Yesterday, 100,000 rioters clashed with police in Belgium over government austerity measures that will raise the pension age and reduce social services. These measures are, it was explained, “essential to keep the budget deficit within European Union constraints” (Belgian protesters clash with police over pensions and pay). This is utter nonsense and is yet another example of the confusion between money and wealth that is contributing to economic stagnation throughout the globe.
What we are witnessing is economic policy based on the fallacy of composition. The latter results when one assumes that what is true at the individual level translates to the whole.…Explaining Keynes without mentioning him.
Forbes | Pragmatic Economics
Belgian Riots And Confusing Money With Wealth
John T. Harvey | Professor of Economics, Texas Christian University
14 comments:
This is not true if by "money" we mean mass measures of precious metals....
Under metals, if we add to the nations stock of precious metals (new strike) then we are adding wealth.
I think what John means here by "money" is state currency. ..
Metal is never money. Metal is merely a tangible asset - like a house or a can of beans.
Neil the word "money" is a metonym which is a figure of speech. ..
Its like "Buckingham Palace".... could mean the Queen or Prince Charles or ? depending on the context ....
Poor choice of words to use metonyms in science. .. you have to be more specific in your assignment of terminology usually.
Hence all the confusion about it .. in the economics field...
Rsp
Neil its like saying Prince Charles isn't part of Buckingham Palace only Queen Elizabeth is.... rsp
Humpty Dumpty words are legion in all things - particularly economics which is more politics and marketing than science.
So you just use the Capitalised Form from law, which infers that it is a defined term.
Defined somewhere...
money, like saving and inflation is now in the hands of the marketeers. The impreciseness is used to influence and control.
Neil they are not that smart...
In fact here is John: "One wonders whether or not those imposing these policies are simply foolish or have an ulterior motive. "
they are manifestly foolish..
and we are not helping them get out of it by using sloppy terminology...
Maybe these academics can imagine they are in a world where they cannot flunk somebody... and they have to work so hard that they can get even the most stupid student up to A level outcomes... not easy but doable imo... we have to up our game...
rsp,
And here is another thing:
"Wealth at the macro level is a function of resources and productive capacity."
By increasing the retirement age in Belgium, they are increasing their 'productive capacity' so therefore they are increasing the wealth of Belgium...
The "US of E" is not going to work if every "state" has a different retirement age... in the US, you cant get Social Security in California at 55 while in New York you have to wait until 65... that will not work...
rsp,
Neil we shouldnt be using Humpty Dumpty words, in science/operations getting the terminology on the record is Job #1...
http://en.wikipedia.org/wiki/Terminology
Terms are important... Its a whole field unto itself... metonyms/synonyms should be avoided imo...
rsp,
"The "US of E" is not going to work if every "state" has a different retirement age... in the US, you cant get Social Security in California at 55 while in New York you have to wait until 65... that will not work..."
that's a good point, but there is a deeper problem:
Who the hell are the morons in Brussels -I mean the EU 'authorities' not the national- Frankfurt or Berlin to tell others when you should retire. No one gave them authority, is disgusting.
On the other side we have record youth unemployment in Europe, yet we want the old people to retire later. All this is because we think we are out of money and we won't be able to fund pensions.
For certain tasks/jobs a 65y old man would be better than someone in his 25-30's, but this is not usually the case. So we would be better having someone young getting a job and actually spending a money, it would be more productive and would add more demand to the economy. Instead we have an old man earning an income that he won't even spend (and have the young on the hook of the old man, as a burden, otherwise he would be starving), not being as productive and just 'dying' to retire ASAP to start spending his retirement income.
All this because "out of money" paradigm. Completely stupid!
I,
Any of us could explain all of this in 5 minutes. .. explain to the European people what all of their option are....
You pointed out in the other thread that polls generally return results that the people generally like the idea of a common currency so that is going to come with some tradeoffs... we need competent people to explain them not take sides imo.... rsp
Europe is in a classic double-bind. They want the benefits of a union but they don't want to give up sovereignty either, since that amounts to giving up control to the strongest link in the chain, which is Germany. Germany doesn't want union either, since it perceives that it would have to subsidize the less productive countries.
If you can't go forward, and you can't sit still, then the only way out is backwards.
Matt an other problem as I see it is that Germany is married to the concept of "hard money". Is not like they don't know you can finance deficits through monetary sovereignty, is they don't want to!
This is a tough question, while the appeal of more accommodating policies (I know because this path has been taking in Spain a couple times in the past decades), in the rest of Europe is large enough, in Germany and maybe a couple other countries it is not. Probably because how they read the history of the first half of the 20th century, they got cause and effect completely backwards.
Should be clear enough by now though, that unless we find aliens to export goods, the 'race-to-the-bottom' export-led recoveries are not a solution, as much as Germany wish. FFS the eurozone has a brutal CA surplus in the last months, now has the biggest export balance of any monetary region in the world by a big margin (even with China).
In my mind, mercantilist export led policies are almost as crazy as gold-buggery. Keep domestic wages depressed enough so that millions of our fellow citizens can labor away making stuff for other people to enjoy.
Obviously, its one thing and rational to trade our technology for your energy, but its another thing altogether to design your entire economic paradigm around sending precious real goods and services away.
"money, like saving and inflation is now in the hands of the marketeers. The impreciseness is used to influence and control"
Neil,
That's been true since even BEFORE the Sophists explained it, and Socrates pointed out the aggregate futility of that distraction.
The utility of semantics, like all topics, varies with the scale of application. Even Neo-Liberalism vs MMT is 90% exposing fallacies of scale.
http://mikenormaneconomics.blogspot.com/2014/10/semantics-or-sophistry-in-policy.html
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