Sunday, March 11, 2012

Scott Fullwiler — MMT on horizontal banking

Scott tweets:

stf18: Apparently #MMT DOES integrate horizontal money! Just have to LOOK.

stf18: Minsky/LR Wray "Securitization" #MMT

stf18: LR Wray "Deficits, Liquidity & Schumpeterian Innovation" #MMT

stf18: LR Wray "Community Development Banking" #MMT

stf18: LR Wray "Community-Based Factoring" #MMT

stf18: LR Wray "What Should Banks Do?" #MMT

stf18: LR Wray "Finance, Saving, Deficits, Liquidity" #MMT

stf18: LR Wray "Money"

stf18: LR Wray "Money in Finance" #MMT

stf18: LR Wray "Integrating Credit, State, Endogenous Money Approaches" #MMT


STF said...

Thanks. Not to mention . . .

1. Randy's first book, "Money and Credit in Capitalist Economies.

2. Another of Randy's books: "Credit and State Theories of Money."

3. All of the research on financial instability and regulating the financial system is based on horizontal money.

4. All of the research on how central bank operations affect/don't affect the economy requires an understanding of horizontal money.

5. As with the saving discussion before, there's an entire PK literature that precedes MMT on horizontal/endogenous money and "the circuit" that we take as "given" and then build upon.

Dan Kervick said...

It's good that more people are finally beginning to explore the full body of thinking by MMT's leading thinkers.

Sad that the stimulus for this expanded awareness is the need to respond to misconceptions about MMT being spread throughout the blogosphere.

John Zelnicker said...

Thank you Scott and Tom for the bibliography. Those who think MMT hasn't integrated horizontal money simply haven't read much of the academic literature at all.

Economic Perspectives from Kansas City said...

Here's a full list of Levy publications by Wray.

Anonymous said...

It's a bad thing that MMT textbook is not out yet. that is the main reason why people start talking about MMT not being this and not considering that. It is hard for an outsider to pick all the pieces from internet. what confuses the would be MMTer even more is that some bloggers are wrong slightly.

Regular Joe six pack doesn't have the time to do his own research on the topic. The subject is complicated enough.

Bob Roddis said...

It is interesting to learn that MMT is truly based upon a few preposterous and unfounded pronouncements.

1. Of course, goods trade for goods. Gold and silver are goods and both can trade for pink underwear and/or butt welders. The claim that goods do not trade for goods or that goods do not buy goods is baseless and utterly false.

2. There is no “macro”. While the term “micro” applies to real live acting human beings who have a microscopic existence in the mind of the technocrat, that’s all there is. It’s like milk. Whether you have a carton of milk or a swimming pool full of milk, it’s just milk. Whether you have one exchange or a million, they’re still just exchanges by individual human beings and they do not transmogrify into “macro”.

3. The “state theory of money” has no humans nor human exchange in it. It is not based upon reality. Mises pointed this out 100 years ago.

I suppose that by repeatedly screaming “macro macro macro macro macro”, you can attempt to deflect attention from this self-evident and undeniable fact of existence.

4. It is easy to understand why you guys meticulously avoid any study of Austrian concepts and avoid even attempts at a slight familiarization with those concepts.

Ryan Harris said...

As we learn and grow more interested we dig deeper into the academic work that provides the foundation. The light books like 7dif whet the appetite. The volatile and impassioned debates allow us to be engaged and be wrong. It draws people in the first place. It is no fun for newbs to learn by reading academic papers alone.

Ryan Harris said...

My point was just that you have setup the various resources quite well from the outside looking in.

Tom Hickey said...

@ Bob

There are different approaches to economics based on different viewpoints. Austrian economics and Post Keynesianism (including MMT) are different view point from the mainstream approaches New Classicalism and New Keynesianism. If economics were physics, then economists would agree to the degree that physicists agree with each other.

But economics is not physics, nor are any of the social and behavior science, as well as psychology, none of which have universally agreed on paradigms that constitues doing "normal science" in Kuhn's sense. Based on this, some have even argued that these are not actually sciences at all, but philosophy with empirical and mathematical characteristics.

Tom Hickey said...

