Tuesday, September 29, 2015

Team McDonnell: meet Labour’s seven economic advisers


From the FT here.

Can you spot the qualified/competent technocrat in this list?  I don't see it...
David Blanchflower
Mariana Mazzucato
Anastasia Nesvetailova
Ann Pettifor
Thomas Piketty
Joseph Stiglitz
Simon Wren-Lewis
I'm sure these ideologue people have the best goals and intentions, but that is never enough to get the job done.

Where is a Bill Mitchell or a Neil Wilson here?  Ignored.


72 comments:

John said...

Neil Wilson and Bill Mitchell? Do you want to get their planet-sized brains blown out of their skulls by the City mob? Leave the poor chaps alone!

The list is better than what we've got. I can only imagine it's a way of assuaging the media and business by selecting economists just about within the mainstream.

But why no Charles Goodhart, or even Adair Turner who seems to have had a major conversion? Or perhaps under Crobyn we can look forward to Goodhart as governor of the Bank of England, and Adair as his deputy. And no Richard Werner, a great economist no more than a hundred miles from Westminster. And Steve Keen can't be more than a few miles away!

Just heard Corbyn on the TV talking about running an economy so that we run "profits for the taxpayer". Bugger!

Matt Franko said...

John none of those people are qualified/competent either...

Tom Hickey said...

Right. It's a matter of voting for the best of the worst.

John said...

Matt, it depends on what your definition of competence is. If competence is out and out MMT, then sure you're right. But then by your standards Marc Lavoie would be considered incompetent, which he clearly is not.

I would sleep a lot easier at night if Charles Goodhart and Richard Werner were brought in to fix the UK's economic problems, which are considerable and frightening.

In any case, Mazzucato and Pettifor are huge steps in the right direction. They understand endogenous money, the role of the state monetarily, and what the state can do to stabilise an economy. They're about as close to MMT as you can get. That's a step forward. Stiglitz is very slowly waking up from his neoclassical coma, and at least he cares about inequality and what the economic and political effects are of too much money concentrated in too few pockets.

Anyway, as I've said in other threads, *politically* speaking hitting the public with MMT economists is madness. Who the hell will vote for someone who tells you that your taxes don't pay for anything? Or that forget the argument over central bank independence. Our policy is to abolish the central bank and run it from a small office within the treasury.

The kind of education we're talking about takes many years, and even then the best of the best economists in the world (Marc Lavoie) disagree with some of MMT.

A said...

They're all excellent, apart from McDonnell.

A said...

"Who the hell will vote for someone who tells you that your taxes don't pay for anything?"

taxes are necessary for spending, so saying that they 'don't pay for anything' is misleading even if it's technically correct in a narrow sense.

Matt Franko said...

Stiglitz on witnessing a bridge collapse: "Just put it back the way it was!"

Picketty on how to build a second bridge span: "just disassemble the bridge span that is already there and use those components to build the second bridge!"

Pettifor: "Democracy is over-rated!" and "the UK is the same as Nigeria!"

You can see what they've done here, they have brought in some left-friendly ideologues for framing and are going to try to get Picketty to do the technical work via his "wealth tax".... because they believe "that is where the money is!"...

Ralph Musgrave said...

My only objections are first Mazzucato since all she ever seems to do is repeat ad nausiam the point that governments are responsible for a lot of basic research (e.g. radar, computers and the jet engine in WWII).

Second, Pettifor understands the point made by Keynes: “Look after unemployment and the budget will look after itself”. But that apart, she has some strange ideas. She also devotes a lot of effort to self-promotion, rather than writing stuff and letting it stand for itself. See:

http://ralphanomics.blogspot.co.uk/2015/09/amazing-discovery-by-ann-pettifor.html

A said...

Matt,

yeah some of Anne Pettifor's live comments are a bit flaky.


A said...

Matt,

saying that the government can create money therefore Piketty's wealth tax idea is dumb, is a pretty dumb argument.

Matt Franko said...

I would say that the govt has authority to credit currency balances in accounts...

What is he going to do? have the govt operate hotels to "make money!"

Have the govt operate golf/tennis resorts to "make money!"

these "wealthy" people have real assets that comprise their "wealth"...

Current case: Trump is "cash poor"...

Is he going to force a liquidation of real assets to pay some tax? then asset values collapse which comprise his "wealth" and his whole plan blows up...

John said...

