aust(e)rians, or the gold bugs.

As a result of this controversy, deLong just today blogged: One Person Who Got it Largely Right in Early 2009: Jamie Galbraith

Jamie Galbraith inquires why I have space in my Project Syndicate column to quote somebody who got it so very wrong in the spring of 2009--Robert Lucas--but not anybody who got it right.

Touché.

Previous iterations of this debate:
  • Jamie Galbraith: Who Are These Economists, Anyway? (January 2010)
    This article is partly a response to Paul Krugman's piece in the Sunday New York Times of September 6, 2009, on the failures of the economists in the face of the crisis. Here, Senior Scholar James K. Galbraith takes up the challenge of identifying some of those economists--the "nobodies" of the profession--who did see it coming, and who have not gotten the credit they deserve. He also points out the urgent need to expand the academic space and the public visibility of ongoing work that is of actual value when faced with the many deep problems of economic life in our time--an imperative for university administrators, for funding agencies, for foundations, and for students.
    The point being that, as with deLong this past week, Krugman criticises "new classical" economists, but fails to actually name any of the obscure economists who did get it right. For laughs, you can check the reply from the new-classical camp: How did Paul Krugman get it so Wrong? (John H. Cochrane, September 16 2009). See also Economics Cage Match: DeLong/Krugman vs. Cochrane/Fama (Freakonomics, 02/05/2009)
    The gloves are definitely coming off. This piece by Chicago economist John Cochrane and another by Chicago's Eugene Fama get under the skin of Brad DeLong and lead Paul Krugman to denounce Cochrane and Fama as barbarians.
    As in Krugman's Brad DeLongís Foolishness (February 23, 2010)
    Ever since I got into this fight, Iíve been trying to explain that there isnít any model there. Eugene Fama, at least, and perhaps Cochrane too, began this debate from a position of complete ignorance ó not understanding at all the logic of Keynesian models (even for the purposes of debunking), and imagining that the savings-investment identity necessarily implies 100-percent crowding out. There was no deeper logic.

  • Dirk Bezemer: 'No one saw this coming' - or did they? (30 Sep 2009)

Display:
I think this is rather unfortunate. At the recent Minsky summer seminar Jan Kregel commented on the Krugman-Keen debate that Krugman is a real asset to the economic profession, just like I think deLong is an asset with his "marking my beliefs to market" narrative.

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 Sun Jul 1st, 2012 at 05:31:46 PM EST
Keen is not the world's greatest diplomat.

Of course, I would be pretty pissed off too, if I were in his position. It is annoying to have to pander to people who realize the obvious years after it happened, yet have to be dragged kicking and screaming into acknowledging anybody who realized it ahead of time. But you are right that he could communicate the basis for that annoyance more effectively if he dispensed with the invective.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 1st, 2012 at 05:50:45 PM EST
[ Parent ]
to identify the practices of the most egregious predators and the obfuscation by their propagandists in a national forum. Beyond that type of analysis of our worst political forces, though, his alternatives seem to be a 'tweak' at best to me.

Of course, his bottom line is to save Capitalism, but my casual reading of his columns suggests that he just wants a kinder/gentler oligopoly. At least I do not see where his proposals transcend that scenario.

OK - I'm a utopian idealist, and I want to see private monopolies go away. My economic model for some foreseeable future is socialism for commodities, entrepreneurial private business for all new business development (with plenty of safety, health, environmental analysis and regulation), and small business and co-operatives for the basic needs of people in local communities.

But in the present context, as Jerome states below and Henry Ford stated 90 years ago, it's all about re-distribution - either that, or we watch (or participate in) the latest version of social dissolution.

As JakeS and others point out, 'printing' money will reduce real debt via inflation. Most of us can benefit from that. However, it's a 'hard sell', because 90% of us are already seeing inflation in the major part of our expenses, due to the effect of the high costs of energy on production of food, on transportation, and, increasingly, on clothing and household miscellaneous. Housing prices may have declined; but rents did not, building supplies did not, hotels did not. Because of food prices, restaurant prices went up.

As to "social dissolution", I've been paying attention for 60 years. I've seen the data that says we live in less dangerous times in terms of a per capita rate of violent death. That merely means that the Pax Americana argument has some traction when it comes to very-large-scale war. At least in the US nowadays, I read more about personal violence from every location than in the past.

I know that anecdotal evidence is not sufficient, but I can think of several counter-arguments to the narrative that says violent crime statistics have "gone down". Foremost is the observation that the current justification for most police activities is that they are 'winning'. It used to be - and still is in Arizona - that 'the barbarians are winning', but that seemed to lose currency about 15 years ago. And in fact - probably associated with apparent economic improvement for most citizens - the anecdotal evidence was that violent crime was waning. I expect that the theme will change again soon.

Then there is climate change. It may seem that some of the propaganda borders on - or is - hysteria; but there is plenty of data (and abnormal weather events) to support some level of anxiety about impacts on our species. I don't believe in the Butterfly Effect - or the Black Swan event - but we can see climate pressure already in many conflicts.

Thomas argues below that solar-based energy capture can moot the growth-limit concerns. Not sure whether that is intended to give modern Capitalism an escape hatch or not, but it can fit with a re-distribution scheme of a sort - good manufacturing and installation jobs that actually work to our advantage as Earthians.

Which brings us back to Krugman - at the least he seems to support this type of economic activity, along with the government support to accelerate it.

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Mon Jul 2nd, 2012 at 12:58:48 PM EST
[ Parent ]
paul spencer:
At least in the US nowadays, I read more about personal violence from every location than in the past.

From Long-Term Historical Trends in Violent Crime by Eisner, we can learn (p 99) that the historical long terms in Europe do decrease dramatically from medieval times to the 1950-74 period, but after that they increase. Still a low level compared to medieval times, but contrary to popular claims not the lowest point in history.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Jul 2nd, 2012 at 04:22:37 PM EST
[ Parent ]
Back in the 90s I did a turn as a prosecuting attorney.  Rudy Giuliani was mayor of NYC and was getting a lot of headlines with "Broken Windows" policy, namely enforcing small crimes like vandalism and truancy to clean up neighborhoods and suppress more serious crimes.  It seemed to work, so many of us tried it.  A few succeeded; most, including Yours Truly, did not.  The reason for the difference was readily apparent.  Those places such as NYC and Seattle that had an economic recovery succeeded.  Those places such as mine that had no recovery did not.  People who had jobs had less time and, more importantly, less inclination to cause trouble.  They didn't need to supplement their incomes through burglary and meth cooking.  Giuliani's "get tough" policy had accomplished nothing.  He had simply been lucky with his timing.

Which leads me to the crime trend you refer to.  1950-1974 was the height of the living wage model.  Stable jobs, stable pay, stable benefits.  That ended in 1974, as the oil embargo put paid to the margins that made all that stability painless for corporate management.  Jobs went, benefits followed, and wages were driven down.  One income couldn't cut it, and when the second was added, as Elizabeth Warren has shown, the death spiral began in earnest.  Still the destruction went on.  Fewer people had jobs, had a stake in the game, and so had little to lose and everything to gain by grabbing whatever was available.  Many who had jobs couldn't cover costs with what was on the table and so started scrounging for what was under it.  And of course there was the general stress of living like that, which leads to lashing out.  And so crime trended upward.

by rifek on Fri Jul 27th, 2012 at 08:02:14 PM EST
[ Parent ]
Of course, his bottom line is to save Capitalism

That is indeed the job of social democracy: saving capitalism from itself.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jul 4th, 2012 at 01:04:11 PM EST
[ Parent ]
The biggest part of the problem is that the principal MMT prophets -- Wray, Keen, Moesler, etc. -- always seem to frame their research around an argument that "everyone else, but especially traditional Keynesian scholars, are idiots."  This inflammatory approach is always going to be a non-starter in academic discourse because it invites suspicion that it's not the work of serious thinkers but rather the work of rejects with an axe to grind. And it is particularly suspicious that it gets leveled against likely intellectual allies who might be inclined to take the arguments more seriously if not required to defend themselves against accusations of being stupid instead. If MMT were demonstrable true this should not matter, but  arguments of MMT, unfortunately, do not yet stand up enough on their own as far as falsifiable hypotheses are concerned, to be able to defend themselves without the interest of more established scholars of similar outlooks such as Krugman and deLong.
by santiago on Fri Jul 6th, 2012 at 03:23:15 PM EST
[ Parent ]
arguments of MMT, unfortunately, do not yet stand up enough on their own as far as falsifiable hypotheses are concerned

Yeah, because neoclassical economics has such a great prediction record...

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 6th, 2012 at 03:25:47 PM EST
[ Parent ]
They do though.  Neoclassical research is thoroughly presented, ad nauseum really, as strictly falsifiable hypotheses. The fact that so many of the hypotheses end up being falsified is another matter, but not the general honesty of the approach.  MMT, on the other hand, isn't even a theory yet, and that's according to its proponents, so it's research tends to be merely the assertion of definitions and the suggestion that they are good alternative explanations for things that have been observed. The MMT literature is still largely just an exegesis of Keynes and Minsky's writings.

We need, from MMT, more falsifiable (i.e. testable) hypotheses about the details of how money and investment works and how we might measure observations and why in everyday life, which is what neoclassical and Keynesian -- and anthropology and psychology for that matter -- do offer at least, even when the hypotheses turn out to be false and even where people ignore the false findings.  For example, if money is created by individuals who engage with each other in relationships of trust and not by the actions of a central bank, how might we test whether this is true or not through observations and measurement of social activities or behavior? I haven't seen much MMT work to date presented in this format, but it needs to be if it wants to be included in the literature of social science instead of the literature of late-night infomercials.

by santiago on Fri Jul 6th, 2012 at 04:17:31 PM EST
[ Parent ]
Right, what's lacking in neoclassical research is any consequences for repeated falsification.

Ideas are published, but falsification makes no difference to their standing.

by Metatone (metatone [a|t] gmail (dot) com) on Fri Jul 6th, 2012 at 04:22:40 PM EST
[ Parent ]
Neoclassical research is thoroughly presented, ad nauseum really, as strictly falsifiable hypotheses. The fact that so many of the hypotheses end up being falsified is another matter, but not the general honesty of the approach.

That would be nice if it were true.

But it's usually not. And when it is, the models which are falsified are not discarded, and the methodologies which have proven empirically sterile are not revised. As long as this is the case, neoclassicals are doing cargo cult science.

MMT, on the other hand, isn't even a theory yet, and that's according to its proponents, so it's research tends to be merely the assertion of definitions and the suggestion that they are good alternative explanations for things that have been observed. The MMT literature is still largely just an exegesis of Keynes and Minsky's writings.

A major problem with neoclassical economics is that it excludes, through rhetorical and pseudo-mathematical slight of hand, a wide range of policy options. Simply pointing out that these policy options exist, and that the neoclassical arguments against exercising those policy options are all horseshit (insofar as they have even been articulated at all), is itself a valuable service to the economics profession.

We need, from MMT, more falsifiable (i.e. testable) hypotheses about the details of how money and investment works and how we might measure observations and why in everyday life,

I'm not sure what MMT literature you read, but here are a couple of falsifiable predictions (a number of which have turned out to be true):

  • In the sectoral balance, the foreign account should lead the domestic accounts, and during an economic downturn the private sector balance should lead the public sector balance, given the state of the foreign balance.

  • M1 less M0 should lead M0.

  • Interest rates lead investment volume, which lead monetary aggregates.

  • Raising interest rates will eliminate Ponzi merchants last, and productive businesses first.

  • Hyperinflation should only be observed in the presence of a specie peg, hard currency debt or similar inflation-indexed credit instruments.

If we broaden our discussion from MMT to general post-Keynesian dynamic economic modeling, we can also include:

  • Fractal behavior in the stock market.

  • The dynamic Phillips curve, in which the rate of change of wages depends on the rate of change of employment as well as the state of employment and the rate of inflation.

  • The absence of "structural" unemployment. (Conversely, the absence of accelerating domestic inflation at full employment.)

  • The observation that financial deregulation is very nearly always criminogenic.

  • The absence of Ricardian equivalence.

  • Routine and persistent violations of Say's Postulate.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 6th, 2012 at 05:50:57 PM EST
[ Parent ]
  • Large, sudden disruptions of the terms of trade should happen exclusively to countries which maintain a specie or FX peg. (This is a corollary to the prediction about hyperinflation.)

  • Investment should lead saving (care must be taken here to distinguish between balance sheet operations and cash flow - this prediction concerns the cash flow only).

  • Asset prices should display episodes of persistent and obvious overvaluation.

  • Overvaluation of assets should be more persistent than undervaluation.

The last two points relate to the inherent asymmetry between long and short positions. A short position comes with implicit leverage, which means that there is a non-zero probability that you will be unable to maintain it until mean-reversion sets in. This means that in order to safely short, you not only need to know that the fair value is below the current value, but also how far up the overvaluation will go. In which case you should not be shorting yet.

Unlike the short position, a long position in a falling market does not inherently have to be carried on margin. Which means that a speculator who is convinced that an asset is undervalued can buy it and be confident that he can decide when to sell.

On a methodological note, the two preceding paragraphs illustrate a wide-spread vulnerability in models employing model-consistent expectations: They tend to be unstable against idiosyncratic behaviour in a small subset of agents. Or, in plain English, "rational expectations" macro is horseshit even before you start comparing it to data.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 6th, 2012 at 06:47:34 PM EST
[ Parent ]
Presenting your work pro-forma as a set of falsifiable hypotheses does not in and of itself imply any honesty, when the shared premised of both author and peer reviewers is that a core set of long falsified assumptions are permitted for analytical tractability.

The utility maximization assumption is not merely "falsifiable", but long since falsified. Even granting the "as if" arguments defending its use, strictly convex preferences cannot be assumed for any choice prior to the determination whether or not to evaluate a departure from previous behavior, since the evaluation itself has a cost and so within a neighborhood of the previous behavior, repeating the behavior without assessing the choice is superior to deciding to evaluate and determining that the preferred outcome is in the neighborhood of the prior behavior. Neutrality of money is clearly false, yet widely assumed for analytical convenience.

