Wednesday, November 23, 2016

Ramanan — Neochartalists Shifting Position


That would be on trade, away from the single principle, "Imports are benefits in real terms of trade," toward a more nuanced articulation. This is based on Bill Mitchell's recent three part series on free trade vs. fair trade.

The Case for Concerted Action
Neochartalists Shifting Positions
V. Ramanan

37 comments:

franco said...

From “exports are a cost and imports benefits”, they have shifted their position. Mitchell goes on to concede

Missing out the full employment stipulation is a little disingenuous.

I don't see it as a shift in position either, it's been noted before:

But with those considerations aside, we have to acknowledge that if a nation has little that the world wants by way of its exports, and is food dependent on imports (and perhaps, other essential resources) then the capacity of the currency-issuing government to alleviate poverty is limited.

http://bilbo.economicoutlook.net/blog/?p=32938

As I understand it Neil Wilson argues that in the end if a foreign exporter doesn't want to sell in your currency then it requires them to accept a loss in their maximum potential for sales as they cannot magic another economy to export to instead.

I think the sometimes fervent support (guilty) in MMT leads to a loss of the nuance it can generate.

andy blatchford said...

Seems Ram is either missing or ignoring 'so called' no shift in position he never got it in the first place.

What Neil is saying is they ignore the other side (and being in Intl trade myself I concur)that exporters need to export. The trade deficit is ex-post.

Magpie said...

But since international trade is the most important determinant of the rise and fall of nations, and that Neochartalism claims to be some fundamental theory of human interactions, its extreme position and shifting away from it should be noticed and critiqued, although welcomed.

In short, Neochartalism which is some sort of moral superiority on fiscal policy has accepted that free trade can put constraints on it. The solution of course is beyond the scope of this post but this shift should acknowledged when Neochartalism is discussed.


I also note a shift in position regarding international trade. How radical the shift, I can't tell. However, I find Ramanan pushes things too far:

(1) trade is the most important determinant of the rise and fall of nations. (?!) Says who? Is Ramanan claiming himself and his mates know what is "the most important determinant of the rise and fall of nations"?
(2) Neochartalism claims to be some fundamental theory of human interactions
(3) Neochartalism which is some sort of moral superiority on fiscal policy

English is not my mother tongue. I know from experience that adults trying to learn a foreign language face a handicap and -- frankly -- I'm as sympathetic to them as I hope people are sympathetic to me.

Having said all that, (2) and (3) don't even make sense. I mean, "moral superiority"? I can only imagine he is trying to express some deep thoughts in his language (Hindi?) but something was lost in translation.

Ramanan said...

Lol Magpie.

Nicky Kaldor claimed that. Not original to me. Have a look at balance of payments constrained growth theory.

"English is not my mother tongue"

Great, so don't comment on others' usage. If you don't understand it ... Have a look at Neochartalists making comments on others' comments on fiscal policy. Anyone who says that fiscal policy has constraints is some neoliberal or something according to them.

Anyway, even if English had been your mother tongue, it shouldn't matter. There are a lot of people in India whose English is far better than those in the UK or the US. So kindly refrain from bringing such things in. It's borderline racist.

Ignacio said...

One person does not make a movement, also I doubt that the ideas about trade and 'exports are a benefit, imports a cost' were that monolithic in the first place.

It's an oversimplification I doubt anyone can take ideas like that too seriously w/o looking at the details (well, on the other side academic economists tend to be that categorical and idealistic).

mmcosker said...

Everything is nuance. Imports can be a benefit for obtaining that which you cannot produce. If the future possibility arises, where current workers could not produce enough goods for retirees, then import that stuff. But, to do that you need to maintain SS dollar flows. If you are importing that which you could produce, then there may be negative consequences.

Magpie said...

Listen, Ramanan, spare me your Pilkingtonian tantrums.

"Neochartalism which is some sort of moral superiority on fiscal policy"

Does not make any fucking sense. Neither in English, nor in Hindi. It's a category error: it's like saying the square root of two is badly cooked. The mountain is sinful.

Like Wolfgang Pauli said: it's not right, it's not even wrong. It's nonsense.

Magpie said...


Then, this pearl:

"Anyway, even if English had been your mother tongue, it shouldn't matter. There are a lot of people in India whose English is far better than those in the UK or the US. So kindly refrain from bringing such things in. It's borderline racist."

What I say it is not right because it's borderline racist?

Fine. If it's a matter of pulling ridiculous accusations, two can play that game.

What you write is borderline xenophobic, anti-Semitic, elitist, misogynist, homophobic and neoliberal. How about that?

Ultimately, fuck you.

Ramanan said...

Lol Magpie. Cool down.