Ralph,

What you consider obvious and elementary standard Keynesian comments by Pettifor and Mazzucato are considered by almost all in economics and politics to be extremely radical, unproven, but if true, some of the most profound insights in history.

Mazzucato is an important thinker. For years radical economists have been pointing out that the state has been instrumental in creating the economic world we see, and it was sneered at as the ideological propaganda of anti-capitalists. Mazzucato has done such impressive research that it is now almost impossible to dismiss this argument.

Having Mazzucato and Pettifor telling McDonnell that there is no constraint on spending and that it's whether the resources exist that are the issue is a unique state of affairs, and is most welcome.

McDonnell as Chancellor of the Exchequer; Goodhart as Governor of the BoE; Adair Turner as his deputy; Werner in a special assistant role to Goodhart and Turner; Mazzucato, Pettifor, Keen, Arestis, Wolf as advisers. Lavoie, Mitchell, Wray and Mosler a phone call away. Radical moderates (Goodhart, Turner, Wolf, Mazzucato) surrounded by radicals is a good way to go. I'd vote for that, and so would a lot of others.

Matt Franko said...

P,

I would say Picketty's idea is dumb independently of whatever the govt can do...

The two ideas are COMPETING ideas...

How much would the value of Lockheed-Martin stock be if the govt didnt spend on defense? ZIP-O...

What would happen to property value in the Florida space coast if NASA just pulled out tomorrow? ZIP-O...

etc...

Dan Kervick said...

Are you kidding me Matt? Joseph Stiglitz ran the World Bank! What has Bill ever run? Some academic research center?

I have seen nothing that tells me MMTers have what it takes to run the kinds of numbers and generate the kinds of well-grounded empirical predictions that would make them "qualified technocrats" They do hardly any empirical research at all and are, by their own account, math averse and model averse. Please.

Piketty (especially) and Mazzucato have generated thorough studies based on meticulous empirical research. MMT is a pseudo-science based on pulling grandiose empirical claims out of one's ass without any empirical evidence to back them up.

Dan Kervick said...

Stiglitz on witnessing a bridge collapse: "Just put it back the way it was!"

Picketty on how to build a second bridge span: "just disassemble the bridge span that is already there and use those components to build the second bridge!"

Matt, what in the world are you talking about? The level of your commentary has gotten worse and worse over recent months. Maybe you should stick to your crackpot theories about electricity and cosmology.

Matt Franko said...

Philippe,

The govt cant "get the money" to pay Lockheed-Martin's invoices by requiring shareholders of Lockheed_Martin to liquidate their shares and turn over the proceeds...

What are they going to do? Let some big contracts out to big UK construction firm then when the invoices come in, tell the firm owners to liquidate their shares and forward the balances to the Treasury so they can pay them?

Dan Kervick said...

Stiglitz on witnessing a bridge collapse: "Just put it back the way it was!"

Picketty on how to build a second bridge span: "just disassemble the bridge span that is already there and use those components to build the second bridge!"

Matt, what in the world are you talking about? The level of your commentary has gotten worse and worse over recent months. Maybe you should stick to your crackpot theories about electricity and cosmology.

A said...

"I would say that the govt has authority to credit currency balances in accounts"

Same thing as what I said.

"making money" basically means accumulating financial claims on others. So yes, the government can 'make money' by operating services for profit and thereby accumulating financial claims on others.

No, Trump is not "cash poor".

"Is he going to force a liquidation of real assets to pay some tax? then asset values collapse"

A wealth tax might lead to lower asset values, but not necessarily. And limiting asset values could be a good thing. What it would do is transfer ownership of assets.

Matt Franko said...

Dan they have made arguments supported by empirical evidence... they have done a good job with this but this is not what I am talking about...

iow MM has made the empirical case that govt involvement is crucial and she is correct yes... ok now what do we do?

I am submitting that she is not the one to take it from there... not her area of ability... they need to bring in different people for implementation...

If they dont bring in Bill or Neil, they have to bring in people LIKE THEM.... or develop similar aptitudes in themselves which might take a while...

and Stiglitz didnt "run" the world bank... he was a high level economist there... he advocates "debt relief"...

http://www.businessinsider.com/stiglitz-pissarides-goodhart-call-for-debt-forgiveness-for-greece-2015-1?r=UK&IR=T

You of all should know that is not a solution...

John said...

Picketty on how to build a second bridge span: "just disassemble the bridge span that is already there and use those components to build the second bridge!"