There are many levels of understanding. The lowest and more prevalent is that based on "commonsense" and conventional wisdom. The next step up the ladder is passing acquaintance, which popularized blogs and works like 7DIF provide. Then there is acquaintance with the actual discipline, through which those not educated in the discipline can acquire basic understanding. But actual expertise involves mastering the discipline, which very few have the time and ability to do.

Crosstalk among these levels is generally fairly simplistic, where it is not actually confused, for example, due to ambiguity of terms with experts using technical definitions and popular readers understanding in terms of ordinary language denotation and connotation.

The aim is to get the voting public up to speed in understanding policy options and their implications for society. Not an easy do, especially with a huge propaganda machine having been mounted to persuade to the contrary, to obscure and to distract from real issus and interests, and to marginalize and demonize all opposition. In-fighting in the opposition just plays into the opponents' hands, as does accepting in any way the opponents' framing.

Anonymous said...

"The claim that goods do not trade for goods or that goods do not buy goods is baseless and utterly false"

I thought that was called barter? I'm pretty certain no one (mmter or otherwise) has argued that barter does not exist. What is your point?

Tom Hickey said...

Now even barter clubs use barter club money to facilitate exchanges. Moreover, all barter is taxable in the US and so the nominal value of transactions has to be reported in the unit of account even though no financial assets was used as an medium of exchange. That is to say, a financial medium of exchange denominated in the state's unit of account is presumed for barter. And the IRS has made clear that it checks up on this in the US.

The Economic Maverick said...

I'm fairly new-ish student to all this, but I always thought that MMT was firmly in the same camp as "horizontal" and "Circuit" and "Endogenous money" folks. Perhaps as an outsider, I just put all of the above, along with MMT, into the same related PK bucket. Who is saying that it isn't?

Anonymous said...

There's nothing stopping people from buying things with bits of gold and silver, or whatever, so long as the seller is willing to accept them in payment. But in general people don't want to accept payment in gold or silver and people don't want to pay for things with gold and silver. A few people here and there do, but only a tiny minority. And as Tom says, even these transactions have to be accounted for in the official currency.

Anonymous said...

"There is no macro"

Just as in a human body there are no organs, no overall body, only atoms, molecules and cells. There is no point in trying to study the body as a whole, or the organs - as they don't exist. Only atoms, molecules and cells exist, and we can only understand human biology by studying them, and nothing but them.

Anonymous said...

"Whether you have a carton of milk or a swimming pool full of milk, it’s just milk"

Whether you have a glass of water or an ocean - it's all the same. You can understand everything you need to know about oceans just by studying a glass of water.

Kristjan said...

Regarding Bob's point about micro and macro: in my opinion for Austrians macro is just adding up micro. That is why you get people like Peter Schiff advocating higher interest rates because he thinks people will save more and this country needs savings. It's a fallacy of composition. Austrians admit that macro is adding up micro for them. When confronted, they start talking about saving coconuts. They might be nice people with good intentions but their economic theory is complete garbage.

STF said...


Yes, I would largely agree with you. We use the mostly the same "model" of the economy as, say, Lavoie/Seccareccia/Rochon, though we have different ways of presenting it.

That is, we've largely accepted the horizontalist framework (indeed, Randy's 1990 book was on endogenous money, though there are some technical differences with horizontalism, as endo money is a broader category) and they've largely accepted our analysis of state money (again, some differences on the edges and in presentation).

Anonymous said...

Scott, maybe you should post this over at It might help to fill a gap in their research. Perhaps you should also go through the 'About MMR' article on that site and debunk all of the incorrect and misleading statements made there about MMT, as well as their other odd ideas.

Bob Roddis said...

1. I'm pretty certain no one (mmter or otherwise) has argued that barter does not exist. What is your point?

From Mr. Wray:

WORKING PAPER NO. 647 | December 2010

This paper advances three fundamental propositions regarding money:

(1) As R. W. Clower (1965) famously put it, money buys goods and goods buy money, but goods do not buy goods.

2. Mr. Hickey wrote: Peter Cooper shows how this methodological analysis applies to macroeconomics from an MMT viewpoint in Thinking in a Macro Way.