Hindi is not my mother tongue. Such bad stereotyping. Hindi is the native language of 40% of Indians. But it's racist when the discussion moves in this direction.

I called you racist because you were depicting an image of me in a certain way.

"Does not make any fucking sense."

Well, as many economists have said, economics is a moral science. And we frequently hear lectures from Neochartalists about how their moral position is superior to others. So now you know what I meant there.

"Ultimately, fuck you."

Lol. Obviously when you don't have an argument, you resort to this.

Lol.

Remember our exchange on Steve Keen and your tribal defense of him? Have you seen papers in ROKE about how wrong he was (and the papers also referred my blog).

Learn some Post-Keynesian economics and learn some manners.

Tom Hickey said...

"Moral science" is a dated way of saying "social science" or "philosophy."

Humans are inherently normative in their behavior rather than mechanical, unlike the objects studied in the natural sciences. So mechanistic models do not capture the range of human behavior and decision making processes that lead to it. Such models are analytically superficial in comparison with more refined conceptual model. Formal consistency and mathematical precision involve tradeoffs analytically.

Keynes used "moral science" in dissing Tinbergen's econometric approach. See Keynes' letter to Roy Harrod, 10 July 1938.

I also want to emphasise strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous in the same way that the material of the other sciences, in spite of its complexity, is constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it is worth while falling to the ground, and whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the centre of the earth.

Heterodox economists in general hold that social science is historically based, and dynamic in that behavior changes with shifting conditions, while conventional economics assumes "natural laws." While humans are creatures of habit individually and influenced by cultural and institutional structure, hence, act somewhat regularly, they are not automatons that behave like atoms.

In addition, to taking this into account, economists themselves are normative to the degree that humans are social. Social behavior conforms to standards, which are norms. She of the enduring questions of ethics and law are about drawing lines. Such questions even arise in the application of natural science, as well as experimentation.

Keynes and Keynesian economists prioritize full employment for two reasons. The first is moral, based on a normative judgment about how a society should be structured and operate for the common welfare. This is meta-economic. Other economists judge that inflation is the greater evil. Attitudes to credit and debt are recognized as being largely moral also. Some hold that if it is legal, it is moral.

The second is economic. The chief objectives of economic policy are growth, employment and price stability. Macroeconomists in general view these goals as trifecta concerning which only two can be achieved simultaneously. MMT economists argue that achieving all three at the same time is not impossible operationally given ample fiscal space.

Moreover, they argue that needlessly sacrificing employment is inefficient and the loss from chronic unemployment is more severe than costs in terms of lower growth or inflation, although there is no need operationally to accept such costs.

Tom Hickey said...

(1) trade is the most important determinant of the rise and fall of nations. (?!) Says who? Is Ramanan claiming himself and his mates know what is "the most important determinant of the rise and fall of nations"?
(2) Neochartalism claims to be some fundamental theory of human interactions
(3) Neochartalism which is some sort of moral superiority on fiscal policy


I would like to hear more about #1. I did a quick search that didn't turn up much of anything.

I would also like to hear more about #2. That is certainly true of Mises's Human Action. I don't find anything comparable in MMT.

Regarding #3, I think that is partially true, but there are also economic arguments offered In choosing to focus on full employment to the degree that fiscal space is available operationally. See my comment above.

The larger issue is the moral and political argument over the responsibility of a society to its members and the duty of a government to promote the general welfare and public purpose. While these are not economic issues but rather ideological, based on values and norms, they involve economic policy and likely also the approach to macroeconomics.

Ramanan said...

Tom,

Wynne Godley in Time, Increasing Returns and Institutions in Macroeconomics in Market and Institutions in Economic Development: Essays in Honour of Paolo Sylos Labini:

"In the long period it will be the success or failure of corporations, with or without active help from governments, to compete in world markets which will govern the rise and fall of nations"

It's more or less Thirlwall's law. Growth an an economy depends on the growth of exports divided by the income elasticity of imports.

About 2: Imagine you have a theory of physical interactions and it's wrong. You call it modern physics. How silly does that look. The name "MMT" is like that. You could have called it monetary operations theory and hundreds of different things. But you call it modern monetary theory. As if it is THE theory.

Tom Hickey said...

Thanks for that Godley quote.

Matt Franko said...

It's a rote teaching and thus not ideal when trying to teach about material systems.... this is what happens with rote you end up with exceptions which lead to disagreements...

STEM uses mathematics based functional equations

jrbarch said...

"In the long period it will be the success or failure of corporations, with or without active help from governments, to compete in world markets which will govern the rise and fall of nations"

In the long period it will be the success or failure of Lucy's lemonade stand, with or without active help from Charles M. Schulz, to compete in unimaginably important and fervently worshipped humongous markets and colossal egos (that are a much more powerful determining factor of human evolution and consciousness than nature) which will govern the rise and fall of the Peanuts gang. Snoopy yawns, rolls over, and laughs out loud in his sleep ....