I thought that was really funny as well as being insightful. I wish I had come up with that.

A said...

Dan,

"MMT is a pseudo-science"

no, it's basically just functional finance as explained by Abba Lerner. It's logical. But as you point out, functional finance can't solve everything.

A said...

"he advocates "debt relief"

A very good idea.

Dan Kervick said...

It's more than that Philippe. It's a body of half-baked junk macroeconomics based on Warren Mosler's empirically untested and imprecise musings about the causes of unemployment and the determinants of prices.

A said...

"Picketty on how to build a second bridge span: "just disassemble the bridge span that is already there and use those components to build the second bridge!""

or, more accurately: "disassemble the crap broken bridge we don't want or need and use those components to build a decent bridge we actually want and need"

Dan Kervick said...

Matt, what's wrong with debt relief? It's one way of redistributing wealth.

Matt Franko said...

See Dan.... John here understands my analogies....

People are different... we have different gifts/abilities.... these lead to cognitive biases...

We have to get the right types into the right roles...

Ideologues can make arguments supported by empirical evidence that is fine ... it helps us determine WHAT to do... not HOW....

These people have been at it for decades with results that are getting WORSE...

We need to get "better" people involved ... maybe I mean "better suited" people...

A said...

Dan, in my previous argument with you I realised you don't actually understand some basic MMT arguments, so I don't think your opinions on it are all that well-informed to be honest. A lot of what you say is really good, but many of your comments about MMT are off-target.

Tom Hickey said...

MMT is a pseudo-science

There is no general theory in economics or any of the social sciences. There is no normal paradigm. As physicist Jason Smith has pointed out, there isn't even the framework for a theory.

Saying that MMT has no macro theory is meaningless. The existing macro "theories" are not scientific theories, they are ideologies masquerading as science.

Putting economics forward as "science" because many economists use some fancy math is nonsense.

I's not that MMT is pseudo-science but rather that conventional economics is.

Economics is a series of narratives, some which use math, but not always correctly. Some of those narratives are true and some false. Distinguishing the true from the false is not always possible, first, for lack of agreement over criteria, and secondly, owing to the difficulty of designing definitive empirical tests.

As Jason Smith has also pointed out, there isn't enough quality data historically to do good empirical research in economics, let alone formalize it in representational models that can be substantiated based on data.

And, to paraphrase Keynes, the "moral sciences" (which we now call social sciences) are infected with uncertainty. Samuelson's assumption of ergodicity is just wrong.

Matt Franko said...

Dan for instance a Lawyerly mind is guided by precedent... precedent is important in that area... ok... but economic systems operations/regulation is not the same thing as legal work...

Innovation is not a product of precedent, etc...

If they want to keep these 7 as "headliners" ok that's fine , but they still better be looking for the right people for the implementation roles...

imo Bill and Neil are the only ones (I know of anyway) starting to look at the plan with the correct quantified systems approach...

Tom Hickey said...

Some narratives in economics are purely fictional, as are some in political thought, going back to Smith and Locke. Other narratives are more like well-researched historical novels. But like novels, economists have to fill in the gaps creatively.

John said...

Whether MMT is completely correct or not is practically irrelevant. After all, there is no such thing as "completely correct". There are gradations of correctness, and the neoliberal gibberish we've been subjected to is near the bottom of the heap, being held up by the Austrians. The Post-Keynesians are closest to the truth, with MMT vying for top spot. MMT economists have made some extraordinarily prescient forecasts, with the correct reasoning. That's impressive, but so have other Post-Keynesians.

The best monetary economist in the world is probably Marc Lavoie, and he is broadly supportive of MMT, but has some issues with it. To me, that translates as "It's damn fine economics". Even if it isn't completely right, its functional finance proposals are more than enough to make the societies we live in much better places.

So why make the good the enemy of the best?

Dan, what turned you off MMT? I thought you were a supporter. I heard an interview with you (on alpha2omega, I think) and you seemed to be supportive of the general thrust. What exactly do you think is wrong with MMT, when even the most objectively critical monetary economists (Lavoie, Rochon and Werner) say it is broadly right?

Dan Kervick said...

You're doing a great job damning MMT with faint praise Tom! :) I guess your defense of MMT is "Well, MMT is no worse, at least, than all the other crappy forms of macroeconomics.

But I didn't say "MMT has no macro theory." I said it has a macro theory which is empirically unsupported junk science.