"In considering the aggregate economy, macro reasoning takes precedence over micro reasoning. If a micro argument is inconsistent with known macro relationships, it is the micro argument that must be rejected."

Oh really? Except there is no "macro". Human exchange already involves more than more person and more complicated relationships involve more people. Neither the people nor the transactions transmogrify into something else. However, more complicated and long term transactions become more distorted than do simple transactions by fiat money creation because economic calculation by individual persons (the only kind we now have) is impaired by fiat money.

If you think there is "macro", why not PROVE IT?

Kristjan said...

To Bob Roddis

Don't hesitate if something needs clarification!

Tom Hickey said...

Bob: "If you think there is "macro", why not PROVE IT?"

I don't even know where to begin with this. Macroeconomics is done by New Classical economists, New Keynesians, and Post Keynesians. That's just about everyone but Austrians. And if they have degrees in economics from recognized universities for sure they studied macro, too. Asking to prove macro is like asking to prove that economists do economics. Macro is an integral aspect of contemporary economics, and the view that micro is scaled up micro is a macro approach. To deny macro is to exclude oneself from universe of discourse.

STF said...

Not to mention that even traditional reductionist fields in the natural sciences have been developing and integrating systems or "macro" viewpoints for the past few decades. They recognize there's something to looking at a system that you can't understand from the parts alone (not that the latter isn't important).

Greg said...

So Mr Roddis, I suppose you dont look at the Dow or even the market price for gold then? Just decide how much you want for your piece of gold from your neighbor or for your share of ATT. All those conglomerations of transactions which result in large market prices are type of macro.

Your sounding like a fool claiming that nothing can be gleaned from a macro view. Not unusual for an Austrian unfortunately.

Anonymous said...

"money buys goods and goods buy money, but goods do not buy goods."

I think the point he's making is that "money" is not a good or commodity, it's an abstract system of credit and debit. That's not the same as saying that it's impossible for one person to swap a commodity for someone else's commodity. It might be worth reading beyond the first couple of lines of the paper if you want to understand his argument. Even if you choose to reject it, when was the last time you engaged in 'barter'? Whenever I go shopping I'm asked to pay with money, not with goods (the shopkeepers aren't particularly interested in the physical quality of the coins or paper I give them).

Bob Roddis said...

It might be worth reading beyond the first couple of lines of the paper if you want to understand his argument.
I’ve read numerous papers by Mr. Wray. I’ve read papers by Mr. Fullwiler. I’ve read Mosler’s little book. I’ve read papers by Stephanie Kelton. I even bought Lerner’s “The Economics of Control”.

I read “Lord Keynes’” blog. I’ve read this blog almost every day for a year.

And I can say without hesitation that no MMTer has the slightest familiarity with even basic Austrian School concepts.

Bob Roddis said...

Macro is an integral aspect of contemporary economics, and the view that micro is scaled up micro is a macro approach. To deny macro is to exclude oneself from universe of discourse.

In biology, prior to the cell theory and the germ theory, people wouldn’t have know what someone discussing cells and germs was talking about. So what? There is no macro. As always, you guys don’t even know where to start to prove there is macro because you cannot. The fact that all the other schools think there is macro (while we for decades have described those schools as fatally flawed) is not an argument.

The Austrians predated the Keynesians. There’s a reason Keynes and the Keynesians ignored and continue to ignore the Austrians.

I suppose you don’t look at the Dow or even the market price for gold then?

Come on. Prices of goods and services are not “macro”. Your theory is that the micro is transmogrified into something new and completely different (to coin a phrase). That’s nonsense.
For the record, I reject that entire “paradox of thrift”. If someone saves instead of buying a death burger, those resources are freed to invest in capital goods which probably will raise the standard of living. Further, the market does not lead to mass structural unemployment. There is no need for an injection of government spending or fiat money to fix a problem that does not exist. All that spending and fiat money can do is distort the pricing process (which is not the same as macro) and which is the cause of the problem, not the cure. Heck, there is no “pricing process” in Keynesian thought.