Joe said...

"Anyway, even if English had been your mother tongue, it shouldn't matter. There are a lot of people in India whose English is far better than those in the UK or the US."

I can't let that nonsense go. Who the hell are you to criticize a native English speakers use of THEIR OWN FUCKING LANGUAGE. That's the old nonsense presciptivist grammar used by people who've self appointed themselves as being superior to others. Actual linguists rejected that bullshit a lifetime ago. Like the "debate" on African American vernacular english, whether it was a real language or not, there never was a debate among linguists, of course it was a language, used correctly (by definition) by those who speak it natively.

Joe said...
This comment has been removed by the author.
Ramanan said...

"Who the hell are you to criticize a native English speakers use of THEIR OWN FUCKING LANGUAGE"

Sorry what. I was just telling Magpie how bad his stereotyping is.

Ramanan said...

"It's a rote teaching and thus not ideal when trying to teach about material systems.... this is what happens with rote you end up with exceptions which lead to disagreements...

STEM uses mathematics based functional equations"

What are you referring to?

Joe said...

I apologize for my excessive hostility. It was uncalled for.

Joe said...
This comment has been removed by the author.
Matt Franko said...

"exports are a cost, imports are a benefit" is a rote statement...

Here is Newtons equation of gravity:

F = G m1 m2 / r^2

Some people might have a hard time understanding this so what we might do is try to dumb it down for them via a rote statement like "well, just think 'what goes up, must come down!'..."

Which is fine until there is a rocket shot that exceeds earths G and goes up and never comes back down.... then you lose all credibility...

So you make a statement like "imports are a benefit!" and then some domestic people are thrown out of their jobs by disgraced China dumping product and people rightly think "what is the benefit?" who were working in that industry...

So its better to just stick with the functional equations and dont try to dumb it down...

So instead of trying to come up with a bunch of clever little rote ditties for the morons, we would do better to consistently express the subject via functional equations all the time like STEM people do...

Tom Hickey said...

So its better to just stick with the functional equations and dont try to dumb it down...

Scientists are faced with a communications problem. Most people are not only not STEM people but also either know know much basic math and don't like to use math if they do.

Even scientists don't read through heavy math papers unless they have to for a particularly important reason since even people that are very competent with math and use it daily have to slow down to read a heavy math paper carefully and they don't want to expend the time unless they have to.

The proportion of readers (scope of communication) is inversely proportional to the math involved.

The other problem involved in social science vs natural science is that formalization and mathematization often results in superficiality because of restrictive assumptions for tractability. In fact it was not even practical to model very complicated or complex systems without the development of digital technology.

In addition, all the data that is relevant in social systems is not quantitative and must be quantified, which requires methodological choices based on decision criteria that often are normative.

Using math and statistics in social science is fraught with methodological pitfalls, too, as math people often point out.

Tom Hickey said...

Lars addresses this today.

The use of mathematics in physics and economics

Ramanan said...

Yep, as Tom says not so easy. Even Stephen Hawking said in his book "A Brief History of Time" that he was warned that each additional equation he writes would reduce readership by 50%.

But it's still true that one has to go beyond nuance. It's fine as long as MMT simplifies when talking to people who are not that as interested in economics as academicians but still interested enough. That's fine. But MMT says similar things about trade even when talking with serious people.

The real position is not much more nuanced that the "exports are a cost, imports benefits". And of course this line doesn't appeal to people who have voting power because: China.

My points aren't about the communication issue.

Matt Franko said...

Neither are mine, mine are about cognition/cognitive ability and associated teaching methodologies iow we must recognize both cognitive ability and teaching methods all the time..

Look at Mike up thread talking to this new DNSA idiot back at Fox:

"We were discussing the economy and she started talking about how America is "broke" and "China is our banker." I asked her if the U.S. would run out of dollars? She just looked at me as if I was completely off my rocker. I repeated, "Do you think we will run out of dollars?" She had no response."

So she has the rote statements "US is broke!" and "China is our banker!" down pat which she got from any of numerous scum libertarian outlets... and can easily regurgitate...

But then Mike LEAVES ROTE and goes over to ACTIVE methods by introducing the concept of a flow here: "would US RUN OUT of dollars?" "run" is a flow ie per unit time and she just goes right to tilt because she was never rigorously trained in mathematical methods... sounds like she literally has to just trip off and just goes blank....

These are the people who probably scored in the 300s maybe 400 max in math on their SATs and never were further developed from there....