A said...

it's not empirically unsupported. However there are so many 'moving parts' in any economy that making predictions is bound to be problematic.

Matt Franko said...

"Well, MMT is no worse, at least, than all the other crappy forms of macroeconomics."

Dan this is a BIG problem we are going to have to probably form an entire new department within the academe bringing together multiple current disciplines ... economic outcomes and resultant things like inequality are in many cases getting WORSE not better... I think at first look here, both the UK Labour plan and the Trump plan would probably help stabilize things here a bit but may make some parts of it worse...

We need entirely new methods and tools its going to take a major effort.

Dan Kervick said...

John, over the past several month I think I have outlined on this blog most of the reasons I have for disparaging MMT. But there are others as well. In short, I think that as economics it is crude, shallow and riddled with conceptual errors and unsupported claims. It offers little assistance for serious people trying to wrestle with the fundamental social and economic problems of our time. The theories it defends are embarrassingly weak and under-developed. It has responded to this deficiency not by working to improve its product, but by avoiding the harder forms of economic research, and avoiding constructive engagement with the kinds of people who would be capable of pushing it into more serious territory. It instead prefers the path of petulant temper tantrums in response to criticisms, intellectual dishonesty, and selling its shabby wares on the wider market by recruiting a cult following of gullible amateurs who don't understand much about economics but are dazzled by the allure of monetary solutions to non-monetary problems.

I'm sorry to have to be so harsh about this. For months I avoided commenting on MMT altogether, and was happy just to let the MMTers play in their corners, and didn't worry about them since they weren't really bothering anybody. But the MMT crank cult and its obsessive simplifications about money, deficits and employment are now playing a destructive role. An equally destructive role is being played by MMT's anti-intellectualism, excuse-making and persecution complexes as they are spread among the faithful. I've had just about enough of blog and Facebook posts by the MMT propaganda squad in which the author flies off into a rage about why various people whose books and paper the author can't even read must be "morons" because they don't agree with various MMT slogans.

A said...

Dan,

what do you think of Abba Lerner's functional finance?

crap nonsense too?

Because it's basically the same thing as MMT.

Tom Hickey said...

I said it has a macro theory which is empirically unsupported junk science.

It's a waste of time looking for precision where it doesn't exist.

Economics is based on ex post data and assuming the future resembles the past. Without ergodicity that's a huge assumption especially when dealing with data that are not only sparse but also in many cases either unreliable or suspect.

Same with finance,

How many PHD economists or financial professionals have made billions trading their knowledge whereas many people who are basically clueless have trading their narratives and hunches?

Macroeconomics is better called political economy because it is policy-oriented. It is the basis of policy "science" in nations with modern monetary economies. Policy "science" is no more a science than economics, which is NOT.

The so-called social sciences stand between the natural science and speculative philosophy as attempts to gain understanding of ourselves and our world.

The natural sciences have an impressive record of explanation and predication that has been proved through application to technology. There is no such record in the social sciences and human engineering has a pretty dismal record, too.

I know of no version of macroeconomics that has a formalized theoretical model whose assumptions are supported empirically and provides a causal explanation that enables useful prediction.

Let's drop the comparison with the natural sciences and look at the social "sciences," of which economics is one even though many economists won't admit it. Economics needs to be approached in the vein of social studies, which are largely dependent on case studies.

The big problem in econ is the mixture of financial information and non-financial (actual, real). Nominal values are often used as representative of real quantities. That creates all sorts of illusions. The other sciences are about quantification of real events and objects, whereas accounting is based on ex post accounting records that are aggregated from reports that are themselves divorced from the journal entries based on which the general ledger is created, from which reports are generated.

So there is an inherent disconnect between measurement and reality at the core of economics.

Dan Kervick said...

it's not empirically unsupported.

It is Philippe. Warren Mosler routinely makes empirical claims about the relationship between employment and deficits, and about the causes of price shifts. And yet so far as I am aware, he has never produced a single paper, or conducted or funded a single research study, that aims at gathering and analyzing the evidence that would be needed to defend these claims.

And when the critical comments on his blog got too tough for him, what did he do? Turn the comments off.

You guys have been had. MMT is snake oil.

Unknown said...



I sat open mouthed at Ann Pettifor talking about her 'Liquidity Preference' beliefs - aka government subsidising lending to businesses so that owners don't have to dilute their equity holding by selling some of it.