I suppose if everyone wants to spend all their money, lay around, eat chips, get fat and not learn how to read, society will probably be poorer than if everyone is thrifty, hard working and smart. But that is not “macro” and that conclusion can be derived entirely from observing individual human beings (the kind we now have and will probably be stuck with for the near future).

Kristjan said...

Bob, if you read all those papers and blogs then how can you question if there is macro and It is not just adding up micro?

When you read Randy's paper, do you still think macro is no different than adding up micro?

That is the main thing what is really wrong with Austrian economics IMO.

Kristjan said...

Bob wrote:"For the record, I reject that entire “paradox of thrift”. If someone saves instead of buying a death burger, those resources are freed to invest in capital goods which probably will raise the standard of living."

How about those resorces freed right now? Millions of people unemployed and firms not working at full capacity. You mix up real with nominal.

Jonf said...

Bob, why do I have the feeling you never really read all those things?

Anonymous said...

Bob, does anyone actually read your ridiculous blog? Does it get lonely in your little one-man rothbardville?

Leverage said...

Childes think like Bob, when you grow up then you realize that the sum of the parts is not the same as the whole. It's called fallacy of composition.

Piaget identified maturity in logical capabilities as a consistent evolution from childhood. I have come to realize a lot of average internet austrians lack basic logic capabilities to present their ideas in a consistent and coherent logical way then they invent 'praexology' and other epistemological nonsense to justify it.

But just like not evey mmt'er knows the full literature, not every Austrians know their literature, any decent (non-religious) modern Austrian and even the old ones (Hayek was one of them who started to reject the whole issue) will reject the whole notion of praexology. They will also will concur that macro is not the same as micro etc. ie. Lachmann.

In short: know your damn school better, it doe snot start with and ends with Mises, that's just religion.

Anonymous said...

It's not worth trying to reason with this guy (Roddis). Read his blog and he comes across as someone who's about to bomb his local federal government building.

Kristjan said...

The Austrians never tend to learn. Bob is demonstrating that not only he doesn't understand what others have to say about their worldview, he ignores the obvious facts when convinient. OK, ecomony starts to save and all the paricipants save at the same time. Sales don't drive economy and Bob is investing when demand is depressive. Of course there are rational expectations and government deficit spending doesn't add AD. You can lower taxes to zero and It makes no difference. If you forget this argument then government deficit spending just increases the prices. Round and round you go telling people how Mises was right and rejecting all the arguments. If someone shows your fallacies then all you have to do is create models with islands and Robinson Crusoes and non monetary economies. You can use expressions like funny money, taxation is theft etc. You will always have followers but not around here.

we might need a buffer stock of unemployed public defenders who can't understand simple text they are reading.

Bob Roddis said...


Like all libertarians, I reject the initiation of force. It is forbidden.

The economic theories of all interventionist schools are BASED upon the initiation and use of force. Look in the mirror.

Further, calling me names is not going to prove the "state theory of money" or that there really is an alternative universe of "macro".

PeterP said...

"I reject the initiation of force. It is forbidden."

The present system uses state money backed by force. Are you saying that the Chartalist (MMT) description is correct but you don't like the system? Fair enough. Present an alternative then.

Until it is introduced though, the system is what it is, and we need to describe it correctly.

Kristjan said...

"Rothbardville is my name for private neighborhoods where like minded people could live together. Liberals with liberals. Conservatives with conservatives. Liberals with conservatives. Whatever. Ban dopers. Ban immoral people. Require immoral people. Ban guns. Require guns. Ban gays"

"Like all libertarians, I reject the initiation of force. It is forbidden."


PeterP said...


One more thing: the strict gold standard also has to be backed by force, otherwise people will do what they have been doing for the past 4000 years: they will start writing IOUs which will circulate as money, its volume uncontrolled by anyone. To stop that you need violence. So gold standard is as interventionist as the state money system, actually more (the present system doesn't put a limit on credit money).

Bob Roddis said...


I'm telling people to reject violence. If crazy Christians hate gays so much, then avoid them. If crazy Christian hate Muslims, avoid them, don't slaughter them Obama-style with drone missiles. If "progressives" can't stand Catholics who hate birth control, AVOID THEM. Move away if it's such a big friggin' deal.