The "approach" is fundamentally dishonest when it follows the form of scientific exploration of economic behavior but is not, in fact, pursuing actually scientific cause and effect explanations of that behavior. That is not being scientific, it is being scientistic.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Fri Jul 6th, 2012 at 07:09:08 PM EST
[ Parent ]
Yanis Varoufakis presented a paper, A Most Peculiar Failure, which describes how neoclassical economics repeatedly produces hypotheses, builds and popularizes edifices on these, then produces research that falsifies core premises and then ignores that falsification, falls back on a more basic principle that has been shown to be of limited value, lets time pass, and then rinse and repeat.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 8th, 2012 at 12:26:24 AM EST
[ Parent ]
We went through a phase when people avoided General Equilibrium arguments because it was shown rigorously that the under all but the most obviously artificial restrictions there will typically be an extremely large  number of General Equilibria, with a large number of them with extremely bad dynamic properties ...

... and then slowly a set of incantations were developed that were used by a sufficient number of peer reviewers so that if they were used, they inoculated a paper from getting knocked about for using GE models, and away they want to the races again with "computable General Equilibrium" models.

But its obvious bullshit modeling: we already know that putting restrictions on a GE model to ensure that it is computable is mathematically equivalent to making assumptions long known to be false.

And then there is rational addiction theory ~ consider all of the rational decisions to die of a drug overdose, once one accepts the laughably absurd assumptions of that "body of literature".

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 8th, 2012 at 08:58:29 PM EST
[ Parent ]
Nevertheless, the fact that we can point out the dishonesty of the practitioners means that the approach itself is honest.
by santiago on Mon Jul 9th, 2012 at 10:50:06 AM EST
[ Parent ]
No: the practitioners believe themselves to be honest, therefore the approach itself is dishonest.

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 Mon Jul 9th, 2012 at 12:12:55 PM EST
[ Parent ]
It doesn't matter what the practitioners believe. As long as the rest of us can see their work, which we can, we can judge their results differently. Hence, the approach remains honest regardless of the intents of practitioners.  That's the importance of providing falsifiable hypotheses in social science. So that if the facts change, so can our opinions, regardless of the judgements of the authors themselves.
by santiago on Mon Jul 9th, 2012 at 11:43:10 PM EST
[ Parent ]
Young-Earth creationists also make falsifiable predictions, which have been long since falsified. That does not make their approach to doing science honest.

I would argue that any research tradition which bases itself of phlogiston, phrenology, catastrophism, economic equilibrium or any similarly centuries hence debunked nonsense demonstrates sufficient detachment from empirical reality that it may safely be called fundamentally dishonest.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 10th, 2012 at 08:08:33 AM EST
[ Parent ]
Actually, no, Young Earth creationists don't make falsifiable predictions, that I know of.  You or I might take their arguments and derive predictions from them, but I don't think they ever actually do that.  

This is different than neoclassical economists, who actually make very specific falsiable hypothoses and who go about proving them empirically.  Other econometric research usually calls into question their original findings, which doesn't appear to change their minds, which is problematic, to say the least.  But this is categorically different from anything creationists do.  And MMT literature, notwithstanding the predictions you've derived and indicated in another comment, also has largely avoided making specific testable hypotheses in the way traditional economics research does.  

As I said before, at this early stage in the MMT research project, that's not surprising or problematic, but what is problematic is that without having made the falsifiable hypothesis case strongly enough, MMT proponents too often go about denigrating the intelligence of other economists rather than improving the science of their theory to stand on its own.  This makes one suspect that there is less to MMT than one would hope, because if it was clearly superior to other approaches, MMT proponents wouldn't need the editorial backhands that seem so common in their writing.

by santiago on Wed Jul 11th, 2012 at 02:14:46 PM EST
[ Parent ]
Actually, no, Young Earth creationists don't make falsifiable predictions, that I know of.

An Index to Creationist Claims, specifically CD110, CD111, CD303, CD501. And that's just from the first half of the geology section.

Most of these date from the adoption of the "Creation Science" strategy, which was developed after McLean vs. Arkansas.

It's Intelligent Design Creationists (the response to Edwards vs. Aguillard) who try very hard to make no falsifiable predictions. YECs have no such inhibitions.

And MMT literature, notwithstanding the predictions you've derived and indicated in another comment, also has largely avoided making specific testable hypotheses in the way traditional economics research does.

I don't know what MMT literature you're familiar with, but the journal articles I've read from MMT'ers (though I will not claim to have read even a substantial fraction of the total MMT literature) contain solid empirical work.

Occasionally, they don't test their hypotheses in quite the same way marginalists do. This is usually because the author draws on (more suitable) mathematics from non-linear dynamics, rather than comparative statics. That's a feature, not a bug.

Example [pdf] (of both these points, incidentally).

This makes one suspect that there is less to MMT than one would hope, because if it was clearly superior to other approaches, MMT proponents wouldn't need the editorial backhands that seem so common in their writing.

Maybe those editorial backhands are caused by seeing warmed-over gold standard economics being used a century after gold standard economics was conclusively proven a total failure. Physicists rarely discuss perpetual motion machine peddlers respectfully.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 11th, 2012 at 02:48:54 PM EST
[ Parent ]
I don't think I'd classify the paper you link to as MMT literature, even if the author is also an MMTer. Money, and MMT's alternative conception of it, has nothing to do with the discussion in the paper.  It stands on its own without any need for MMTs insights regarding the definition and role of money in society.
by santiago on Wed Jul 11th, 2012 at 03:09:08 PM EST
[ Parent ]
On the contrary, repudiation of the loanable funds fallacy is central to the demand-side model-building in that paper.

And while there are other ways to depart from the loanable funds fallacy than chartalist or creditary models of money, it is one of the prominent consequences of such a conception of money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 11th, 2012 at 03:22:55 PM EST
[ Parent ]
I don't see it. You've obviously read it more closely than I have, but I don't see how anything in the paper is dependent upon a repudiation of a loanable funds fallacy. Other than a sentence about the Job Guarantee, something MMTers like to talk about, it seems like traditional Keynes, and consistent with non-MMT conceptions of money as well.
by santiago on Wed Jul 11th, 2012 at 04:11:23 PM EST
[ Parent ]
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

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 11th, 2012 at 04:25:50 PM EST
[ Parent ]
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
[ Parent ]
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

Friends come and go. Enemies accumulate.

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

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 12th, 2012 at 04:50:24 PM EST
[ Parent ]
You made me google "Lysenkoist."
by santiago on Thu Jul 12th, 2012 at 05:27:45 PM EST
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 13th, 2012 at 05:57:54 AM EST
[ Parent ]
JakeS:

Really existing neoclassical economics is a systematically dishonest enterprise.

- Jake

word...

it is the legal waterboarding of whole societies.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:55:56 AM EST
[ Parent ]
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
[ Parent ]
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

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jul 13th, 2012 at 04:41:28 PM EST
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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 (gk (gk quattro due due sette @gmail.com)) on Fri Jul 13th, 2012 at 01:45:29 PM EST
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:36:52 AM EST
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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
[ Parent ]
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

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 23rd, 2012 at 10:26:00 AM EST
[ Parent ]
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.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

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

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:51:28 AM EST
[ Parent ]
...what is problematic is that without having made the falsifiable hypothesis case strongly enough, MMT proponents too often go about denigrating the intelligence of other economists...

What is more problematic is that there is no funding from the predominant sources of research funding for ANY modeling not based on DSGE. I suspect that similar constraints apply to other non-mainstream research areas in economics. Talk about putting your finger on the scale - more like the NCE/"New Classical" guys are standing in their pan of the scale when it comes to awarding grants, not to mention publishing papers.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jul 14th, 2012 at 11:58:55 AM EST
[ Parent ]
Well, Steve Keen's position may be a bit extreme, but this is it in all its glory: A dynamic monetary multi-sectoral model of production (May 16th, 2011)
At the level of pure theory, a similar contentment prevailed. Though he acknowledged one notable dissenter (Solow 2008), Blanchard's survey was unequivocal:
The state of macro is good. (Blanchard 2009, p. 210)
Few more poorly timed statements have ever been made by prominent economists.

...

Blanchard was forced into recanting his optimism less than a year later (Blanchard, Dell'Ariccia et al. 2010). But while he criticized macroeconomic policy prior to the crisis, he remained a believer in neoclassical theory itself:

Identifying the flaws of existing policy is (relatively) easy. Defining a new macroeconomic policy framework is much harder... It is important to start by stating the obvious, namely, that the baby should not be thrown out with the bathwater. Most of the elements of the pre-crisis consensus, including the major conclusions from macroeconomic theory, still hold. Among them, the ultimate targets remain output and inflation stability. The natural rate hypothesis holds, at least to a good enough approximation, and policymakers should not design policy on the assumption that there is a long-term trade-off between inflation and unemployment. Stable inflation must remain one of the major goals of monetary policy. Fiscal sustainability is of the essence, not only for the long term but also in affecting expectations in the short term. (Blanchard, Dell'Ariccia et al. 2010, p. 207; emphasis added)
Blanchard's unwillingness to countenance the possibility that the Great Recession may be a Kuhnian critical anomaly for neoclassical macroeconomics (Bezemer 2011) is representative of this school of thought:
Indeed, the extreme severity of this great recession makes it tempting to argue that new theories are required to fully explain it... But ... it would be premature to abandon more familiar models just yet. (Ireland 2011, p. 1; emphasis added)
As a representative of the Post Keynesian and complexity theory rump, and one of the handful of economists to foresee the Great Recession (Keen 1995; Keen 2000; Keen 2006; Keen 2007; Keen 2007; Bezemer 2009; Bezemer 2011), I could not disagree more with Blanchard and his colleagues.

...

I cover the myriad flaws in neoclassical macroeconomics in much more detail in Keen 2011b; suffice it to say here that, far from it being unwise to "throw the baby out with the bathwater", neoclassical macroeconomics should never have been conceived in the first place.



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 6th, 2012 at 03:36:48 PM EST
[ Parent ]
Keen does present some good work around the narrow question of whether it makes sense to conceive of the real world as a continuous series of static events or if the dynamic nature of the world needs a different conception altogether (it does, he concludes). That's an example of trying to make falsifiable arguments, of which more is needed among MMT proponents.
by santiago on Fri Jul 6th, 2012 at 04:26:09 PM EST
[ Parent ]
I just found the following interview with Mark Thoma, who's a left-leaning neoclassical econometrist: FiveBooks Interviews >
Mark Thoma on Econometrics
(The Browser)
There are several groups. There's the divide between the New Keynesians who believe both monetary and fiscal policy are effective policy tools, the modern version of the monetarists who believe in monetary but not fiscal policy, and the Real Business Cycle economists who don't think either type of policy is effective. The big split is the first one, monetarists versus Keynesians to use an older terminology -- That's people like Lucas and Sargent people like me, Krugman, Brad DeLong and others. Then there's another, much smaller group that don't think any of us have a clue. Those are the heterodox economists. They don't like the tools and techniques we use, they don't like equilibrium models. It's people like Jamie Galbraith, who don't agree with either side.

...

In your field of econometrics, and in economics in general, is there a lot of change going on as a result of the crisis?

There should be, and there has been. But not as much as I would like to see. Since I was in grad school - I graduated in 1986 so it's been about 25 years - we've probably gone through two or three generations of models. When I started it was very Keynesian, then it was New Classical, then we got something called the Real Business Cycle models, then we got the New Keynesian models, and today there is an emerging set of models called the new monetarist models. Within the field there's been a lot of churning of models. The reason those first sets of models didn't survive was because they didn't stand up to the data.

The models that Lucas got his Nobel prize for - the new classical models, where expectations play a fundamental role, only unexpected money matters and things like that - had some really strong implications. We took that model to the data and it couldn't explain the magnitude and the duration of business cycles simultaneously. It also couldn't explain why expected money was correlted with output, and it got rejected. Then we went to real business cycle models. They did better. But they had trouble explaining Great Depressions and other sorts of things, so we rejected those models and went to New Keynesian models. Those models were doing great, or relatively so anyway, right up to the crisis. Then they did horridly. You don't need advanced econometrics to reject that class of models - it's clear that they just didn't handle the crisis. So we're going to reject those too. There's been a lot of change, and I expect that change will speed up. I wish it was even faster, because it's very clear to me that the models we were using prior to the crisis are not going to get the job done.

Maybe Mark Thoma should apply his econometrics to testing whether Stock-Flow Consistent models match the data better than Neoclassical models...

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 Sat Jul 7th, 2012 at 03:44:04 PM EST
[ Parent ]
I tend to react with greater sympathy to econometrics than to the theory stuff, because the modeling tools (and, importantly, the computing power to make proper time-series econometrics a routine matter) are quite recent.

Whereas any observer of the political economy who has been paying attention at all at any point in the last 100 years should be able to tell you that Ricardian equivalence does not work.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Jul 7th, 2012 at 06:43:06 PM EST
[ Parent ]
Underbelly: A Macro Economist you can Take Home to Mother (JULY 07, 2012)
I can't think think of anyone better equipped than Mark Thoma to sell the world on the plausbility of of macro.  As the undisputed econ ubberblogger, he evinces an almost compulsive deal to get curerent, comprehensive news on academic economics to a waiting audience.  So it is perfectly right that he be picked to offer a Browser "Five Books" on macro theory.  His contribution is up today, although I'd say it is a bit misnamed: the piece is called "Mark Thoma on Econometrics," and while he covers both, it seems to me that macro  is the real centerpiece.

Ah yes, you are thinking, here at last I will get the definitive presentation on whether macro deserves to be recognized as a science and not mere necromancy.  And give him his due: I think he has laid out his case in as persuasive and fair-minded a manner as we are likely to get. ...