She talked about getting a quote of 28% on a business loan. I was quite amazed that she didn't realise that is a 'go away' quote that suggests that the bank believes the proposed business plan was total junk.

I've had no problem getting six figures at 2.8% - ten times less. But then I have sufficient collateral.

Unbelievable support of state subsidised wealth concentration. Add that to the 'politicians are corrupt, but central bankers can't be' and you have to wonder what is going on.

All the people quoted are fundamentally Wicksellian/Samuelson believers who deify the central bank and believe that you can control an economy by jiggling interest rates.

Quite why you should believe people, who require 5% of the population permanently in unemployment and that private borrowing of money should be encouraged indirectly primarily by giving wealth people and foreigners a risk free government income, is anybody's guess.

McDonnell thinks he can make the 'tax the rich' line stick. He's going to be disappointed. The rich will simply use their propaganda machines to let the middle-classes know "You're next". They will then dutifully vote for the Tories.




Unknown said...

"And yet so far as I am aware, he has never produced a single paper, or conducted or funded a single research study, that aims at gathering and analyzing the evidence that would be needed to defend these claims."

Neither has anybody else for any of their stuff. It's all a bunch of curve fitting based upon dodgy use of statistical methods.

Because you can't 'prove' anything without trying it. We don't have the LHC in economics.

You know that, but you're just determined to be antagonistic.

I don't subscribe to some of Warren's stuff. I prefer Bill Mitchell's version - where there is less weakness.

However since the government is the margin purchaser in the economy, and if it is prepared to say 'no deal' then it will cause a recession and price reductions. That is a simple matter of logic.

A said...

Dan,

you can't really judge an economic theory by the behaviour of its online enthusiasts. For example, Hayek was a clever man who wrote some clever things, but many of the online people who would describe themselves as his supporters are completely ignorant morons.

Dan Kervick said...

Tom, there are many areas of economics that are quite amenable to quality empirical research. For example, I read a paper the other day examining the alleged connections between changes in interest rates and changes in business investment. This is work that can be done. MMT doesn't like that kind of research because (i) they don't know how to do it, and (ii) they are afraid of what the results would show if they did do it.

Matt Franko said...

Dan,

If you have officials going all around saying "we're out of money!" and "we're borrowing from the Chinese!" ... I'm sorry you're a moron there is no other way to sugar coat it....

Just the other day Trump said: "we owe $19T! ... what are we going to do if all those people show up and want us to pay it back?!?" verbatim.... big cheers went up....

Are you saying this is an intelligent statement? Because it is ultimately not...

A said...

"And when the critical comments on his blog got too tough for him, what did he do? Turn the comments off"

I think he did that because he didn't want to spend all that time responding to and moderating comments, arguments, criticisms and insults which were after a while just the same thing over and over again.

John said...

Dan,

I think constructive engagement is important. For example, I think someone like Scott Fullwiler, as far as I can understand him, goes out of his way with extremely detailed rebuttals and explanations of the criticisms directed at MMT. And he always seems to come out on top. And it isn't because he's lucky in his enemies or confronting straw men.

I also think that your criticisms are extremely useful. But from what I can gather, any time you've put up a criticism, Neil Wilson and others have seemingly explained it. I would say that even when they do explain these things that other problems arise. That's the problem with MMT. It's like a Russian doll: there's always something more to it lurking underneath. Every explanation requires further elucidation almost ad infinitum.

I agree that some MMTers, who'll go unmentioned, do not react very favourably to criticism and are less than agreeable in their responses. I for one think that the MMT academics are not very good at explaining themselves, and leave amateurs in serious trouble if they repeat anything that they've read or heard. The only people who are in a position to defend MMT are ultra-sophisticated people like Neil Wilson, Tom Hickey, Matt Franko and co. As much as i admire them, I think they do not really appreciate how difficult it is to *really* explain this stuff. It is a huge problem.

The zeal of the convert blinds him to the difficulties of others seeing what you so clearly see. This doesn't happen in, say, trying to explain evolution. Read a half-decent book on evolution, and you're in a position of explaining it to others. It seems to me that MMT is almost unique in economics in not being able to explain itself. I just hope Mitchell's and Wray's MMT textbook will answer all this stuff. Does anybody have the foggiest idea when it's coming out?

Matt Franko said...

Dan,

Carl Icahn has a computer animation in the video Mike posted above where he shows a stack of $ bills taking off and actually flying across the Atlantic Ocean over and landing in Europe... do you think this is a helpful animation?