Under the present system, they use the political system to sic the cops on each other all of the time. That's what the current presidential election is about. Oh, and see present day Iraq.

At least 90 Iraqi teenagers with "emo" appearances have been stoned to death by religious extremists in Baghdad in the past month after an inflammatory interior ministry statement dubbed it "devil worshiping", activists said.

The problem is physical safety, war, murder and genocide, not "lack of aggregate demand".

The Economic Maverick said...

STF - thanks for responding. Could we bring the discussion back to the topic of the original post, endogenous money and horizontal banking? Here is my new understanding of it, per my reading from many in this community, including material you tweeted earlier. I'm trying to learn the operational/technical details.

Kristjan said...

That's very nice Bob. I hope you understand that we still need state. Political system might be doing something wrong and that doesn't mean we have to get rid of the political system. We have to change It. That's what MMT is all about-changing the political economy. Austrians right now don't understand that the state is telling who has what in our society. MMT is not about managing the economy more than It is managed already. It is about telling the driver what steering wheel does, what gas pedal does etc. This is the hardest part for Austrians to understand. John Carney wrote a very good article about this.

Greg said...


Conglomerating multiple transactions into a stock market or commodity market IS a macro operation. Anything that involves more than a few people is MACRO.

Simply saying there is no such thing as macro is insufficient. We have decided to look at what taxation, spending and other actions have on collective behavior. We have called this macro. If you want to argue that nothing useful can come out of looking at this collective action....... go ahead, but you have to show that we've done nothing useful with this activity.

Letsgetitdone said...

Bob, I'm not sure I understand you. Are you saying that there is no political-economic system at the macro level in nations whose behavior includes structural and holistic properties not explainable from the attributes of political-economic agents at the micro-level of that system?

If so, I think you're denying the whole thrust of contemporary complexity and complex adaptive systems theory along with findings dominant in all the sciences except perhaps economics where the view still prevails among some that the macro level is explainable solely in terms of the attributes of economic agents.

The thrust of work in these other sciences, in philosophy, in biology, and even in some parts of physics no longer supports the reductionism you seem to be defending when you say there is no Macro, and imply that only the individuals level is real. So, I think you need to get over methodological individualism and move on. Maybe reading Harold Moskowitz's The Theory Of Everything will help you do that. Or maybe Popper and Eccles The Self and Its Brain can help you. Or John Holland's Emergence. Or Alicia Juarrero's Dynamics in Action. There are nay number of books that can do this for you. But I'm afraid Mises, and Hayek are not among them.

Tom Hickey said...

Economic Maverick

Good post overall. You have "fractal" instead of "fractional bank reserves" in the intro just before the numbered points.

# 3 is incomplete. Banks don't need to get reserves for intrabank exchanges. If they already have sufficient reserves from deposits that involve reserve transfer, they don't need to go the interbank market to borrow reserves either. The Fed also stands by as the lender of last resort to provide banks that are short at the end a period, for a penalty rate called the discount rate.

4a. the loan is a bank asset because it is an account receivable to the bank. Interest is bank income on the loan.

4b. The deposit is booked as a bank liability because it is the amount that the bank has promised the customer in the loan. It is an account payable.

4c. add to the end "according to a regulatory formula."

5a. I would not use "money supply" in that this term is used differently by many to denote the amount of reserves. Better to say something like the amount of bank created credit money, which increases spending power in the economy along with government created money injected into the economy by deficits. Bank credit created money is called horizontal or endogenous money because there is both an asset and a liability created along with it. Government created money is called vertical or exogenous since an assets is created in non-government but no corresponding liability in non-government.

5e "Later, they go get the required funding, which the loan itself created. " I would say instead something like, "Later they go get the reserves needed for settlement in the interbank system and to meet reserve requirements. The cb stands by to ensure that the amount of reserves needed to clear accounts in the interbank settlement system is sufficient to ensure the liquidity of the interbank system by acting as the lender of last resort."