...

... Like I say, I have all kinds of respect for this guy.  And that's precisely the point: if this is the best he can do, don't we have a slam-dunk confession that macro is a bunch of just-so stories, bound together with the confident faith that somehow, someday, the models may be aBle to tell us something?

You need better macro models? How about some stock-flow models?

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 Sun Jul 8th, 2012 at 03:53:45 AM EST
[ Parent ]
Two nits one might pick: Keen is not an MMT'er, though the differences are mostly in terminology and focus - Keen is sharper than the MMT'ers on business cycles, the MMT'ers are keener than Keen on macrostabilization.

And the WaPo left out the Chartalists from their genealogy.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 1st, 2012 at 05:44:42 PM EST
Chartalism is in the genealogy of Keynes himself, I think.

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 Sun Jul 1st, 2012 at 05:46:42 PM EST
[ Parent ]
Keynes was a practical man, and as such somewhat intellectually promiscuous. Keynes is also, like Fisher, one of those economists whose name needs to be followed by a year, because the 1937 vintage Keynes is not the 1936 vintage, which in turn is not the 1933 vintage.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 1st, 2012 at 05:52:42 PM EST
[ Parent ]
The school of thought that Keen and the MMT people (as well as those economists enumerated by Keen and earlier by Bezemer) all belong to is the "monetary circuit" tradition.

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 Sun Jul 1st, 2012 at 05:53:32 PM EST
[ Parent ]
The (core) MMT'ers are chartalists, not circuitists. That's what makes them sharper in their analysis of the monetary system, but less sharp in their causal model of business cycles.

But of course the two schools converge, because they place a premium on empirical relevance.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 1st, 2012 at 06:22:31 PM EST
[ Parent ]
Perhaps 'the air of effortless superiority' with which The Mainstream, in which Krugman and DeLong so badly need to remain, habitually employs to dismisses all who cannot trace at least one intellectual ancestor to Samuelson is beginning to seem tiresome. We can hope at least. More likely is that the center and right of The Mainstream will, for the sin of mentioning Keen and other heterodox economists, try to tie Krugman and DeLong to them and also cast them out of Heaven.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 1st, 2012 at 07:30:24 PM EST
I'm still waiting for Keen and the other heretics to understand that the point of NCE isn't empiricism -  it's propaganda.

The advantage of not needing to be empirical is that you can lie for a living, and that air of effortless superiority can only help make the lies more convincing.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Jul 1st, 2012 at 09:03:09 PM EST
[ Parent ]
But it is a bit more complicated than that, I think. I suspect that almost all of the Mainstream Economists have a high opinion of themselves and the quality of their work, however laughable that may seem. In order to hold that opinion they have complex rationalizations, many of them well stated in the literature, others more private, that allow them to convince themselves that they have intellectual integrity and are doing important work. That accomplishment is the chief bulwark of Mainstream Economics. As long as they can continue their beliefs they will be able to defend their position convinced they are doing so on the merits. That defense will be effective not on the merits but on account of the mental capture they have accomplished.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 1st, 2012 at 09:09:57 PM EST
[ Parent ]
Indeed.

But that's exactly what good propaganda does - it rewards the apparatchiks who spout the party line, locks dissidents out of power and influence, and makes competing world views literally unthinkable for those who choose to dedicate their lives and work to the Party.

Belief and integrity aren't really the issue. Although I certainly have my suspicions that some of the big names - e.g. Greenspan - know exactly what they're doing.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jul 2nd, 2012 at 06:26:09 AM EST
[ Parent ]
I noticed an interview in Asian Times that mentions Keynes, propaganda and such fun, with an economist Guido Preparata. Worth digesting.
by das monde on Mon Jul 2nd, 2012 at 06:36:40 AM EST
[ Parent ]
You mean this:
LS: The corporate logo of the Nazi party was the ancient swastika - which is basically a vector diagram of rotation, spin and stress. Why was it chosen?

GP: I briefly mention in the book an 1) axis through Hyperborea - the mythical land of ancestors - whose spinning is symbolized by the cross; and 2) the dextrogyration as symbol of an active principle of altering a given course of cosmic development (whatever that truly signifies; I am no initiate, alas).

by gk (gk (gk quattro due due sette @gmail.com)) on Mon Jul 2nd, 2012 at 06:49:04 AM EST
[ Parent ]
My first "reading" was very cursory, basically just noticed the names of Keynes and Veblen on the second page. The link to Veblen's predictions of the German trajectory is the best catch by far. Most of the rest is pretty incomprehensible (like unkind words on Keynes, speculations that Soviets financially supported Nazis as well, etc. So it is hard to digest. But the bit about work-creating "money" (Mefo-Wechsel) byt zero-interest loans is perhaps informative (at the bottom of page 3). The question "Why the Allies never bombed the train tracks that lead to Germany's extermination camps in the occupied territories of Poland, even though the leadership of the Allies had solid information of what was going on there?" looks haunting indeed.
by das monde on Mon Jul 2nd, 2012 at 11:17:18 AM EST
[ Parent ]
It's an interesting piece. It is a bit ranty and bonkers in places, but that's mostly because it's assuming evil rather than stupid as a driver of political outcomes.

Bias against the UK/US axis is likely in an Asian publication. I'm not convinced the UK/US establishment is that all-knowing and omnipotent.

But on the other hand I think the comments about keeping Europe balkanised and ineffectual, not just as a political entity but as a political model, are spot on. And the suggestion that the US economy has been bubbled deliberately won't be new to anyone here.

Also interesting to see a critical view of Keynes for a change.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jul 2nd, 2012 at 12:26:00 PM EST
[ Parent ]
Preparada uses 'spiritual' in an uncommon way and that is not all. But his link to Veblen's review of The Economic Consequences of the Peace, by itself, justified the time to read the article. I think Preparata makes the same error of treating Veblen's analysis in 1920 as definitive as he accuses Keynes of doing in Economic Consequences.

Veblen is undoubtedly correct in pointing out that the unmentioned specter of Bolshevism colored all that Wilson did at Versailles, despite the fact that Wilson's 14 Points antedated the Bolshevick takeover in Russia. But at the time of his review Britain and the USA both had troops in what became The Soviet Union, opposing the Bolshevicks. Does anyone know if Veblen revisited his treatment of The Economic Consequences of the Peace at a later date?

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 11:43:57 PM EST
[ Parent ]
That was the point since before they turned mathematical, as Veblen acutely understood and elliptically explained, and remained the point after their mathematical turn was funded ... its never been about a scientific approach to understanding society, its always been about rationalizing the already existing folkviews of those with the money to finance neoclassical economics.

And of course, the chartalist Post Keynesians are not necessarily on the "far end" of the spectrum of macroeconomists.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 1st, 2012 at 10:48:35 PM EST
[ Parent ]
I suppose what irked Keen..

If somebody calls Krugman "a Minskyan," he just tells us he does not know what he is talking about. Keen has a good reason to be irked.

by kjr63 on Sun Jul 1st, 2012 at 07:48:30 PM EST
Steve's a good bloke, even if he's got a sharp tongue at times.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Jul 1st, 2012 at 10:49:35 PM EST
[ Parent ]
Steve Keen has a gag reflex that is far too low for him ever to be a diplomat.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 07:47:51 AM EST
[ Parent ]
Good thing he's an academic macroeconomist, then.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 10:58:00 AM EST
[ Parent ]
He just understands the importance of the issue.
by kjr63 on Mon Jul 2nd, 2012 at 02:08:22 PM EST
[ Parent ]
How do either group deal with bailing out banks without taking equity in them?

Wind power
by Jerome a Paris (etg@eurotrib.com) on Mon Jul 2nd, 2012 at 12:52:48 AM EST
By not doing that.

Keen proposes to bail out the debtors by giving them cash in hand, conditional on it being used for debt repayment before other uses. The MMT crowd generally tend to suggest New Deal style public works. But they are less concerned with the details of the response to the downturn, because they reason that if your response is less than optimal, you can always just make it bigger to compensate. The only penalty for that is a bit of inflation, and that's not considered a serious problem by most MMTers.

And Keen has a few choice words to say about regulators who are soft on Ponzi merchants.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 02:32:14 AM EST
[ Parent ]
Keens debt jubilee:

My HARDtalk interview transcribed | Steve Keen's Debtwatch

SK: ...[This is] a working model. But the idea would be, you would give the money to the public and if the person who received it was in debt, the first thing they would have to do is pay their debt level down. They could not spend.

HT: So basically a government would say, Look, we're not giving this extra money to the banks. We might even take back money that we put into the banks. We're going to give all effectively per capita. If you have any debts it has to go to that.

SK: That's right, it pays the debt down first of all. The reason we have to do something like this rather than simply writing the debt off is...

HT: It's a tax cut?

SK: No. It's very different to cutting a tax. If you give the money to everybody and then require those who are in debt to reduce their debt then they're better off obviously. But the complaint people make about a jubilee or a debt write-off is, What about me? I've saved money. I've bought bonds. I'm going to lose.

by generic on Mon Jul 2nd, 2012 at 05:27:12 AM EST
[ Parent ]
So a debt-jubilee with added money to those that has no debt to make it more politically appealing. Makes sense.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon Jul 2nd, 2012 at 07:15:49 AM EST
[ Parent ]
Why not just have state-backed rights issues for the banks?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jul 4th, 2012 at 01:07:05 PM EST
[ Parent ]
Because if the market doesn't want to buy the rights, the state is left with the equity as the underwriter of the issue. (I presume that's what you mean by "state-backed"). And the Euro crisis is an example of what happens when that happens.

Also, helping people pay down their debt is a net positive for economic stability.

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 Wed Jul 4th, 2012 at 01:13:45 PM EST
[ Parent ]
Nothing wrong with the state having to take an equity position in banks during a crisis. The shares can be sold 10-30 years later, likely at a considerable profit.

The Euro crisis is certainly not a good example of this: it stems not from equity injections in broke banks but rather from the lack of a competent central bank. After all, if a state lacks the funds to inject equity into its banks, that equity can be created by the central bank with just the stroke of a pen, or rather the click of a button on a keyboard. If you have a competent central bank, that is.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Jul 4th, 2012 at 01:18:15 PM EST
[ Parent ]
Helping people pay down their debts creates moral hazard, and it is also unfair to those who were prudent enough not to borrow more than they could afford. If this can be avoided, it's a good thing.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jul 4th, 2012 at 01:19:53 PM EST
[ Parent ]
Paying people sensibly instead of cynically cutting their income and forcing them into debt works better than either option.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Jul 4th, 2012 at 01:37:51 PM EST
[ Parent ]
But if you pay people they may spend it and inflate away our savings. We can't have that!

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 Wed Jul 4th, 2012 at 02:39:28 PM EST
[ Parent ]
That is a point Keen's debt jubilee avoids since if you were prudent you get cash to spend as you like, but if you have loans you get cash that must go to pay back loans. So same sum, but more freedom for the prudent.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jul 4th, 2012 at 02:22:08 PM EST
[ Parent ]
Yeah, because governments and central banks haven't been engaging in massive moral hazard to the benefit of the TBTFs over the past 5 years.

Moral hazard is the last refuge of the scoundrel.

Between moral hazard and mass unemployment, I choose moral hazard every time.

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 Wed Jul 4th, 2012 at 02:38:46 PM EST
[ Parent ]
Debt writedown is what you do when your predecessors have neglected to do the responsible thing. Which is to maintain a bank of shovel-ready public works which can be begun immediately, and which would pay the debtors money to pay down their debts in exchange for goods and services of durable value.

However, such projects cannot be conjured forth on demand, they must be prepared ahead of time. And in the absence of such preparation, the alternative to debt writedown is make-work. Which is not without problems of its own.

In a properly regulated financial system, such moral hazard creating events would be rare, because in a properly regulated financial system lenders are prevented from lending to overextended borrowers, speculators and Ponzi merchants.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 03:09:16 PM EST
[ Parent ]
No, if you want to be really responsible after your irresponsible predecessors, the thing to do is to dust off vagrancy laws, open debtors' prisons, and save up your hard-shat gold ingots.

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 Wed Jul 4th, 2012 at 03:16:17 PM EST
[ Parent ]
Thus illustrating the value of having an active political party which articulates the revolutionary alternative to capitalism.

Not because such an alternative is desirable, but because it sets a lower bound on the decadence to which capitalism can fall. A lower bound which would otherwise, judging by historical experience, be wholly absent.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 03:21:10 PM EST
[ Parent ]
After price crash in housing market it's also a moral hazard to leave only the debtor to foot the bill.
by kjr63 on Sun Jul 8th, 2012 at 05:36:46 PM EST
[ Parent ]
Don't be silly, it's only moral hazard if the poor benefit.

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 Sun Jul 8th, 2012 at 06:16:34 PM EST
[ Parent ]
Yeah. He is the speculator.
by kjr63 on Tue Jul 10th, 2012 at 07:54:08 AM EST
[ Parent ]
After price crash in housing market it's also a moral hazard to leave only the debtor to foot the bill.

FIFY.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 8th, 2012 at 07:15:12 PM EST
[ Parent ]
Yes, of course.
by kjr63 on Tue Jul 10th, 2012 at 07:48:56 AM EST
[ Parent ]
Because the problem is not limited to the banks. Banks, households and industrial firms must all be solvent (at least on a sectoral basis), for your economy to work. Rights issues for the banks does not help unless you then put households and industrial firms through bankruptcy, which is not without costs of its own.

One of those costs is that bankruptcy proceedings will not necessarily be able to distinguish between a prudent firm (which should be restructured) and a Ponzi merchant (who should be liquidated) during a general industrial depression. A debt writedown will let the prudent firm off the hook, but the Ponzi merchant will still have to either cease his activities or go bankrupt soon enough.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 03:15:44 PM EST
[ Parent ]
JakeS:
One of those costs is that bankruptcy proceedings will not necessarily be able to distinguish between a prudent firm (which should be restructured) and a Ponzi merchant (who should be liquidated) during a general industrial depression.

