Thursday, February 13, 2020

Politicians Who Want Us to Live Beyond Our Means — Peter Cooper

Politicians often tell us that we should live within our means. Quite right. Unfortunately, many of them do not appear to understand what this actually entails when it comes to fiscal policy. So far as most economists are concerned, the events of the last decade have thoroughly discredited advocates of austerity. Yet, it remains quite common to hear politicians from across the political spectrum calling for reductions in fiscal deficits or even fiscal surpluses. There appears to be little awareness that, in most countries, a call for a fiscal surplus is, literally, a call for the society to live beyond its means.... 
Excellent  summary. Save it and pass it on.

heteconomist
Politicians Who Want Us to Live Beyond Our Means
Peter Cooper

15 comments:

Matt Franko said...

"Here is a simple accounting relationship. It is an identity, true by definition:

Government Balance + Domestic Private Sector Balance + Foreign Balance = 0"


if it was that "simple!" then everybody would understand it....

This is like Bill saying he could substitute 2 years of Calculus in a few minutes of a free lecture...

MMT is getting NOOOOOOOOOOOOOOOOOO_WHHHHHHHHHEEEERRRRRRRRE....

#pedagogyfail

Matt Franko said...

"Politicians Who Want Us to Live Beyond Our Means"

Yo they DO NOT want us to live beyond our means...

This is an Irony Peter is employing here IT... WILL... NOT.... WORK...

https://en.wikipedia.org/wiki/Irony

"Irony (from Ancient Greek εἰρωνεία eirōneía, meaning 'dissimulation, feigned ignorance'[1]), in its broadest sense, is a rhetorical device, literary technique, or event in which what appears, on the surface, to be the case, differs radically from what is actually the case."

You Art Degree people endlessly employing your figurative language... HAS not worked.... IS NOT working.... WILL NOT work ever....

Bob said...

Maybe the title should read: Politicians Who Want Us to Live Without Any Means

S400 said...

“You Art Degree people endlessly employing your figurative language”

Art Degree Envy.

Matt Franko said...

Competent technocracy is not an applied Art its applied Science...

finger painting is applied Art...

AXEC / E.K-H said...

MMTers: too stupid for simple math
Comment on Peter Cooper on “Politicians Who Want Us to Live Beyond Our Means”#1

Peter Cooper asserts: “Here is a simple accounting relationship. It is an identity, true by definition: Government Balance + Domestic Private Sector Balance + Foreign Balance = 0.

This identity composes a nation’s economy into three broad sectors. The government sector spends and taxes. The domestic private sector spends (households consume, businesses invest) and receives income. The foreign sector receives payments from, and makes payments to, domestic residents.

A sector is in surplus (its financial balance is positive) when its total spending is less than its income or revenue. Conversely, a sector is in deficit (its balance is negative) when its total spending exceeds its income or revenue. The accounting identity shows that the balances of the three sectors must sum to zero. If one sector maintains a surplus, at least one of the other sectors must be in deficit.”

Matt Franko echoes: “‘Here is a simple accounting relationship. It is an identity, true by definition: Government Balance + Domestic Private Sector Balance + Foreign Balance = 0’ if it was that ‘simple!’ then everybody would understand it …”.

Good point. MMTers definitively do NOT understand it. Neither does the rest of the basket of deplorables who have successfully completed Econ 101.

Eric Tymoigne, for example, asserts#2: “First, regarding the identity itself, for a domestic economy we have, in terms of economic flows: GFB + PDFB + RWFB ≡ 0.

With PDFB the private domestic financial balance, RWFB the financial balance of the Rest of the World, and GFB the government financial balance. This identity holds all the time, in any domestic economy (in a world economy RWFB disappears). For economic analysis, it is insightful to arrange this identity differently in function of the type of monetary regime. In a country that is monetarily sovereign the federal government has full financial flexibility. By monetary sovereignty, one means that there is a stable and operative federal/national government that is the monopoly supplier of the currency used as ultimate means of payment in the domestic economy, and that the domestic currency is not tied to any asset (like gold) or foreign currency.” and “This means that, for a monetarily sovereign country, the most insightful way to arrange the national accounting identity is: −GFB ≡ PDFB + RWFB or −GFB ≡ NGFB.