I would modify "But under the current balance sheet recession, private sector deleveraging limits credit demand, thus precluding further credit expansion and money supply expansion," to. "But there is no causal transmission from excess reserves to lending, which is dependent on the demand for loans by creditworthy borrowers at an interest rate that is profitable to the bank. When there is a lack of demand by creditworthy customers, banks do not make loans, thus creating deposits, just because reserves are available. Under the current balance sheet recession, private sector deleveraging limits credit demand, thus precluding further credit expansion and resulting increase in spending power."

I would take out the "few questions" section and do a separate post on it.

Good work. You are getting it.

Tom Hickey said...

Ooops, "fractal banking system" should be "fractional reserve banking system" instead of "fractional bank reserves' as I wrote above.

"Fractal banking system" is OK, but "fractional reserve system" is more common and more people will understand it, IMHO.

Senexx said...

I've been absent so I missed a lot of this but a question for Bob Roddis?

Do you deny the existence of the "fallacy of composition"?

The Economic Maverick said...

@Tom H - Thanks a bunch!
Will start to update

Anonymous said...

Don't bother with Bob, he's a Mises fanatic who has the ideology so deeply burnt into his mind that nothing else can even make an impression. All he feels when he reads anything that contradicts his ideology is hatred. Logical arguments just bounce off his brain. Look at his farcical blog. It's not worth trying to reason with people like that.

Bob Roddis said...

Do you deny the existence of the "fallacy of composition"?

Of course I deny the ones claimed by Mr. Wray, “the paradox and thrift” and the claimed non-equivalence of household vs. government debt. The only difference between household and government debt is that the government can cheat on paying back the debt and/or can steal and kill to obtain resources with which to pay back the debt. The very same rules of existence apply.

Keynesians engage in a form of the fallacy of composition by assuming that government overseers can have superior information than that supplied by free market prices. Hayek called it “The Fatal Conceit”. Another form of Keynesian self-delusion is the belief that elections are superior to the market process. Elections are nothing more than two wolves and a kitten voting on what’s for dinner.

Tom Hickey said...

Bob, you might consider investigating PayPal founder Peter Thiel's project to create Libertarian floating island. It is highly doubtful that a country like the US will ever adopt a LIbertarian constitution, and I doubt that any other developed country will either. There are opportunities in the undeveloped world, but I doubt you would like them unless you plan to marry into on the established families or become a war lord.

Peter Thiel's alternative sounds like the most promising, although if he funds it, I suspect he will have more say than others in how it is managed. If that is not to your liking, maybe you could come up with some innovation yourself and make a billion or two and do it according to your principles.

Letsgetitdone said...

Anonymous, I know he's what one calls a "troll," and that one should not feed the "troll." However, some in Austrian Economics, in particular Hayek believed in emergence, did Hayek's friend Karl Popper, and I think there's a funamental contradiction between methodological individualism, the basis for the claim that there is not macro, and the notion of emergence.

In my view, political systems with their Governmental institutions have emerged from social interaction among human beings. Formal Governments may seem to be different because sometimes those who run them may seek to impose institutional arrangements that are inconsistent with the evolved emergent patterns of society. However, this is a separate issue from the issue of whether the macro-level political economy imposes real constraints and causal influences on individual interacting with the higher level macro system. As soon as one recognizes that this kind of influence is fact, the possibility of a science dealing with the macro level becomes very real.

Once we recognize this possibility, we have to start asking questions about macro statics and macro dynamics, the tendencies of the macro system over time, and how these tendencies may be changed for good or ill by human action. Te conservative position is that human intervention at the macro level should be minimized because our knowledge cannot be as good as market signals in telling us how to act upon that system. That is, our knowledge can't be as good as the market's.

But the progressive position is that we can affect the macro system in a beneficial way, if we implement policies that support tendencies toward free self-organization by individuals in shaping the future. In addition, modern social dynamics have shown time again that markets are unstable because participants in them often have an interest in subverting them to undermine the level playing fields required for the market system. So, the longer term tendencies of unconstrained capitalism are toward oligarchy plutocracy, lemon socialism, kleptocracy, and eventually fascism. And further, our knowledge of social and political dynamics may well be good enough to stop this kind of evolution and to use productive forces to enhance democracy, open society, and real, rather than just formal, individual liberty.