And this was demonstrated in the 90ies financial crisis in Sweden. The banks were saved (but not their owners). Small businesses on the other hand perished. Bankrättsföreningen estimated a loss of 60 000 companies and 400 000 jobs. Now, being small business owners that are tribaly on the right they can't blame the Bildt governments austerity program that took Sweden to the high-unemployment society, so all their blame lands on lawyers, judges and accountants. (Also, horrible page.) But I think the numbers are about right.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Jul 9th, 2012 at 06:43:18 AM EST
[ Parent ]
Also substantial direct employment as an employment guarantee, which allows the Samuelsonian hydraulic stimulus to be more focused on public works with long term benefit.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 10:59:58 AM EST
[ Parent ]
Or as with Randall Wray's Job Guarantee proposal.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 03:09:40 PM EST
[ Parent ]
Yes, that's one example of employment insurance.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 03:55:22 PM EST
[ Parent ]
The 20th century economy theory developed under conditions of more or less constant growth. But how much can economy grow, and what happens when we cannot double car sales, dentist services and financial paper exchange every 28 years (under 2.5% annual growth) anymore?

Keynesians are generally right how to revive growth in a crisis - if it is possible. Nevertheless, the reality is a bit more complicated than Keynesian toy models. Debt problems are that huge that respecting them 100% leads to a nanny global state for creditors: they would be getting their cut regardless of whether economic exchange would be growing, or could be growing at all. With the growing weight of interest entitlements, productive economy would have hard chances for growing even if energy and other resources were practically limitless - that is the interpretation of Keen, Hudson of how the classical economy (including Adam Smith) has to be applied today. And if we are close to "growth" limits of some key resources, then cyclical economy and technological progress are just sweet stories before a Real Downer.

by das monde on Mon Jul 2nd, 2012 at 05:18:04 AM EST
The mildest Keynesian conclusion, I think, is that in order to avoid a Fisher debt deflation from killing your real economy, you have to make sure that the nominal GDP at least doesn't shrink. I'm personally rather unconcerned with "real wealth" and "inflation". Sure, if we reach some sort of "real" limits then we'll all become poorer, but it's much better that it happens gradually and through price inflation than if it happens catastrophically through mass unemployment, deprivation and possibly war.

So: there is no reason for monetary scarcity, and Bad Things™ happen to your economy if you don't attempt at least to keep nominal GDP growth on a nondecreasing path. The rest is redistribution of real wealth, and that is politics. (Not that I'm belittling those issues, but they have nothing to do with finance or monetary theory, and the least one can ask of monetary policy is that it doesn't make the job of political economy harder)

Brad deLong, of all people, has been very insistent on Nominal GDP targetting as in Nominal GDP Targeting: Is It Simply the Re-animation of Dead Tissue? (October 30, 2011)

I agree: money printing-financed fiscal expansion in the service of nominal GDP targeting is by far the better policy.

...

That is why [Christina Romer's] op-ed said that the Fed should not just announce this policy of nominal GDP targeting but also start buying bonds for cash, promise that it was going to keep interest rates lower for longer, and sell dollars to foreigners to push the value of the dollar down--and credibly promise it was going to keep doing all these things until nominal GDP was back to its pre-2009 track.

...

And, of course, once expectations coordinate on the good equilibrium, you don't need to do any quantitative easing at all--rather the reverse: the Fed will have to shrink its balance sheet relatively quickly in order to maintain a good and non-inflationary equilibrium.

The article is full of "equilibrium" talk and even includes an extended quote from two guys who assume Ricardian Equivalence.

So, the MMT crowd would argue that deLong is reaching the right conclusion for the wrong reasons, and wasting his time debating people who are not even wrong, but my point is that we really need to stop thinking about money as a thing and that real resource constraints imply fiat money constraints or we'll never get out of depression. The real fight is redistributive, and the real problem is that real growth allows the redistribution problem to be swept under the rug of a growing pie where those at the bottom are happy because their share of crumbs keeps increasing.

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 Mon Jul 2nd, 2012 at 05:48:26 AM EST
[ Parent ]
Migeru:
the real problem is that real growth allows the redistribution problem to be swept under the rug of a growing pie where those at the bottom are happy because their share of crumbs keeps increasing.

Indeed, just as chocolate can make any shit tasty (as they say about sweets industry), obvious growth can mask vile and abhorrent edges and make it all look good. Can you beat a Ponzi scheme in that?

Economy behavior at growth limits is a very undeveloped, yet very important subject. Perhaps the first approximation is already ugly enough that no one would like to come with it openly. Living organisms and other thermodynamic examples show that when adequate resources are cut, functionality is shed in a hierarchical fashion in single organisms, and rather similarly under competition. John Michael Greer points to a study that shows the same pattern in the macro-economic context as well:

... a forgotten classic of political economy [is] Paul Blumberg's 1980 study Inequality in an Age of Decline. Analyzing the downward spiral of the American economy in the 1970s--the last time, please note, that soaring energy prices clamped down on an industrial society--Blumberg showed that while a rising tide lifts all boats, a falling tide behaves in a much more selective fashion, as those groups with more political influence and economic clout are able to hang onto a disproportionate share of a shrinking pie at the expense of those with less.

The decades since Blumberg's book appeared have only sharpened his argument. One after another, nearly every economic sector has undergone drastic reorganizations that slashed jobs, pay, and benefits for everyone below the middle class, and a growing number of people in the lower end of the middle class itself. Now that everyone below them has been thrown under the bus, the middle classes are discovering that it's their turn next, as the classes above them scramble to maintain their own access to the payoffs of privilege...

If there is some private foreknowledge or even synthesis of today's economic situation, that might be a quite natural, almost thermodynamic process, as core control group can have better perception of what is happening, and overwhelming control of information and key resources.
by das monde on Mon Jul 2nd, 2012 at 06:26:04 AM EST
[ Parent ]
Anecdotal evidence has been cited on ET that such an understanding is possessed by some of the financial operators and that they have concluded that the time is past for building anything and now can only scramble as fast as they can to grab as much as they can while the economy and society burn down.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 10:51:06 AM EST
[ Parent ]
I think the monetary theory subjacent to most keynesians finally made click in my head, but I cannot stop thinking that according to Keynes, economic problems seem to stem from demand problems and I find very difficult to square that out with a world with diminishing resources.

I would imagine that one can conceive demand in a nominal way. But at some point the virtual and the physical will have to connect some way, no?

Honestly very confused here...

by cagatacos on Mon Jul 2nd, 2012 at 07:46:20 AM EST
[ Parent ]
Indeed it does. The way it connects is through inflation, which enables a growing nominal economy (which is necessary for the stability of our financial system) to exist in the context of a stationary physical economy (which is necessary for the stability of our planet's carrying capacity).

The quest to protect rentiers from the inflation necessary to balance exponentially growing nominal output with stagnant or declining physical output (to, as von Mises so candidly put it, "make the world safe for international banking") has been the driving force behind a great of economic quackery and charlatanism.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 07:56:28 AM EST
[ Parent ]
Would it be fair to say, then, that there is a correlation between inflation and equality? Or, in other words, deflationary pressure tends to lead to increased inequality?
by cagatacos on Mon Jul 2nd, 2012 at 08:34:20 AM EST
[ Parent ]
In addition, mild inflation is financially stabilizing. Inflating debt away works wonders for reducing the probability of cascading insolvencies.

Which is why inflation-indexed debt, commodity money, and foreign debt in hard currency are abominations.

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 Mon Jul 2nd, 2012 at 08:45:12 AM EST
[ Parent ]
Regarding commodity money. What about if it was something that was directly connected to the size of the economy say, energy?

Like this proposal...

by cagatacos on Mon Jul 2nd, 2012 at 08:50:58 AM EST
[ Parent ]
Just as deflationary as the gold standard. You must not allow your legal system to generate claims to more thermodynamic free energy than will be available to mankind over a significant period of time.

Claims over money, which are just claims over more money? Sure. You can have as many of those as you like.

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 Mon Jul 2nd, 2012 at 08:57:18 AM EST
[ Parent ]
Money is a token of political power. Why would you expect the desirable level of political power tokens to be tied to the availability of kWh? Except, of course, if you were a power company...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 09:51:12 AM EST
[ Parent ]
Money as a token of political power, thats it? Shouldn't it be connected somehow to the efficient working of society?

(Yeah, I know "efficient" is a slippery concept, but it is no good to put all money/power in our favourite class and then things do not work - e.g., there is not enough production to feed people).

Far from me to suggest that money and power are not tightly associated, but I would say that there should be space for a definition that in includes society functioning.

by cagatacos on Mon Jul 2nd, 2012 at 11:02:53 AM EST
[ Parent ]
Money is credit. What is credit?

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 Mon Jul 2nd, 2012 at 11:36:23 AM EST
[ Parent ]
Money as a token of political power, thats it? Shouldn't it be connected somehow to the efficient working of society?

In the same sense and to the same extent that parliament should be connected somehow to the efficient working of society. That does not, however, mean that the number of votes cast in elections, or the number of laws passed in parliament, should be tied to the amount of gold, land or kWh in the economy.

Far from me to suggest that money and power are not tightly associated, but I would say that there should be space for a definition that in includes society functioning.

Well, I should hope that parliament keeps the functioning of society in mind when it conducts its business. That is one of the selling points of democracy, after all.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 01:05:25 PM EST
[ Parent ]
I should hope that parliament keeps the functioning of society in mind when it conducts its business.

So should I, but the current problem is that the space available for any legislative body to keep 'the functioning of society in mind' is continually being shrunken by the demands of fund raising and the consequences of the choices of from whom to accept such donations.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 03:14:57 PM EST
[ Parent ]
Would it be fair to say, then, that there is a correlation between inflation and equality?

Njah. Inflation is a necessary condition for an equitable economic distribution. But it is not sufficient (there are inflationary episodes which have done nothing good for social or economic equality, but I am aware of no deflationary episodes which have done anything good for social or economic equality).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 09:50:15 AM EST
[ Parent ]
Yes. Deflations are typically the time when the wealthy consolidate their positions at the expense of those less wealthy while inflation erodes the wealth of most of the wealthy.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 11:01:49 AM EST
[ Parent ]
It is necessary to distinguish between demands that are resource intensive and those that are 'sustainable', while keeping in mind that Keynes wrote before resource depletion became a serious concern, especially oil.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 07:56:49 AM EST
[ Parent ]
Goods are limited, services not. Demand is shifting to the latter.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Mon Jul 2nd, 2012 at 08:58:12 AM EST
[ Parent ]
What is the ecological footprint of massage therapy?

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 Mon Jul 2nd, 2012 at 11:57:29 AM EST
[ Parent ]
Are we now arguing for the commodification of everything in order to keep the system from collapse? Because if no one pays for it it won't do squat for our depression problem.

Remember this (Forgive the daly fail link):
Leanne Shepherd, the policewoman branded an illegal childminder - for looking after her colleague's toddler | Mail Online


Detective Constable Leanne Shepherd was ordered by the education watchdog Ofsted to end her private arrangement with her friend, DC Lucy Jarrett, or they would face prosecution.

The Thames Valley Police detectives - who gave birth within a few months
of each other - share a job at Aylesbury Police Station in Buckinghamshire.


I'd rather have nominal growth only thank you very much.
by generic on Mon Jul 2nd, 2012 at 02:29:25 PM EST
[ Parent ]
The government can pay for it... or people can do it for free for their neighbours.

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 Mon Jul 2nd, 2012 at 02:41:29 PM EST
[ Parent ]
Here's an odd tangent of a question:

How much of "growth" since WW2 can be attributed to bringing things in from the informal economy to the formal one?

Hairdressing and childcare are obvious examples. The shift from trading between neighbours to specialised, paid labour.

Food preparation is probably a bigger, but less easy to analyse one.

Seems like it might be important, somehow.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 2nd, 2012 at 03:06:13 PM EST
[ Parent ]
The other side of commodification is handling a bit power (in the form of money) to those who would otherwise have less. So it can be seen as a growth of the number of inhabitants that does things that count as real work and are rewarded with a bit of power accordingly.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Jul 3rd, 2012 at 02:56:37 AM EST
[ Parent ]
depends on the size of your eco-feet.

kidding aside, the car drive to work is the weak link, and if there were an electric car that could climb the kind of Apennine hills clients like to live on top of, that would be repaired.

if clients buy their own massage table, i could visit most of them on horseback. this would seriously dent the numbers accessible on a good day however.

one could also work without a table, but the kinds i practice do benefit from being off ground level, beds/couches are not great places to receive treatments, though some can happen ok at a pinch.

good public transport could also resolve this issue, (hah). after the great unwinding i expect 90% of my work to be within a 10sq k radius, much likely in barter for foodstuffs difficult to raise on my smallholding.

the return to manual labour for many should be a boost to demand. modern massage culture has become mostly stroking the one percent here in yurp. observing modern thailand and their millennial relationship with it is instructive, and an excellent model of low eco footprint integration and a complete lack of pampering approach.

i hope we euros can adopt something similar, especially if we are forced to go back to 'simples' as our main healing tools.

great question...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Mon Jul 2nd, 2012 at 03:41:00 PM EST
[ Parent ]
... Look, resource constraints dont exist, as far as the economy is concerned. Putting a tonne of alluminum into a car does not remove it from the planet - atoms are infinitely recyclable, and we are nowhere in the vicinity of running out of energy - Bluntly, if you belive that solar/wind/ect energy can replace fossile fuels. And you do belive this, right? Then they can also fuel a much higher global level of energy use and (real) wealth.

The alternative is nonsensical - do you imagine that the world will succeed in replacing oil, coal and gas and then just go "Rather than pave over another 30 square kilometers of the Sahara desert, we are going to leave two billion africans in energy penury" ?