It is false and amateurish as you say, Icahn didnt get the MMT people to help produce it I can all but assure you...

A said...
This comment has been removed by the author.
A said...

"MMT doesn't like that kind of research"

that's funny, because I've seen lots of MMT people linking to precisely that sort of research (into interest rates and investment).

Tom Hickey said...

Of course, I don't mean that economists never say intelligent things. They some times do. How to tell without a general theory embedded in a conceptual framework whether this was due to luck, a partial account, a special case, etc.

The problem is not that there are not conceptual frameworks in economics or general theories. The problem is that they are based on assumptions that either implausible, overly simplified for the context they purport to explain, or have been called into question based on observed events.

BTW, this is a discussion about philosophy of science, philosophy of social science, and philosophy of economics for those unfamiliar with these fields. Many professional economists seem to be unaware of these fields, let alone the issues and debate, and they don't seem to be a part of economics education, even at the PhD level.

As a result the dominant faction in the discipline can just declare than all such issues are settled in their favor and enforce it by excluding dissidents. That's just dogmatism. And there is no accountability for the adverse consequences of policy mistakes resulting from poor advice represented as "scientific."

Dan Kervick said...

All the people quoted are fundamentally Wicksellian/Samuelson believers who deify the central bank and believe that you can control an economy by jiggling interest rates.

Definitely agree with Neil on this one. This is the reigning orthodoxy on the "liberal" side, and it's maddening.

Dan Kervick said...

"because I've seen lots of MMT people linking to precisely that sort of research."

Maybe they and their graduate students should try actually doing some of it.

A said...

"Maybe they and their graduate students should try actually doing some of it."

Well they do, but maybe you haven't noticed that economists frequently refer to research which they themselves didn't personally do. This is generally how things work in academia/science.

John said...

Tom,

That's the problem with economics, and indeed all of the natural and social sciences. The philosophy has been eliminated. Einstein was consumed by philosophy, and even back in his day was complaining that physicists weren't appreciative of the philosophy of science. He wrote a really lovely book with Leopold Infeld called "The Evolution of Physics". He was, and still is, as MMTers say "Out of Paradigm". But their paradigm is wrong, and Einstein's conceptual paradigm and philosophy was right - even when he was wrong.

The major problem with most people is that they do not think empirically and philosophically. A revolution is needed in education, from nursery all the way up to university, with philosophical reasoning a major component.

Tom Hickey said...

there are many areas of economics that are quite amenable to quality empirical research.

Case studies and special cases. This is how social sciences generally proceed rather than trying to elaborate comprehensive theories.

For example, I read a paper the other day examining the alleged connections between changes in interest rates and changes in business investment.

There are hundreds of papers making the monetarist case, which works as expected in some cases and not in others like now with now rates for over seven years and holding.

Conclusion? Interest rates are one factor and at times a dominant factor. At other times, not so much.A broader and deeper explanation is needed and it is lacking in monetarist-based models.

Looking at a single factor in macro, or a two variable model, is seldom very useful by itself because it is too simplistic, although it can be informative in terms of formulating a broader account.

Tom Hickey said...

I think he did that because he didn't want to spend all that time responding to and moderating comments, arguments, criticisms and insults which were after a while just the same thing over and over again.

Some of that, but the simpler explanation is that he got a girlfriend and didn't have time anymore. He was also in the process of retiring and selling off his stuff that required his attention.

Dan Kervick said...

Case studies and special cases. This is how social sciences generally proceed rather than trying to elaborate comprehensive theories.

True enough. We generally don't need elaborate comprehensive theories. We need more engineers, and fewer grand macroeconomic wizards.

There are hundreds of papers making the monetarist case

This particular paper cast doubt on the monetarist line.

Unknown said...

In pretty much any economics paper I've seen the modelling is woeful. There is this idea that there is maths and there is narrative. And that's it.

It's deeply primitive stuff and I can't believe there are dozens of people sitting there looking for statistical regularities in aggregate data streams.

At least in finance when people tried that and acted on it they were quickly bankrupted as the system adapted to fill in the 'anomaly' they'd found.

The general Lucas critique applies - policy works on individual entities, not on the aggregate and you need to understand the aggregation process. But there are few if any of the 'deep parameters' he talks about. The system is adaptive and evolutionary - as you would expect with a network of intelligent creatures at its core.

Tom Hickey said...