Her wiki says she got some sort of Art degree from GWU and then "After the Ford Administration, McFarland studied at Oxford University (BA, MA) in Politics, Philosophy and Economics,[citation needed] and the Massachusetts Institute of Technology with concentrations on nuclear weapons, China, and the Soviet Union"

So she is no way anyhow a math person... she cant get it... all non-math training... you need more balance...

Matt Franko said...

do professional golfers not hit like 200-300 balls a day?

or do we think they are "just good!"?

Tom Hickey said...

So she is no way anyhow a math person... she cant get it... all non-math training... you need more balance...

Hmm. I wonder how she got into a PHD program at MIT with low math scores in a discipline that was undoubtedly heavy in game theory and decision analysis using math models.

Matt Franko said...

Ummm, 1 she is female (Title IX) and 2 had Ford admin/CFR connections...

Matt Franko said...

Btw did she finish?

Tom Hickey said...

Did not complete her dissertation, which is not unusual. About half of PhD candidates that are ABD (all but dissertation) don't complete their dissertation. There are a lot of a reasons but one common one is that being ABD one has finished the course work and is employable. A lot of people just don't find the time or have the discipline to finish once they are working.

But regardless of whether she finished, I can't imagine that she was a math dummy and was working in a strategy program at MIT. Not credible.

Tom Hickey said...

I don't think that math competence shows anymore than that one is "smart." There are plenty of math "experts" that are morons when it comes to other matters, such as economics. There are two basic problems, it seems. The first is GIGO. Math doesn't turn garbage into gold. The second is assumptions. Very "smart" people start with loony assumptions, e.g., because they don't understand operations, for example, or can't distinguish among different contexts whose difference is relevant, like different monetary arrangements. Math is not going to help in this regard because it is a matter of getting out more, or at least looking out the window.

Calgacus said...

Was writing something to respond to Ramanan's economic confusions being spread here, on not infertile ground apparently. But I must immediately respond to basic confusions about mathematics & simplicity here. As mathematicians know: Gooder math is simpler, easier than less gooder math. But it can take a long time to think things gooder, because as Barbie said: "Math is hard." Simple ideas come last.

For instance the MMTers "exports are a cost, imports are a benefit" is not something oversimplified, that needs to be be refined - or rather confused - by misapplication of Thirlwall's law etc. If one ignores finance (which one should not, usually) of course ("real") exports are a cost, (real) imports are a benefit. If one doesn't ignore finance, but counts exports or imports of dollars etc, then it is something absolutely true, something that it is impossible to think otherwise about. Sure, like the rest of MMT it is "obvious", but the point is that it is important to take the point of view of not-ignoring-the obvious, of accounting. Its importance is that it is from the right point of view, the sort of point of view that shows the irrelevancy, illogic and untruth of Ramanan's & others' obscurantism.

In math, especially good math and good economics, like MMT, one can follow every step with baby steps that you can explain to anyone. The path may be long, but it all fits together. On the other hand, much "economics" is stuff that looks like math to a non-mathematician, but either isn't, or is "math" misapplied to an irrelevant case, as here with the silly mistatement and claim of Thirlwall's law magically restricting growth. MMT learners should not recapitulate the history of "Keynesianism", which added so much useless complication, detail and nuance that the Keynesians ended up discarding simple truths, solid regulative ideas in favor of stuff whose nonsensical nature and irrelevancy to the real world was obscured by its pointless complexity.

For those who want some writing on the mathematician's view of math and simplicity, today's recommendation is a look at Springer's wonderful new translation of the great Felix Klein's Elementary Mathematics from a Higher Standpoint. As the translator points out, even translating the title's "Hoher" as "Advanced" earlier was wrong. Klein's point was as I said above - much progress, the most important progress makes things simpler, not more complicated. However much bad writing, confusion, ignorance and consequent undersimplification temporarily obscure this.

Matt Franko said...

Cmon Tom her wiki says she was writing foreign policy speeches when she was a freshman at GWU already... she is probably some donor's daughter or something ...

Tom Hickey said...

All I hear is speculation.

Matt Franko said...

Darwin got a lot of mileage on speculation....

That "math" is just thick algebra Tom....

I'd assume she might use the phrase "let's not go off on a tangent"....

You'd ask her what that means and she would say "not get off the subject" or something ok probably...

Then slide her a piece of paper and a pencil and tell her to sketch up a quick tangential geometry diagram and she would have no idea what to do...

Tom Hickey said...

Cmon Tom her wiki says she was writing foreign policy speeches when she was a freshman at GWU already... she is probably some donor's daughter or something ...

More likely she is a proponent with the game theory and decision analysis that are the staple of US strategic thinking about nukes, coming out of MIT. That's what scares me.