This is not a possible outcome. If renewables work, they will also work for a growing global economy at a minimum until the entire world reaches something recognizable as first world standards.

If renewables cannot deliver this result, then people who are dying at thirty due to lack of electricity will go with the 1960's tech that can, and we get a fast-breeder fission powered world.

Under no circumstances other than "We all die in global war" will the future be short on energy. And even that future will be short on energy because it is short on people, rather than due to any physical restraints.

by Thomas on Mon Jul 2nd, 2012 at 09:00:30 AM EST
[ Parent ]
That is a different discussion.

I am not as convinced as you that fossil fuels will be replaced in their totality by other sources. Honestly I do not have an opinion on that: not convinced either-way. They might be a total replacement or they might only mitigate part of the problem, we will see.

I can only hope you are correct. But we will put the theory to the test around now.

by cagatacos on Mon Jul 2nd, 2012 at 11:18:43 AM EST
[ Parent ]
Atoms are recyclable, and energy is conserved - yet there is a petty matter of fighting entropy. Without energy flows you can't put atoms in desired order, run internet and modern agriculture, support metabolism of the global economy.

And no, I do not think that renewables would save the planet activity as it is now. Some downsizing is bound to happen, as extraction of oil and aluminum will require more investments of the same energy. The only thing that might keep the bonanza going is a determined jump towards a type II civilization, perhaps.

by das monde on Mon Jul 2nd, 2012 at 11:48:42 AM EST
[ Parent ]
That is not a politically possible outcome. either renewables can, in fact, do the job, or the power will be found elsewhere.
Places without reliable electricity are hellholes in which people die very young, and in droves. Nuclear fission exists. It is a technology which is understood. It is a very unpopular technology, but if all else fails, it will get used, and quite possibly used in very reckless ways (a molten salts reactor with no containment dome can be knocked together very cheaply.)  because possibly dying of cancer at 60 beats the shit out of dying at 40 from lack of clean water, refrigiration, ect. Therefore, the future will have a sufficiency of electricity. That is certain. Where it is coming from is not yet known.  

And with electricity, all else is possible.

by Thomas on Mon Jul 2nd, 2012 at 03:01:12 PM EST
[ Parent ]
The difference between "enough electricity that people don't die" and "enough electricity for another doubling or two of economic activity" is not negligible.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 03:03:18 PM EST
[ Parent ]
What happens when political impossibility meets physical limits?

And what is political impossibility nowadays? Dishing Social Security was the the third rail of American politics - no politician with touch it. By now Social Security is about to be done. Is the austerity in Greece and Spain supposed to be politically possible? All you need is one set of stories for the political and media class, other stories for the vanishing middle class (those with high skills, still workable business, or financial fish), and a few stories for loosers. The process of gradual cut of resources from the bottom is clearly under way.

by das monde on Mon Jul 2nd, 2012 at 09:17:44 PM EST
[ Parent ]
The point is that the physical limits are nowhere in the vicinity of where we currently are, because a: The energy flows extractable from incoming solar flux are collosal (renewables) and if that doesnt work out, nuclear fission is a thing that exists, and will get used in preference to running out of electricity.

Actually, lets put some numbers on this. National happiness correlates very strongly with gdp up until 15-20 k per capita - in order for the world to be above this point, at least one more doubling of incomes (eh, specifically, several doublings in the third world) is nessesary. Real Growth will certainly not be allowed to stop before this point, because that would imply collosal unnessesary suffering for ever. (the corrolation is probably what it is because those 15-20 k is what it takes to be reasonably assured that you will see your kids grow up and graduate highschool.)

 Looking for more numbers (well, following links off wiki) it appears that wealth grants some returns to life satisfaction up until 70k /year. Assuming a very flat income distribution, that is 3 doublings of global gdp. It isnt 8 times current energy use because a lot of that represents low-energy use activities, but that is the point where a steady-state real economy could halt and not piss off everyone who wants a better life.

by Thomas on Tue Jul 3rd, 2012 at 01:00:31 AM EST
[ Parent ]
Technically, it should be possible to extract another magnitude of energy flows from resources in sight indeed. However:
  1. The dominant energy resource - oil - is about to decline. Oil offers such a bonanza of energy (in horse or slave powers) that replacing it is a serious challenge.
  2. You need to invest energy and time to build infrastructure for alternative resources. Energy returns per energy invested are going to decline for oil in particular, and they are typically lower for alternatives.
  3. You need to invest energy and time to innovate and organize. Energy balance predicaments are accelerating, and nothing guarantees that we would catch up just in time.
  4. The global demand is just about the same as the global production. If the production would start to decline, the demand would be forced to decline.
  5. It is surely possible to adjust the global demand, but any adaptation requires time and energy as well.
  6. If some elites are perceiving the peak of this civilization cycle, they may be coming to Malthusian conclusions and taking according actions.
  7. Economy, real estate and other markets surely impact human populations faster and much more directly than any ecological limit. That opens possibilities for decline or collapse management.

So the question is: is this economic crisis just a power grab of elites "as usual", or is there some preparation for a deep decline behind?
by das monde on Tue Jul 3rd, 2012 at 02:47:01 AM EST
[ Parent ]
It is a power grab. This is blatantly obvious, because the causes have fuck all to do with the sectors of the economy that actually use energy and resources. Banks dont care what the cost of oil is, except if they can corner the market in it. We are being robbed by people, not by mother nature, and we will go on being robbed by people until we regulate the financial sector into oblivion. Or, you know, burn it down. Any narrative which tries to explain this crisis as the inevitable workings of globalization/history/nature/xxxxx should be regarded with extreme suspicion, because that narrative is the standard lie used by exploiters to cover the fact that they are fucking someone over. TINA is always a lie. No exceptions.
by Thomas on Tue Jul 3rd, 2012 at 03:06:52 AM EST
[ Parent ]
If you ask a random bond-collecting "job creator", he would acting for money grab merely, without much thinking about actual power, just assuming that more money will provide to his dynasty more comfort, security, etc., including more opportunities for power. He would not even pause of how the financial nanny system would continue to reward his progeny. Most of power holders (nominal or secretive) would be ignorant (frequently willfully) about energy flows as well, even if doing oil business.

However, I suspect that the elites are increasingly coordinated in their wealth power quest. The coordination center might be very small - a core of Bilderbergers, say. And if the coordination is driven by peak oil concerns, that is very significant.

by das monde on Tue Jul 3rd, 2012 at 04:38:41 AM EST
[ Parent ]
The Energy Trap | Do the Math

In brief, the idea is that once we enter a decline phase in fossil fuel availability--first in petroleum--our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here's the rub. The construction of that shiny new infrastructure requires not just money, but...energy. And that's the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term--effectively steepening the decline--for a long-term energy plan? It's a trap!

by generic on Tue Jul 3rd, 2012 at 03:36:00 AM EST
[ Parent ]
That series of events has nothing to do with resources, and everything to do with top down class warfare by finaciers and other rentiers either sociopatic, or conditioned by training to think of the economy as a zero sum game where they can only win if others loose.
by Thomas on Tue Jul 3rd, 2012 at 01:11:04 AM EST
[ Parent ]
Blaming it on "resource constraints" not only misunderstands the situation, it gives the assholes currently destroying peoples lives by the millions political cover. Dont do this. TINA is a lie. TINA is always a lie.
by Thomas on Tue Jul 3rd, 2012 at 01:13:19 AM EST
[ Parent ]
Yes, but what happens now shows that it is politically possible to deprive people of a lot. Including electricity I suspect, though I admit I have not followed if cutting the power for those that have not met all new tax obligations in Greece ever came into practise.

So

Thomas:

That is not a politically possible outcome. either renewables can, in fact, do the job, or the power will be found elsewhere.

is simply not true.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Jul 3rd, 2012 at 03:03:52 AM EST
[ Parent ]
The basic equation of sustainability is:
   sustainable + unsustainable = unsustainable

... which is to say, unless the energy supply, material supply, and waste disposal/recycling are all sustainable, the economy in question is not sustainable.

Te fact that there is sufficient sustainable energy supply to provide a sufficient energy budget to sustain an industrial economy does not imply that there is a sufficient sustainable energy supply to supply ongoing, unlimited exponential growth in energy consumption per capita.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 03:45:44 PM EST
[ Parent ]
I think the monetary theory subjacent to most keynesians finally made click in my head
Diary!
I cannot stop thinking that according to Keynes, economic problems seem to stem from demand problems ...

I would imagine that one can conceive demand in a nominal way. ...

See my diary Keynes and the monetarization of economics (July 16th, 2006) for Keynes' discussion of real vs. nominal quantities and why he decides to measure labour in nominal wage terms and output in nominal money terms:
Nevertheless these difficulties are rightly regarded as 'conundrums'. They are 'purely theoretical' in the sense that they never perplex, or indeed enter in any way into, business decisions and have no relevance in the causal sequence of economic events, which are clear-cut and determinate in spite of the quantitative indeterminacy of  these concepts. It is natural, therefore, to conclude that they not only lack precision but are unnecessary. Obviously our quantitative analysis must be expressed without using any quantitatively vague expressions. And, indeed, as soon as one makes the attempt, it becomes clear, as I hope to show, that one can get on much better without them.

...

In dealing with the theory of employment I propose, therefore, to make use of only two fundamental units of quantity, namely, quantities of money-value and quantities of employment. The first of these is strictly homogeneous, and the second can be made so. For, in so far as different grades and kinds of labour and salaried assistance enjoy a more or less fixed relative remuneration, the quantity of employment can be sufficiently defined for our purpose by taking an hour's employment of special labour in proportion to its remuneration; i.e. an hour of special labour remunerated at double ordinary rates will count as two units. We shall call the unit in which the quantity of employment the labour-unit; and the money-wage of a labour-unit we shall call the wage-unit.

...

It is my belief that much unnecessary perplexity can be avoided if we limit ourselves strictly to the two units, money and labour, when we are dealingg with behaviour of the economic system as a whole; reserving the use of units of particular outputs and eqquipments to the occasions when we are analysing the output of individual firms or industries in isolation; and the use of vague concepts, such as the quantity of output as a whole, the quantity of capital equipment as a whole and the general level of prices, to the occasions  when we are attempting some historical comparison which is within certain (perhaps fairly wide) limis avowedly imprecise and approximate.

Maybe it's because Keynes was a mathematician by training that he didn't need to make apologies for writing economics without making apologies for not using too much mathematics.

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 Mon Jul 2nd, 2012 at 09:04:29 AM EST
[ Parent ]
I do not have enough content to merit a diary. But I do strongly believe that

  1. The notion of money of hard-monetarists is closely aligned to the intuitive view of money. "Money is what you need to survive". Suggesting toying with the money supply will go against the gut feeling of most people (one is essentially saying that "your money wealth" is irrelevant as money can be created and destroyed at will).

  2. Hard-monetarists are wrong. Money is something to make society work and its existence and supply should be decided on a pragmatic basis (the opposite of, say, gold). It is the flow of money that assures that things work (and who gets a share), not individual wealth per se.

  3. A corollary of point 1 is that any discussion of money in the public sphere about money will probably be lost by sensible views on money.

I will one day maybe make a diary on what made me click on what money is (I still remember the moment). It will be very short, but might address an important question: how to make people understand the nature of money. At least I can describe what worked for me.
by cagatacos on Mon Jul 2nd, 2012 at 11:13:44 AM EST
[ Parent ]
There is one intuitive view of money, money as a thing, which underpinds "sound-money" politics. As you say, we need an alternative metaphor to use in the public discourse. One possibility is Warren Mosler's MMT to Congress: You are the scorekeepers for the US dollar, not a player! (July 30th, 2011)
That correct analogy is between scorekeepers in card games and your role as scorekeeper for the US dollar.

As scorekeeper in a card game, you keep track of how many points everyone has.
You award points to players with winning hands.
You subtract points from players with losing hands.

So as the scorekeeper, let me ask you:

How many points do you have?

Can the scorekeeper run out of points?

When you award points to players with winning hands,
where do those points come from?

When the scorekeeper subtracts points from players with losing hands,
does he have more points?

Do you understand the difference between being the scorekeeper and being the players?

You are the scorekeep for the US dollar.



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 Mon Jul 2nd, 2012 at 11:41:26 AM EST
[ Parent ]
I do not have enough content to merit a diary.

Of course you do, for the Socratic Economics series, no less.

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 Mon Jul 2nd, 2012 at 11:55:55 AM EST
[ Parent ]
Just to thank everybody that tried to elucidate my doubts.
by cagatacos on Mon Jul 2nd, 2012 at 11:14:25 AM EST
[ Parent ]
I don't know about "nominal demand", but physical demand is related to population growth. Most likely population should decrease and that does not happen by creating poverty by squeezing demand. Population growth is most of all about income distribution. And we know what neoclassicals think about that.
by kjr63 on Mon Jul 2nd, 2012 at 02:24:24 PM EST
[ Parent ]
Physical demand is related to population and material consumption per capita.

In the Impact=PAT relationship, Population, Affluence, Technology, the leverage on reducing the impact from the "AT" factors is very high in most high income nations. 1,000 average Americans do far more damage to the ecosystem than 10,000 average Indians or Congolese.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jul 3rd, 2012 at 05:06:37 PM EST
[ Parent ]
A central problem of a monetary production economy, as opposed to an agrarian production based economy, is that employment is dependent upon production of new product, and so maintaining production of new goods and services is required to avoid mass unemployment.

However, the General Theory approach is not limited to demand alone, that is more the post-WWII Samuelsonian approach in which the supply side was taken for granted by the Keynesians dominating macroeconomics in large part to avoid fighting with the neoclassicals and their fictitious utility maximizing model dominating microeconomics.