The major problem with most people is that they do not think empirically and philosophically. A revolution is needed in education, from nursery all the way up to university, with philosophical reasoning a major component.

Right. It's called liberal education and it is the basis for creating and maintaining the informed electorate capable of critical and creative thinking that is necessary for the health of liberal democracy.

This is a big reason that the current push is toward a corporate model of education. At the University of Iowa, the regents just selected a business person with zero background in either nonprofits or education as president. The faculty rebelled and the liberal arts professors just wrote an open letter to the governor of the State of Iowa demanding that he fire the entire board of regents of the university. Of course, being the good neoliberal he is, he refused.

"The price of freedom is eternal vigilance." Freedom is disappearing in the US with the decline of liberal education and the rise of corporatism.

Tom Hickey said...

This particular paper cast doubt on the monetarist line.

The Wicksellians have a bigger problem than a few discordant papers. Their best answer to the "liquidity trap" seems to be to outlaw cash and go to negative policy rates. The whole world is refuting them daily and they are in denial.

This is the indication of just how dogmatic they are, and they are more liberal then the New Classical cohort that is now just making stuff up.

Tom Hickey said...

The system is adaptive and evolutionary - as you would expect with a network of intelligent creatures at its core.

Especially when money is involved.

Sort of like Warren Buffet looking for under-appreciated assets, buying up a bunch, and then letting it be known that he is in big. Quickly that asset is no longer under-appreciated.

John said...

Tom: "This is a big reason that the current push is toward a corporate model of education. At the University of Iowa, the regents just selected a business person with zero background in either nonprofits or education as president."

It doesn't help when you have superstars like Neil Degrasse Tyson saying philosophy is useless, thus showing a monumental ignorance of his own subject and its development.

Not only is it a fantastically ignorant and unbelievably stupid thing to say, but it also plays into the hands of those who want to subject education to the business models that have ruined every other area that have touched by such ideological fantasies. Some areas of life are not amenable to the corporate business model.

In fact, corporate business is not particularly amenable to the current corporate business model!

Matt Franko said...

Dan if you look at what Neil is getting into here:

"You can already see that there are two unfortunate positive feedback loops inherent within the calculations.

Net investment spending (Gross spending less depreciation) for 2014/15 was £30,328mn. If you express receipts as a percentage of total expenditure you find the tax take is 89.4%. So for every £100 spent, £89.40 came back as tax and £10.60 was held as financial savings.

The tax take percentage varies as the tax side auto stabilisers allow people to save. In the post crash era where people are generally saving it has been as low as 82%.

So to clear the current budget deficit at a conservative tax take of 80% you'd need to make £61,095mn of extra investment spending (i.e. the capital net spend needs to be three times what it currently is). That will vary up and down depending upon the actions of the automatic stabilisers. In 2009/2010 you would have needed £107,684mn of investment spending."

and Bill here:

"In 2014-15, the Office for Budget Responsibility reported total Public sector current receipts at £646 billion (35.8 per cent of GDP), Public sector current expenditure including interest payments was £669.3 billion (37 per cent of GDP), Depreciation on ‘used up’ capital was £37.4 billion (2.1 per cent of GDP) which gave ‘Current Budget Deficit’ of £59.8 billion (3.3 per cent of GDP).

The reported figure was £56.9 billion (there is some internal inconsistency in the data provided).

Even on current estimates the ‘Current Budget Deficit’ will be £38.7 billion in 2019-20, when Jeremy Corbyn will take office if elected.

Public sector net investment was only £30.4 billion in 2014-15 or 1.7 per cent of GDP.

Overall, the fiscal deficit was £87.3 billion or 5 per cent of GDP (adding the capital and the current balances)."

Has Thomas done this type of systemic analysis? If not and they have brought him in as their "tech guy" he should call Bill and Neil and get with them and go over this...

He may be able to still pull it off to an extent .... but he has to get the right people on board with him...

Dan Kervick said...

Matt, I'm sorry. MMTers just seem to be hawking another version of standard neo-monetarist, macroeconomic stabilization theory, with a bit more emphasis on the deficit spending dimension backed up by their quirky theories about money and the government "monopoly". You guys need to get out more. There is a world of debate going on out there about the global environment, industrial organization, the ownership of wealth, labor organization, energy transformation, development and much, much more that MMT is playing no constructive part in. I'm not interested in your narrow, money management outlook on the world that reduces everything to monetary flows.

Matt Franko said...