Where NGFB is the non-government financial balance (the sum of the financial balance of the private domestic sector and the Rest of the World). This way of arranging the identity shows well that the government sector (through its federal branch) is the ultimate provider/holder of domestic currency: government fiscal deficit (surplus) is always equal to non-government financial surplus (deficit).”

All this is provably false.#3-#8 To begin with, the number of sectors is FOUR: household sector, business sector, government sector, and Rest of the World. Accordingly, the axiomatically correct balances equation reads (X−M)+(G−T)+(I−S)−(Q−Yd)=0. Legend: Q macroeconomic profit, S household sector saving, G government expenditures, T taxes.

The sectoral balances equation reduces to −S=Q when the economy is reduced to the household and business sector. And it reduces to G−T=Q when the economy is reduced to the government and business sector, that is Public Deficit = Private Profit.

Note that neither Peter Copper nor Eric Tymoigne ever tell one anything about macroeconomic profit Q which is the balance of the business sector. One would think that this balance plays a central role in any description of the monetary economy. Obviously, it does NOT and this tells one something important about economics and economists: economics is failed/fake science and economists are either stupid or corrupt or both.

Egmont Kakarot-Handtke

References
https://axecorg.blogspot.com/2020/02/mmters-too-stupid-for-simple-math.html

Matt Franko said...

"Maybe the title should read: Politicians Who Want Us to Live Without Any Means"

Yes, that would be literal and accurate not figurative...

S400 said...

“Competent technocracy“
Disqualify Matt then. Being driven by art degree envy doesn’t make you technocracy competent.

Matt Franko said...

S, I posted an old Bob Ross video upthread for you... I promise no Math or Science involved... enjoy!!!!

Matt Franko said...

"that is Public Deficit = Private Profit."

Egmont the libertarians will N_E_V_E_R accept that... they just will not...

They rather think that (since the govt Treasury issues financial securities to create the non-govt assets) that the govt is BORROWING the munnie from the public...

If for libertarians, it ever came to the point where they had to accept that all of their munnie was govt issued assets they I dont know they would probably hang themselves or something.... they just wouldnt be able to go on...

AXEC / E.K-H said...

Matt Franko

You say: “‘that is Public Deficit = Private Profit.’ Egmont the libertarians will N_E_V_E_R accept that... they just will not....”

Economics is a science according to its self-definition since the founding fathers. Science runs on the criterion true/false with true/false defined as material/formal consistency and NOTHING else. In science, it is a matter of indifference what libertarians think or accept or not accept. Libertarians are political agenda pushers and NOT scientists. The opinions of anti-scientists/politicians/trolls are irrelevant in science. Science is about knowledge, politics is about opinions. Opinions are worthless, and politicians are known to be utterly stupid creatures.

Money does NOT come into the economy by government deficit-spending. Imagine that the balances of the government and the household sector are zero, that is, all sectoral balances are zero, does this means that no money comes into the economy? NO! It is the Central Bank that issues the transaction money, i.e. finances the wage bill Yw with C=Yw and G=T and Q=0.#1-#5

Scientists listen to what the math says and NOT to what political agenda pushers say. And the math says that the MMT balances equation is false. MMT is refuted on all counts.

Egmont Kakarot-Handtke

#1 The ultimate ― analytical ― origin of money
https://axecorg.blogspot.com/2017/07/the-ultimate-analytical-origin-of-money.html

#2 How money emerges out of nothing ― the functional account
https://axecorg.blogspot.com/2017/07/how-money-emerges-out-of-nothing.html

#3 Basics of monetary theory: the two monies
https://axecorg.blogspot.com/2017/10/basics-of-monetary-theory-two-monies.html

#4 The right and the wrong way to bring money into the economy
https://axecorg.blogspot.com/2019/07/the-right-and-wrong-way-to-bring-money.html

#5 Criminals and the monetary order
https://axecorg.blogspot.com/2019/10/criminals-and-monetary-order.html

S400 said...

” I posted an old Bob Ross video upthread for you..”

Yes I saw that and now I know how deep your Art degree envy is as you think that is great art.

S400 said...

That finger painting class is more Matt’s level of understanding. Keep up the good work. Some day you will become an artist in your mother’s eyes.

Bob said...

There are people who believe that art = technical accuracy.

S400 said...

“Sorry finger painting time is over with this one.. back to work...”

Put that finger painting course into your CV.