Not conceding the supply side to the neoclassicals is a big part of what the "Post" in Post Keynesian refer to ~ "post" General Theory economics that assumes a place for genuine uncertainty all the way down to the ground.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 03:53:48 PM EST
[ Parent ]
Pure technical growth remains possible in a material steady state, but pure technical growth cannot deliver relentless growth quarter by quarter, since technological progress in technical efficiency proceeds in waves, so if relying on material expansion for growth is no longer an option, relying on growth to provide for ongoing full employment is no longer an option, and so the employment insurance program is a critical part of the model.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 11:06:48 AM EST
[ Parent ]
But "relentless growth quarter by quarter" is most demanded by the financial sector, largely for the purpose of self-aggrandizement. We should say 'FUCK THAT!' to the financial sector but are constrained by three problems:

  1. In our take the easy path approach we have given finance control of the state and must figure out how to get it back.

  2. We must figure how to get the real economy supplying jobs and the necessary goods and services with a financial sector about 10-20% the size of what we now have.

  3. We must build a consensus on how to accomplish these goals.

The biggest obstacle is 1, followed by 3. I believe there are several ways to accomplish 2, if we can just get the power to try and agree on an approach to try.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jul 3rd, 2012 at 07:42:50 PM EST
[ Parent ]
I wonder to what extent (1) doesn't follow from the lack of (3) in much of the world ~ in the US, UK, Australia, Norway, Sweden and other sovereign economies, we have the means to engage in Depression finance, given that we retain the capacity to create money to accommodate public spending.

In the Eurozone, of course, the monetary system was built on a fantasy of a self-equilibrating private economy that would not require any extended public deficits in order to meet the requirements of an extended private sector imbalance of savings and investment in real productive capacity, and so the capacity to spend at the level of the Eurozone must be created, or else the Eurozone dismantled.

Which leads directly into (2): we must certainly establish an independence between productive participation in the economy and the production of new goods and service for sale in the economy. One approach to that independence is Employment Insurance, aka the Job Guarantee.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jul 4th, 2012 at 02:29:14 AM EST
[ Parent ]
the capacity to spend at the level of the Eurozone must be created, or else the Eurozone dismantled

Or the European political economy replaced by a smoking crater.

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 Wed Jul 4th, 2012 at 05:33:15 AM EST
[ Parent ]
That is not a sustainable outcome. The parliament of the street will not accept it for long.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 06:51:04 AM EST
[ Parent ]
Of course it is sustainable. Once it is a smoking crater it cannot be unsmoked. Just like a failed state cannot be unfailed.

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 Wed Jul 4th, 2012 at 07:00:55 AM EST
[ Parent ]
The French experience from roughly 1780 to the battle of Waterloo would suggest otherwise.

As would the German experience from 1929 through 1945, and then again from 1945 through 1970.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 07:08:44 AM EST
[ Parent ]
Let's have the Franco-German experience of 1870 while we're at it.

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 Wed Jul 4th, 2012 at 07:10:27 AM EST
[ Parent ]
Did that involved a failed state un-failing?

Arguably the US in the 1860s and '70s did involve a failed state. Then again, it arguably never un-failed.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 07:44:15 AM EST
[ Parent ]
Germany did not fail in 1870. If anything it failed in 1866 and that was a comparatively harmless affair. In France the napoleonic regime failed. But prior to that it lasted twenty years, the average of 19th century political regimes in France. France the country didn't fail; neither the society nor the state was much changed.

Since the war was confined to two countries and one year the european order or balance did not fail either, especially compared to the Napoleonic wars or the world wars.

by IM on Wed Jul 4th, 2012 at 11:18:35 AM EST
[ Parent ]
The French experience from roughly 1780 to the battle of Waterloo would suggest otherwise.

Were we to consider France from 1780 to 1789 to have been a 'failed state' then we would have to say most monarchies in history have been through multiple 'failed state' episodes from which they recovered. The French Monarchy from Louis XIV to 1789 required an astute and capable monarch to function well. Louis XVI was neither nor was he very interested in governing. This made the challenges presented by high food prices combined with high sovereign debt and a regressive and inadequate revenue system practically insoluble.

There had been previous periods of instability, such as The Fronde, from which the Monarchy had recovered, but the difference this time was that the lead for the opposition was taken not by nobles trying to increase their autonomy, though there was some of that, but by representatives of The Third Estate, by men with education and means, who came to understand that re-constituting the old monarchy was incompatible with their goals and they set about creating a new type of government.

The 'logic of the situation' led to appropriation of chruch lands - the prime third of all French arable land - which gave all who purchased assignats a vested interest in the new state. The counter-revolutionary, reactionary attacks on France by other monarchies fueled rampant nationalism and 'the nation in arms' which led to stunning victories and expansion of French territory and rampant triumphalism.

Far from being a 'failed state' the French Revolution, by 1792, had produced the most powerful state on the Continent and transformed the nature of what a state could be. This posed severe challenges for the other European states of the time.    

iV

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 4th, 2012 at 12:14:29 PM EST
[ Parent ]
The French Monarchy from Louis XIV to 1789 required an astute and capable monarch to function well. Louis XVI was neither nor was he very interested in governing.

Like Louis XV?

But more importantly, was the french economy prior to 1789 failed? I don't think so. And as you pointed out, if the french state prior to 1789 was failing, then a lot of quite similar european states were failing.

I think we all concur that the french state of the revolution was very successful.That was JakeS point I think: France failing in 1780, quite unfailed in 1795.

by IM on Wed Jul 4th, 2012 at 12:19:43 PM EST
[ Parent ]
I would say that a state which is in such a condition as to provoke serious attempts at armed revolution (successful or not) would count as having failed in a basic function of statehood.

That this applies to at least one state somewhere in Europe for most of the period between the collapse of the Roman empire and the late interbellum is a commentary on the sad state of post-Roman Europe, not on the stringency of requirements for qualifying as a non-failed state.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 4th, 2012 at 02:25:32 PM EST
[ Parent ]
The french economy had problems, but was not failed.

The french government on the other hand had severe problems and - lacking a fiat currency - was on its way to some form of bankrupcy as it was politically unable to tax those that had the money.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Jul 4th, 2012 at 02:47:23 PM EST
[ Parent ]
Louis XV lacked his father's consuming passion for directing the state and delegated more than he should have to ministers, but was an improvement on the Regency and, when he chose to focus, had acceptable capability. The problem was that there had been so little effective effort to strengthen and rationalize governance that much of the power that Louis had soaked out of the nobility was just allowed to dissipate instead of being consolidated for the benefit of the state. Louis XVI was a full order of magnitude less competent than his father, it seems to me. My point was that there are a great number of times in various kingdoms when the monarchy was threatened but very few times when successful revolutions occurred.

The French Republic harnessed political, social and military power on a scale that created a new norm. The only other kingdom in Europe to have gone through such a transformation was Great Britain, so Great Britain and France resumed their traditional roles as rivals on more equal terms that before the revolution, with Great Britain playing a largely defensive role, financing and supporting those increasingly fewer allies it could find on the continent.

The energies released by the French Revolution set France on the path of transition to a more industrial nation, but intermittently. Slowing that process was one result of the Congress of Vienna, though the intent may have been more to slow secularism and republicanism, especially from the point of view of Austria and Russia, but anything that slowed France from going through an agricultural commercial, and industrial revolution was a benefit to Great Britain.

But we have now 'progressed' to the point where we have recreated the kind of parasitic, unaccountable, rent seeking dominance by a small group in the financial sector that we previously saw in the clergy and nobility of the ancien régime in France or in pre-Civil War Stuart England. Even though the 18th Century was an 'empty world' and we are now in a quite 'full world' and facing ever rising prices for natural resources I think we could still harness a much greater efficiency by instituting economic and social organizations that mobilize the full potential of the whole population and serve to equalize both wealth distribution and leisure rather than, as at present, further concentrate wealth at the top.

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 4th, 2012 at 03:49:21 PM EST
[ Parent ]
"but was an improvement on the Regency"

I am a fan of the view that the regency was the happiest period in 18th century France.

"The French Republic harnessed political, social and military power on a scale that created a new norm."

I am still a fan of the Toqueville view that the revolution and napoleon just finished off the centralizing tendencies of the ancien regime.

by IM on Wed Jul 4th, 2012 at 03:54:28 PM EST
[ Parent ]
the revolution and napoleon just finished off the centralizing tendencies of the ancien regime

Yeah, because the French Republic hasn't been centralist at all. Oh, no.

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 Wed Jul 4th, 2012 at 04:09:28 PM EST
[ Parent ]
I thinkn IM meant finished as in compleated, not as in ended.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Jul 4th, 2012 at 04:17:19 PM EST
[ Parent ]
finished off on the sense of completing it. That is the Toqueville thesis in the

L'Ancien Régime et la Révolution

http://en.wikipedia.org/wiki/The_Old_Regime_and_the_Revolution

"It is one of the major early historical works on the French Revolution. In this book, de Tocqueville develops his main theory about the French revolution, the theory of continuity, in which he states that even though the French tried to disassociate themselves from the past and from the autocratic old regime, they eventually reverted to a powerful central government."

As I said a plausible thesis.

Could you for once think before firing?

by IM on Wed Jul 4th, 2012 at 04:17:40 PM EST
[ Parent ]
Nah, it's more fun this way.

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 Wed Jul 4th, 2012 at 04:47:54 PM EST
[ Parent ]
I am a fan of the view that the regency was the happiest period in 18th century France.

Certainly it was for the nobility at court and the attendant courtesans and dandies, and the inflating of the Mississippi Bubble was accompanied by the usual euphoria.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 4th, 2012 at 06:19:00 PM EST
[ Parent ]
Courtesans and dandies are people too, my friend.

I was more thinking of more peace, less gloire. At the death of the regent France was better off then at the death of Louis XIV.

by IM on Thu Jul 5th, 2012 at 02:14:09 AM EST
[ Parent ]
Also: new Orleans, a city still holding up the spirit of it's name patron! That alone is a pro regency argument.
by IM on Thu Jul 5th, 2012 at 02:16:19 AM EST
[ Parent ]
ARGeezer:
the difference this time was that the lead for the opposition was taken not by nobles trying to increase their autonomy, though there was some of that, but by representatives of The Third Estate

Just to have things in the right order: first the nobles blocked tax reform and demanded that the Estates would meet, then the Third Estate couped the whole thing by declaring themselves the National Assembly. And the rest is history.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Jul 4th, 2012 at 02:45:00 PM EST
[ Parent ]
Indeed! The nobility defended the status quo. Then the Third Estate seized control, joined by some of the clergy and nobility, and the whole process moved leftwards over the next few years, often driven by popular demonstrations and events, until Thermador.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jul 4th, 2012 at 06:02:42 PM EST
[ Parent ]
I would reckon that replacing the European political economy by a smoking crater is one approach to dismantling the Eurozone. Not the most materially efficient approach, of course.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Jul 4th, 2012 at 11:54:55 AM EST
[ Parent ]
No, no, the Euro will outlivebury us all, as JC Juncker said. The European economy will be a smoking crater, but the Eurozone will endure.

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 Wed Jul 4th, 2012 at 01:15:16 PM EST
[ Parent ]
Ah, I was referring to real world reality as opposed to the folkviews of the very important people. The Eurozone may well survive for quite some time in the same sense that the Roman Empire survived for many centuries as the Holy Roman Empire.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Jul 4th, 2012 at 04:33:33 PM EST
[ Parent ]
Bill Mitchell joins the fray: Revisionism is rife and ignorance is being elevated to higher levels (July 2, 2012)
Sometimes I read things and consider either I live in a parallel universe or the writers do. I always conclude the latter. There is an increasing number of articles and commentaries coming out which aim to re-write history in favour of the writer's reputation or that of his/her mates. Revisionism, which includes the practice of personal reincarnation is rife at present. Everybody seemed to predict the crisis. Even those that clearly in their own writing didn't have a clue that the trouble was coming predicted it. As part of this process, key organisations that should be learning from the crisis such as the BIS are demonstrating that they are in an educational void. They have become just another propaganda machines. And so the crisis continues as ignorance is elevated to higher levels.

...

The thing that curled the ears of many progressives was the claim that these economists worked in the Minskian tradition. The best response to the article was from my colleague Randy Wray - Brad Delong: We're all Minskians now!. Randy was a doctoral student under Minsky.

...

But substantively, it is a real concern when economists who basically operate within the mainstream macroeconomics tradition lay claim to prescience and channel writers that they have never written about or whose thoughts they have never advanced - except now - when it is obvious to them that they were wrong.



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 Mon Jul 2nd, 2012 at 08:25:53 AM EST
EconoMonitor: BRAD DELONG: WE'RE ALL MINSKIANS NOW! (L. Randall Wray, June 30th, 2012)
Earlier this week I noted, tongue-firmly-in-cheek, that we're all MMTers now, following Paul McCulley's recommendation that we just declare victory. And be nice about it.

Well here is a strange post from Brad DeLong: http://www.guardian.co.uk/business/economics-blog/2012/jun/29/us-treasury-rates-economic-prophets. He proclaims that essentially anyone who is anyone is a Minskian. And apparently always was. That is why mainstream economists like "Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers" ought to be trusted.

...

... To paraphrase Brad (again, a bit of tongue-in-check; you can go to his post to get the details):

Boy, I cannot figure out how interest rates are so low. I missed the whole 20 years episode in Japan. Why on earth aren't the US and Japan punished with high rates as if they were Greece? It really is a puzzle. And why can't central banks just target nominal GDP growth-let us say a China-like 10 or 12 % per year-and thereby get us out of the mess? What, are they stupid or something? Fly the helicopters!

Answer: Japan and the US are not Greece. ...

...

OK final matter. Target nominal GDP growth. Yes we could do that although it is a hard thing to hit. And if we are going to try it, we've got to use the right tool.

...

But as I doubt that Brad and the other "Minskians" are advocating that, nominal GDP targeting is a pipe dream. It will be no more successful than was Chairman Bernanke's "Great Moderation". We cannot target nominal GDP growth with monetary policy (interest rate setting). It must be done using fiscal policy. We can disguise that (as the Chinese do) but it is fiscal policy that will ramp up spending. Interest rates are impotent, particularly now.