Thats like saying Podiatrists are useless because there is a whole rest of the body above the ankle...

Dan Kervick said...

Thats like saying Podiatrists are useless because there is a whole rest of the body above the ankle...

It's more like saying podiatrists are useful for treating all that stuff in the rest of the body.

A better analogy would be that you have a bunch of people offering serious plans for treating various problems in the body, and you have some other cranks yelling, "Don't they know it's all about the feet?! The foot is the bllod monopolist of the body! The body will be great if we just pump some blood into the feet and watch the blood flow in and out of the feet!"

Matt Franko said...

Well nobody here is saying that the way to help the poor young person who was denied adequate care for his mental illness and then was driven to suicide when even the inadequate care was removed that the McDonnell guy talked about is to build infrastructure...

that poor kid needed xfer payments made either to him or directly on his behalf so he could get the adequate care he needed and this was denied...

So the solution is to discus labor organization and energy transformation???

I dont think so....

Unknown said...

"There is a world of debate going on out there about the global environment, industrial organization, the ownership of wealth, labor organization, energy transformation, development and much, much more that MMT is playing no constructive part in"

None of which mean anything, because just like the hippy ideals of the 60s the politics of reality of earning a living will get in the way.

And the remnants will end up publishing equivalents of 'socialist economic bulletin' once they've managed to drop into a public sector job that provides them with the *money* they need to live.

'Lack of money' is the social control mechanism corporatism uses to maintain its grip. You have to free that off or all the other stuff comes to nothing.

There is no marxist - socialist revolution coming this time any more than it has done the last two dozen times.

Ignacio said...

The problem with economics is the academe doesn't know anything about the real world. "You should get out out more", indeed the academe should... without solving the "money" problem there ain't fixing of any problem, no matter how the solution looks like...

And no matter how much "talking" it's done, instead misery and "crappification" of society is what we get, like now. Doomsday talking is through the proof and you can see it in popular culture, humanity is giving up upon itself, and it often comes from 'lefty' types, there is no solution to anything when you can't recognize that the rules are man-made. All that talking does not tackle this, therein there are no real solutions proposed, just much wishful thinking.

I agree though that we need more engineer types in places of authority, and less ideologues (economists). Most of the interesting economics are micro oriented, and often not done by economists, an economists is by definition a poorly trained statistician (in the best case), I would take any day a real mathematician, physicist, engineer or even junior statistician, much better foundations and modeling skills. That's why you rarely see economists in high finance compared to mathematicians or physicists. We also need more Eccles types, and more practical people, that's why despite disagreeing with MMT on many things, I would take over it other than ideologues who cannot carry forward they plans because they actually don't have real plans to do it.

Economist as a career shouldn't exist, it does not have legitimate theoretical corpus, they don't even know the basics of the scientific method, and on top they are hurtful. Humanity was doing fine without economic schools until very recently (barely a few decades ago). It should be relegated to research until they actually have some foundational theoretic corpus to teach it. It can be absorbed by statistics, engineering, psychology/neuroscience, sociology etc. It doesn't even have a valid epistemic domain.

Bob said...

Dan,

How can we achieve full employment?

Tom Hickey said...

@ Ignacio

Agree completely.

Econ can be folded into already existing fields that are actually producing useful knowledge. Political economy should be integrated with policy sci, sociology, anthropology, psychology, and history to be practical in policy formulation.

In other countries, engineers are often positioned in top places in government, and in the US, most successful political leaders are well versed in history.

As Peter Radford observes, most of the practical work in econ that is relevant to business is being done in business schools, where very little theoretical econ is taught because it is not deemed to be very relevant to the field.

Econometrics is a branch of applied math and can be shifted to math departments.

Then people involved in econ would have to deal with the relevant factors along with people that are versed in them, working together in environments in which these factors are taken seriously.

Random said...

Bob, by introducing a government job offer at the living wage. Done.

Andy Blatchford said...

"There is a world of debate going on out there about the global environment, industrial organization, the ownership of wealth, labor organization, energy transformation, development and much, much more that MMT is playing no constructive part in"

Great so you are debating Dan but apart from that what are you actually 'doing'? Sanctimonious pronouncements from the left are very tiring, the "left" in the west has been debating for 150 years and have got exactly nowhere. I have bothered to go out, join a patry, stand for election etc...Failed yes and almost certainly will fail plenty more...hell I know there is almost no point. When you do that please let us know.