Anonymous said...

"If someone saves instead of buying a death burger, those resources are freed to invest in capital goods which probably will raise the standard of living."

Bob Roddis, like his "austrian" chums, doesn't understand how the monetary system works.

“This model (loanable funds market) is simply inapplicable to our current monetary system in which bank loans are created “out of thin air” without the requirement of prior reserve balances or deposits to “fund” the loan’s creation. Completely contrary to the loanable funds model, in fact, the vast majority of bank liabilities have been created by banks simply growing their balance sheets through loans and asset purchases.”

Calgacus said...

I have some sympathy for Bob here.

"There is no “macro”.

As Kenneth Boulding noted, macroeconomics is just what used to be called "the theory of money". Whenever there is money, there is macro & vice versa. Money is an inherently macroeconomic concept.

The “state theory of money” has no humans nor human exchange in it. It is not based upon reality. Mises pointed this out 100 years ago.

As I've said before to Bob, Mises simply did not understand what Knapp was saying. The credit/state theory emphatically does have humans & human exchange in it. In fact, more so than Menger Mises etc commodity theory of money. Which amounts to saying there is no such thing as money, = via Boulding, no such thing as macro.

There really isn't any such thing as a fallacy of composition. If aggregating things gets things wrong, then there was something wrong in the beginning. In the dog/bone example - every dog focuses on getting his own bone, and reasons, if I did, why can't the other dogs, every dog? But he ignores that his bone-getting involves subtracting from the finite supply.

And it's true that there isn't any ultimate, fundamental difference between household & government debt. Except the obvious one that makes all the difference. Who owes whom.

Bob makes a fundamental mistake in using words like "superior" abstractly, uncritically. Economics just describes what is, doesn't moralize in this way. And if you do look at things descriptively, you will discover that for the basically universally held notions of superiority (more wealth for everyone): evil Keynesian MMT deficit spending, guaranteed government jobs, are usually necessary.

Should be about as controversial as the similar proposition that if you drive a car with an oil leak, you should either fix the leak, or add oil. And targetting a little bit of oil after opening the cap usually works better than indiscriminately dumping much more oil all over the engine and hoping some gets into the working parts.

Letsgetitdone said...

Calgacus, I usually entirely agree with what you say, but aggregation, using arithmetic operations on the attributes of individuals, to derive the properties of wholes works only with analytical properties of higher level systems, not with structural, or global properties of those systems. The structural properties require defining relational attributes among individual or other lower-level agents. The global properties, are emergent -- not projectible at all from the attributes of individuals. That such properties exist is very hard to deny. See my discussion here: on pdf pp.92-98. See also: for a compelling philosophical discussion. In short, I think methodological individualism, the basis for Bob's claim that there is no macro is very difficult to maintain today. Even Popper a vigorous defender of MI in his younger days in the 1930s and 40s, abandoned MI fully in his book with Eccles, The Self and Its Brain in 1977.

Tom Hickey said...

Very good, Joe, that is why I call it "methodological holism." Daniel Little uses "methodological localism" for a similar concept.

Where individualist reductionism goes wrong is in not realizing that an organic whole as a system is not the sum of its part as is an aggregate. Rather, a whole as a system is not the sum of its parts but is defined as elements and groups and their relationships, as well as the relationship of the whole with other wholes in a larger network. This is te basis of systems analysis analytically, organicity in the life sciences, and institutionalism socially and culturally.

All reductionism is simplistic as complexity increases, regardless the field. This doesn't violate the basic claim about the elements being the foundation. It just says that in many cases relationship is more significant for the analysis than element. While individuals remain the some ontologically, their behavior is affected by higher level relationships in a way that is not predictable by using the elements alone. This is no way involves methodological collectivism in which non-element are taken to have ontological substance in the same way as the elements. Individuals and society are both organic wholes rather than arithmetic or mechanical aggregates.

But individuals are analyzable into more basic elements like organs, cells, molecules and atoms, but this doesn't affect the substantial status of the individual as person since is a person is not the body.Similarly, a society does not become a person by being a system composed of persons as elements.