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 Mon Jul 2nd, 2012 at 08:31:42 AM EST
[ Parent ]
EconoMinitor: Paul McCulley - MMT Won: Declare Victory But Be Magnanimous About It (June 25th, 2012)
As readers of this blog know, MMTers like to begin the analysis by consolidating the central bank and treasury because it simplifies the analysis. We then argue that this consolidated "government" spends by crediting accounts ("keystrokes") and taxes by debiting them. Deficit spending thus leads to net credits of bank deposits as well as bank reserves. Bond sales offer an interest-earning alternative to zero (or low) earning reserves.

...

Paul closed his talk with an appeal. He noted that MMT gets all this right. It foresaw the Global Financial Collapse. It predicted the current crisis of Euroland, providing the correct prognosis of the fatal flaws of divorcing fiscal policy from currency sovereignty. And it predicted that the first serious financial crisis would create an insurmountable EMU crisis. Only a thorough reformation to unify fiscal policy and currency sovereignty will save the project of integration.

So, Paul asked, why not simply declare victory? Be magnanimous toward all those who got it wrong. No need to rub their faces in their mistakes and the mess they've made. Welcome them aboard.

We're all MMTers now!



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 Mon Jul 2nd, 2012 at 08:43:30 AM EST
[ Parent ]
MMTers can be as welcoming as they can be, but if the Mainstream won't change channels it will be for naught. But, if MMT becomes the preferred mode of analysis for a significant section of the financial community because it simply works better and provides them with superior analysis, insights and profits, then it might start to make encroachments. But, more likely, many in the financial community will incorporate the analysis, but be quiet about it, as the insights MMT provides could undermine the public rationale that supports the looting. It will be interesting to see how this plays out. I would expect any major transition to be sudden, as with catastrophe theory. Making grant money for research into 'stock and flow' monetary circuit analysis available from the Fed and other funding sources would be a major sign of a transition.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Jul 2nd, 2012 at 12:23:55 PM EST
[ Parent ]
I misread the title. I thought this thread was about Pacific anthropology.

I am a proud Polykeynesian. I get on well with Microkeynesians. Not so sure about Melakeynesians.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Mon Jul 2nd, 2012 at 10:41:23 AM EST
Good soccer players, but, the Melakeynesians.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 2nd, 2012 at 11:09:04 AM EST
[ Parent ]
BTW, Am I the only one who has strong intestinal problems when seeing a picture of Larry Summers (especially near Paul Krugman - whom I deeply respect)?
by cagatacos on Mon Jul 2nd, 2012 at 01:44:18 PM EST
My thought exactly.  Larry Summers?  You're kidding right?  That Larry Summers??

Now where are we going and what's with the handbasket?
by budr on Mon Jul 2nd, 2012 at 02:04:47 PM EST
[ Parent ]
Brad deLong comments on Randy Wray's blog response
The major complaint seems to me to be my list of economists I find worth listening to: "Paul Krugman, Christy Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers." Well, Larry, Barry, and Olivier taught me this stuff, so they are on the list. Larry, Christy, and Olivier have been the senior government policymakers leading the charge for more and better expansionary policies. Raghu, Paul, Barry, and Gary called the dangers of the leveraged housing bubble early. Barry, Ken, and Carmen have been thinking very hard about the dangers of a long-term depression generated by a financial panic for a long time. All are very much worth listening to.
(my emphasis)

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 Mon Jul 2nd, 2012 at 02:40:23 PM EST
[ Parent ]
I have a soft spot for Brad DeLong.

Which is why I would ask everyone to keep in mind that he's very interested in politics (which is in part a good thing and in part not.) As such, he's interested in coalition-building - and statements like this should be viewed in that light.

It's not good for advancing the intellectual enlightenment of economics, but in terms of getting the economy out of the depression, it may not be all bad.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 2nd, 2012 at 03:03:48 PM EST
[ Parent ]
Nobody (other than Chicago or Aust(e)rian school economists and hangers-on) is disputing the value of deLong and Krugman both to the economics profession and to progressive economic policy. Here's Randy Wray:
I am following Paul McCulley's advice and so must be nice. And I do like a lot of what Brad DeLong and Paul Krugman write--oh, maybe 90% of it. Alone among this bunch, however, only Rajan (so far as I know) saw the crisis coming.
As I say in the diary, I think deLong is commendable for his "marking my beliefs to market". These make interesting reading: March 2000, July 2002, and December 2011.

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 Mon Jul 2nd, 2012 at 03:19:50 PM EST
[ Parent ]
Alone among this bunch, however, only Rajan (so far as I know) saw the crisis coming.

That's not quite true. Krugman did scream "we're turning Japanese!" to everyone who would listen. He didn't have any particularly coherent model for why he thought so, but it was sufficiently obvious that he could use the Mk.I Eyeball Panic Prediction System.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 04:05:27 PM EST
[ Parent ]
Well, I'm hardly qualified to judge.  I don't even know most of the names on that list.  My impression of Summers was formed during his stint at Treasury under Clinton, which left me profoundly unimpressed.  If he did anything more constructive than the occasional ponderous press statement full of meaningless buzz words, it didn't make any impression where I live.

Now where are we going and what's with the handbasket?
by budr on Mon Jul 2nd, 2012 at 04:15:03 PM EST
[ Parent ]
Summers, as Clinton's Treasury Secretary, proudly presided over the deficit reduction of the 1990s which, according to the sectoral balances approach to macro, fuelled a massive private debt bubble leading to the early 2000s recession.

@deficitowl

What happens when you combine a government surplus with a current account deficit? GRAPHIC explanation: pic.twitter.com/1qUhRl2T



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 Mon Jul 2nd, 2012 at 05:08:16 PM EST
[ Parent ]
And let's not forget Russia.

Because Russia sure hasn't forgotten Larry the Liquidator.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 2nd, 2012 at 05:16:54 PM EST
[ Parent ]
Brad deLong: Marking My Beliefs to Market (March 2000)
Back at the start of the 1990s I was one of those who believed (a) that Russia needed to privatize and stabilize its economy as fast as possible, and (b) that the U.S. needed to embark upon a Marshall Plan-scale--$60 billion a year of grants--aid program to support Russian reform.

Thanks to the Reagan deficits and Bush's "read my lips: no new taxes" Republican convention speech, we blew the opportunity to make a $240 billion or so short-term investment that would have been likely to make the world a better place, and that would have removed the chance that we will have to spend $100 billion a year permanently--$2 trillion in present value--to guard against whatever follows the current Weimar Russia.

But even in the absence of large-scale western aid, and even with the lack of the political consensus--found in east and northeast central Europe--that copying the institutions of western Europe as rapidly as possible was job 1, Russia's reformers pushed ahead with (rapid) large-scale voucher-based privatization, (delayed) macroeconomic stabilization, and in the process struck a bunch of political [deals] that concentrated industrial wealth in the hands of a new group of "robber barons."

Now to have concentrated ownership of industrial wealth is not fatal to an economy. The U.S. prospered in the late nineteenth century when its robber barons directed industrial development. And the corrupt interpenetration of economy and politics is not fatal either--Leland Stanford could run the Central Pacific Railroad and be Governor of California, Nelson Aldrich could be the Senator from Standard Oil, and the Pennsylvania state legislature could be a wholly-owned subsidiary of the Pennsylvania Railroad. In the long run, as long as politics remains or becomes democratic, pressure for social democracy will redistribute wealth. And as long as the robber barons are good not just at extracting privileges from legislatures but also at running enterprises they will leave much of value behind them, and people who benefit in subsequent generations can imagine that they were industrial statesmen.

So I continue to be optimistic about Russia: politics is slowly becoming more democratic--with a successful transfer of power via election--and wealth is now in the hands of people who have a very strong interest in successful economic development. Now if only Russia's nascent politically-powerful property-owning class recognizes its interest in successful development instead of (or alongside of) its interest in suckling at the teat of the state.

But others before have tried to create a powerful, self-confident, entrepreneurial class in Russia interested in economic growth and development: Pyotr Stolypin, Peter the Great, Ivan Kalusha. And Russia today is in much worse a state than I had thought a decade ago that it would be by now...



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 Mon Jul 2nd, 2012 at 05:21:08 PM EST
[ Parent ]
..pressure for social democracy..

Lol. Pressure for neo-feudalism, that is called social democracy.

by kjr63 on Mon Jul 2nd, 2012 at 07:13:07 PM EST
[ Parent ]
"to have concentrated ownership of industrial wealth is not fatal to an economy"

Jesus, how about fatal to the rest of the people whose ownership of industrial wealth was forcefully taken away from them and given to a bunch of gangsters?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Jul 2nd, 2012 at 09:18:00 PM EST
[ Parent ]
And to state that politics "is slowly becoming more democratic--with a successful transfer of power via election" around the time the 2000 elections, at the height of the Second Chechen War and with Putin being appointed successor by "Yeltsin" (and I use the quotes advisedly), is really bizarre and shows a deep ignorance of the facts on the ground of the sort one recently associates with the ECB. So it is not clear to me which market he is marking to...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Mon Jul 2nd, 2012 at 09:28:20 PM EST
[ Parent ]
Thanks to the Reagan deficits and Bush's "read my lips: no new taxes" Republican convention speech, we blew the opportunity to make a $240 billion or so short-term investment that would have been likely to make the world a better place, and that would have removed the chance that we will have to spend $100 billion a year permanently--$2 trillion in present value--to guard against whatever follows the current Weimar Russia.

But even in the absence of large-scale western aid, and even with the lack of the political consensus--found in east and northeast central Europe--that copying the institutions of western Europe as rapidly as possible was job 1, Russia's reformers pushed ahead with (rapid) large-scale voucher-based privatization, (delayed) macroeconomic stabilization, and in the process struck a bunch of political [deals] that concentrated industrial wealth in the hands of a new group of "robber barons."


Weasel alert! Weasel alert!

Let's unpack this bullshit, shall we.

Thanks to the Reagan deficits and Bush's "read my lips: no new taxes" Republican convention speech, we blew the opportunity to make a $240 billion or so short-term investment

Raygun and Bush pere had both been out the door for half a decade at the peak of the Russian crisis.

But even in the absence of large-scale western aid, and even with the lack of the political consensus--foundmanufactured in east and northeast central Europe--that copying the institutions of western Europe as rapidly as possible was job 1

Fixed it for you.

Russia's reformers pushed ahead with (rapid) large-scale voucher-based privatization, (delayed) macroeconomic stabilization, and in the process struck a bunch of political [deals] that concentrated industrial wealth in the hands of a new group of "robber barons."

And dare I suggest that it is no coincidence that DeLong fails to name "Russia's reformers?" Wait, I just did.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 3rd, 2012 at 03:50:50 AM EST
[ Parent ]
Brad de Long: Mark-My-Beliefs-to-Market Time (July 26, 2002)
And so I have begun thinking: What if I wanted to make the argument that the neoliberal policy mix adopted by President Carlos Menem and Finance Minister Domingo Cavallo was a big mistake, that it was all doomed to failure from the beginning and should not have been undertaken, that from the moment he proposed his Convertibility Plan to stop Argentina's hyperinflation the Sunday Horse was pulling the Argentine cart down a track that led nowhere? What would that argument look like?

As I see it, such an argument would have five steps:

  • First, the neoliberal program pushed by Domingo Cavallo demanded free markets--the end to protectionism, the end to quantitative restrictions of all kinds, the end of limits on freedom of contract, and most importantly the end to controls on the ability of not just goods but money to flow into and out of Argentina, and the end of the government's ability to force Argentines to denominate their wealth in a unit of account--the peso--whose value it controlled.
  • Second, the neoliberal program pushed by Domingo Cavallo required a hard peg of the value of the peso to the dollar: nothing else would convince Argentines that the days of hyperinflation had passed, and that they no longer had to dissipate resources and waste time insuring themselves against inflation, but could trust the unit of account.
  • Third, Argentina is a country in which the government constantly promises the people more than it can deliver. It promises rich oligarchs that it will not collect too much in taxes. It promises workers and consumers a generous social insurance state. It promises rapid economic development, large expenditures on infrastructure, jobs for politically well-connected boys, and so forth. An unequal distribution of income and wealth, a lack of social comity between the working and the middle classes, a viciousness in politics going back to General Galtieri, the Dirty War, Juan Peron and his enemies, and even before means that claims on national product and demands that the government enforce those claims are inevitably going to mount up to more than 100% of what is available. The basic political fight over how national product is to be distributed among social classes is unresolved, and any political movement that makes only promises it can keep is doomed to rapid defeat.
  • Hence, fourth, in Argentina government deficits--large government deficits--are a law of nature, a fact of life. Moreover, everyone knows that large government deficits are a fact of life and a law of nature. Hence interest rates on Argentine debt will be low and reasonable only rarely and for short periods.
  • Fifth, points one through four mean that the neoliberal reform program in Argentina in the 1990s had exactly the same chance of avoiding disaster as one would expect if one gave a modern gene-splicing biochemistry lab to Doctor Frankenstein. The fundamental unresolved conflicts of Argentine politics mean that debt is going to mount. The fact that everyone knows that Argentine politics generates chronic deficits means that the interest payments due on that debt are likely to explode. Exploding interest payments mean that the dynamics of Argentine debt are unstable, and thus that the hard-currency exchange-rate peg cannot last. And free access to international capital markets, to dollar-denominated bank accounts, and so on, and so forth, means that when the crisis caused by the contradiction between the hard currency peg and the fundamentals of Argentine politics comes, it will be five times as bad: at least with tight controls on foreign exchange and a primitive, underdeveloped banking system, the amount of damage a government default can do to normal economic life is limited.

From this perspective, pushing neoliberal, market-opening reforms on Argentina looks as wise as giving a supply of gasoline to a bunch of pyromaniacs, on the grounds that gasoline is a very useful and powerful fuel.

My intellectual problem right now is that this argument I have just constructed--which was supposed to be a strawman that I, a card-carrying neoliberal, could easily demolish--feels too convincing.



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 Tue Jul 3rd, 2012 at 04:46:50 AM EST
[ Parent ]
  • Third, Argentina is a country in which the government constantly promises the people more than it can deliver. It promises rich oligarchs that it will not collect too much in taxes. It promises workers and consumers a generous social insurance state. It promises rapid economic development, large expenditures on infrastructure, jobs for politically well-connected boys, and so forth. An unequal distribution of income and wealth, a lack of social comity between the working and the middle classes, a viciousness in politics going back to General Galtieri, the Dirty War, Juan Peron and his enemies, and even before means that claims on national product and demands that the government enforce those claims are inevitably going to mount up to more than 100% of what is available. The basic political fight over how national product is to be distributed among social classes is unresolved, and any political movement that makes only promises it can keep is doomed to rapid defeat.points one and two always and everywhere empower oligarchs to seek a greater share of the national product than is politically and economically sustainable.

  • Hence, fourth, in Argentina government deficits--large government deficits--are a law of nature, a fact of life. Moreover, everyone knows that large government deficits are a fact of life and a law of nature. Hence interest rates on Argentine debt will be low and reasonable only rarely and for short periods.when, in the absence of a specie peg, the central bank does its job and dictates low and reasonable interest rates.

  • Fifth, points one through four mean that the neoliberal reform program in Argentina in the 1990s hadhas exactly the same chance of avoiding disaster as one would expect if one gave a modern gene-splicing biochemistry lab to Doctor Frankenstein. The fundamental unresolved conflicts of Argentine politics mean that debt is going to mount. The fact that everyone knows that Argentine politics generates chronic deficits means that the interest payments due on that debt are likely to explode. Exploding interest payments mean that the dynamics of Argentine debt are unstable, and thus that the hard-currency exchange-rate peg cannot last. And free access to international capital markets, to dollar-denominated bank accounts, and so on, and so forth, means that when the crisis caused by the contradiction between the hard currency peg and the fundamentals of Argentine politicselementary national accounting comes, it will be five times as bad: at least with tight controls on foreign exchange and a primitive, underdeveloped banking system, the amount of damage a government default can do to normal economic life is limited.

There, fixed it for you.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 3rd, 2012 at 05:23:27 AM EST
[ Parent ]
Brad deLong: MARK-MY-BELIEFS-TO-MARKET TIME: I SHOULD MAKE THIS AN ANNUAL OBSERVANCE (December 10, 2011)
Things that I think I have gotten really, really wrong so far in my career:

  • My belief that central banks had the tools, the skill, and the political will to stabilize economies at high levels of employment and low levels of inflation, and thus that fiscal policy and financial institutions policy no longer had any compelling stabilization policy role to play.

  • My belief that large, leveraged financial institutions had sufficient caution and sufficient control over their derivatives books that their derivative positions did not pose major systemic risk.

  • My belief that the principal threat to the world economy would come from the fact that in a crisis the shaky long-term finances of the U.S. social insurance state might provoke a collapse of confidence in the long-term value of the dollar.

  • My belief that closer economic integration between Mexico and the U.S. would be, while a rough ride for Mexico, a clear net plus for Mexico.

  • My belief that economists as a group understood as much about the causes of recessions and depressions as John Stuart Mill understood in 1829: that a downturn is a shortfall of planned spending at full employment below income caused by an excess demand for financial assets, and it is cured by either (a) having the government do the spending-in-excess-of-income that the private sector will not, or (b) having the government flood the zone with financial assets so that there is no longer an economy-wide excess demand for them.

  • My belief that pushing neoliberal, market-opening reforms on countries like Argentina in the 1990s was not a policy as wise as giving a supply of gasoline to a bunch of pyromaniacs.

  • My belief that the rapid growth of the Japanese economy in the 1970s and 1980s would continue into the 1990s and 2000s.

  • My belief that the 6% unemployment NAIRU of the U.S. in the 1970s and 1980s would continue into the 1990s and 2000s.

  • My belief around 1990 that the rapid privatization of Russian industry was the best chance to set up a favorable political dynamic that would lead to rapid economic recovery and political development in Russia.

  • My belief that, automatic stabilizers aside, fiscal policy no longer had a legitimate countercyclical role to play because the Federal Reserve and other central banks were mighty and powerful and could and would act appropriately inside fiscal authorities' decision loops.

  • My belief that no advanced country government with as frayed a safety net as America would tolerate even near-double digit unemployment for years.

Any others to suggest?


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 Tue Jul 3rd, 2012 at 02:37:47 PM EST
[ Parent ]
On the topic of Brad deLong's contentious column, the perils of prophecy, there is this nice post on the Naked Keynesianism blog: Sensible theory and economic predictions (July 13, 2011)
Economists are well known for having predicted nine of the last five recessions.  Or so goes the joke.  The fact that economists cannot predict and that forecasters are always wrong is not new, and I would suggest less important than often understood.  The problem is not so much that economists cannot predict particular events, but that the dominant theory is an ineffective tool for understanding real economies. And that is true for both the New Classical/Real business Cycle types that believe that markets are efficient immediately, or the imperfectionist New Keynesian, that think that they are too, but only in the long run (this view should lead you to believe that the main solution is to reduce imperfections). As a result, the mainstream always provides unreasonable predictions.

...

Not only deregulation was something good for Europe, but also giving up the currency would allow for lower interest rates and higher growth.  For him [Rudiger Dornbusch, in 1990]:

"Having a national money is expensive ... It offers little flexibility and year after year an interest cost is paid for what is the illusion of independence. ... Monetary sovereignty nowadays means only the right to bad money.  How can the periphery get out of the self-inflicted historical curse of a central bank and a national money. Do what Argentina did ... Give up the national money and create a hard link to a world class currency."
It goes without saying that this does not sound like good advice these days.  And before you say that hindsight is always 20-20, I want to remind you that yes some people that were in favor of the European project actually saw the limitations of the euro.  The economists that did not believe in the efficiency of markets (at least not for allocating resources, including labor) argued that giving up a tool (like the exchange rate) would imply the need for other tools.  Here is Wynne Godley in 1992, about the project of a common currency for Europe:
"It needs to be emphasised at the start that the establishment of a single currency in the EC would indeed bring to an end the sovereignty of its component nations and their power to take independent action on major issues. ... the power to issue its own money, to make drafts on its own central bank, is the main thing which defines national independence. If a country gives up or loses this power, it acquires the status of a local authority or colony. Local authorities and regions obviously cannot devalue. But they also lose the power to finance deficits through money creation while other methods of raising finance are subject to central regulation. Nor can they change interest rates. As local authorities possess none of the instruments of macro-economic policy, their political choice is confined to relatively minor matters of emphasis - a bit more education here, a bit less infrastructure there."


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 Tue Jul 3rd, 2012 at 02:59:05 PM EST
Brad deLong: OLIVIER BLANCHARD AND HIS TEAM TALK SENSE: ECONOMISTS SQUARELY IN THE BAGEHOT-MINSKY-KINDLEBERGER TRADITION WATCH
Mike Konczal:
The IMF Goes All-Out on Balance-Sheet Recessions, Providing Sanity on Economic Policy: [T]he recent April 2012 World Economic Report by the IMF.... The relevant part is Chapter 3, "Dealing with Household Debt".... You should read it all, but I want to point out a few high-level arguments they make:

...

  • (1) The run-up in household debt and leverage explains the economic collapse across countries...

  • (2) Financial crises are not a driver of prolongued recessions. If anything they are a symptom.

  • (3) HAMP is a failed program.

  • (4) Foreclosures are a problem.

...

Support for household debt restructuring: Finally, the government may choose to tackle the problem of household debt directly by setting up frameworks for voluntary out-of-court household debt restructuring--including write-downs--or by initiating government-sponsored debt restructuring programs....

Huh. That's actually an amazing set of polices. When can we start? And can we get the IMF advising US economic policy if this is what they are suggesting?



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 Tue Jul 3rd, 2012 at 03:41:29 PM EST
Silly DeLong. The IMF only gives sane advice to debtors who owe money to people who do not own shares in US State Department Inc.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jul 3rd, 2012 at 06:22:29 PM EST
[ Parent ]
Marginal revolution: Reminiscences of Miles Kimball, and others (July 10, 2012)
Brad DeLong was a few years older.  He was thought of as the slightly right-wing guy (compared to his peers he was) who read a lot of unusual history of economic thought, including Adam Ferguson.  He and his girlfriend (now wife) were inseparable and always affectionate.


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 Tue Jul 10th, 2012 at 08:52:18 AM EST
My question is this: how advanced are the economic mathematical models, really? For example, in engineering you have various situations where you can get an oscillation. One of the claims of the economists is that since the Great Depression, they have been able to keep business cycles under control.

So is there an analysis that shows the poles and nodes of the equations, so that you can figure out which parameters to adjust to reduce or eliminate the oscillation?

Also, economic data is noisy and complicated, but is it really all that much more noisy and complicated than the data you have for physics or chemistry?

The level of political argumentation in economics is scary given the social impact associated with the policies it drives...

by asdf on Thu Jul 12th, 2012 at 03:56:29 PM EST
[ Parent ]
My question is this: how advanced are the economic mathematical models, really?

Comparing it to phlogiston theory would be an insult to the serious chemists who worked in the phlogiston paradigm.

For example, in engineering you have various situations where you can get an oscillation. One of the claims of the economists is that since the Great Depression, they have been able to keep business cycles under control.

So is there an analysis that shows the poles and nodes of the equations, so that you can figure out which parameters to adjust to reduce or eliminate the oscillation?


No. Those economists who believe that the business cycle has been eliminated don't do dynamic models, and those who do dynamic models laugh (so they don't cry) when they hear the claim that the business cycle has been eliminated.

Given proper dynamic models of the economy, we probably could eliminate the business cycle, since even dynamic toy models give serviceable heuristics for limiting credit cycles. But in modeling terms, most economists haven't joined the 19th century yet.

Also, economic data is noisy and complicated, but is it really all that much more noisy and complicated than the data you have for physics or chemistry?

Yes. The repeatability of physics and chemistry experiments makes the data much more tractable. The better comparison is to medicine, where you also in many cases cannot ethically perform prospective experiments. (Not that this stops the ECBuBa or the IMF from doing precisely that...)

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 12th, 2012 at 04:58:40 PM EST
[ Parent ]
Also, economic data is noisy and complicated, but is it really all that much more noisy and complicated than the data you have for physics or chemistry?

Hardly so. You have wages, profits, rents and money. You have computer records of all kinds of transactions for hundreds of years. It shouldn't be too hard to make resonably accurate model that you can also easily test.

Already Adam Smith said that increase in money supply increases production. But first you have to know that money supply is increased. No harm is done also if one knows that price and value are too different things.

by kjr63 on Fri Jul 13th, 2012 at 06:05:24 AM EST
[ Parent ]
I think we should all go and read Godley and Lavoie.

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 06:07:08 AM EST
[ Parent ]
Could we have an introduktion perhaps?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Jul 13th, 2012 at 05:20:39 PM EST
[ Parent ]
Bezemer: 'No one saw this coming' - or did they? (Vox, 30 September 2009)
The most detailed of these models, which has also been used to construct public projections and analyses, are "Flow of Funds" models of the US developed by Wynne Godley and associates at the Levy Economics Institute. These may serve as pars pro toto for the class of "Flow of Funds" models of real-financial interactions (e.g. also Werner, 1997; Graziani, 2003; Hudson, 2006; Keen, 2009). A simplified (closed-economy) representation in Godley (1999) consists of stocks and flows of a number of asset classes between four sectors (explicitly separating out the financial sector), with their properties and interrelations represented in over 60 equations (Table 1; see Godley 1999 for all symbols).

In "Flow of Funds" models, liquidity generated in the financial sector flows to firms, households and the government as they borrow. This may facilitate fixed-capital investment and production, but it may also feed asset price inflation, consumption, and debt growth. Liquidity returns to the financial sector as financial investments or in payment of debt service and financial fees. Key features of "Flow of Funds" models are thus bank credit flows, since "evolving finance in the form of bank loans is required if production is to be financed ..." (Godley, 1999:405). Also, there are explicit payment flows such as interest, "not quite the same as in the national accounts, where it is standard practice... to ignore interest payments, although they are an inevitable cost given that production takes time" (Godley, 1999:405).

The model is solved by imposing macro accounting identities and adaptive expectations rather than individual optimisation. There is a steady state but not equilibrium. One advantage is that growth paths can be identified as unsustainable given the existing "bedrock" accounting relations. This allowed Godley and Wray in 2000 to conclude that "Goldilocks was doomed" - with a government surplus and current account deficit, US economic growth had to be predicated on ongoing and unsustainably high rates of private debt growth.

Basically, the economy is a network. At this level of abstraction it is a network of sectors, but similar models can be considered in which the nodes are individual economic agents (firms, households...). It is also possible to consider trade models adding one "external sector", or to consider several countries with their respective sectoral breakdowns. The edges are economic relations. Such a network can be represented as a directed graph can be represented in terms of matrices. Variables on the nodes are stocks, aggregated into balance sheets. Variables on the edges are cash flows, aggregated into cash flow statement.

The matrix above is a particular graph specification - there are others, obviously - where rows are edges and columns are nodes (there are three instances where the rows contain 3 nonzero entries: this means two different edges are being summarised by a single row). The row sums are zero because any cash flow is the same cash flow from and to some sectors. The column sums are zero by conservation of cash at each node (which is made possible by counting accumulation as a flow into/out of a "stock" - the bottom half of the table).

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 Sat Jul 14th, 2012 at 02:47:17 AM EST
[ Parent ]
kjr63:
No harm is done also if one knows that price and value are too different things.

beautiful typo, truer than even what you meant, methinks!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Jul 13th, 2012 at 07:37:56 AM EST
[ Parent ]


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