tag:blogger.com,1999:blog-2761684730989137546.post3273204493760124966..comments2024-03-29T09:32:34.853-04:00Comments on Mike Norman Economics: Progressives, be progressive!mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-2761684730989137546.post-55734580594712502812011-06-18T14:09:31.848-04:002011-06-18T14:09:31.848-04:00Good work, Anonymous.
BTW, MMT is not just base...Good work, Anonymous. <br /><br />BTW, MMT is not just based on the sectoral balance approach and functional finance, with a JG as a buffer of employed and the JB wage serving as price floor.<br /><br />A great deal of MMT analysis is Minskian, and MMT addresses the concern about asset price, wealth inequality, etc., on this basis. It is a reason that MMT prefers fiscal policy to monetary policy, since fiscal policy can be tightly targeted. Tax policy can be design to address the issues you and others raise.<br /><br />For example, Michael Hudson proposes taxing economic rent — land rent, monopoly rent, and financial rent — to discourage rent-seeking behavior and encourage gains from productive contribution both by entrepreneurs and workers. <br /><br />On the other hand, Warren Mosler focuses more on regulation to do this, and Bill Black observes that a lot of the present mess can be addressed legally by enforcing present statute, since it was a criminal enterprise emanating from the top and controlled by the top.<br /><br />Obviously, just pouring money into the present system will just see it funnel to the top, and MMT economists are well aware of this. This sorry state of affairs must be addressed with fiscal policy, and regulation, enforcement, and strict accountability. <br /><br />This will require a political revolution reversing the status quo, since a plutocratic oligarchy has captured the apparatus of the state. I don't think that MMT folks are naive about what is required and how difficult it will be to implement. If you look at Warren Mosler's proposals for the banking system, it would neuter the financial system and return it to old-fashioned banking. <br /><br />That isn't going to easy to accomplish politically, given the power and influence of the financial sector that is skimming a significant portion of GDP with rent.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-75196866669112313432011-06-18T12:36:26.043-04:002011-06-18T12:36:26.043-04:00Just saying, for the record. Macro = Micro scaled-...Just saying, for the record. Macro = Micro scaled-up must be the biggest bullshit spoken out out there.<br /><br />It's completlly ignores how the real world and our current universe works with a pletora of laws which render this vision obsolete. Aparentlly most economists lack scientific formation and are unable to learn from other complexity sciences (which are actually, all, including physics, which does also take place in our caotic, uncertain and stochastic universe). And no, building pretty mathematical models w/o empirical foundations and not testable/falsable is not scientific.<br /><br />Also 'austrian economics' ignore some of the things Marx actually got right: capital accumulation, falling rate of profits, etc. and the problems they cause in a procyclycal system (like capitalism is, thanks to the very nature of money, which is not just an evolution of 'barter economics' like the missguided Robinson Crussoe story tries to explain) and get disguised in the 'business cycle'<br /><br />The solution from MMT perspective to this is inflationary (constantlly increasing the money supply, either by the means of debt-based money (credit money), or by the means of fiat, government based high powered money (and eventually, it's all about the fiat, as credit money is just a liability from the financial system to the CB/government, and MMT acknowledges this). I don't like this because I think the money problem is not just a flow problem, but also a stock problem. And building huge stocks of money supply is by its nature procyclical (asset bubbles, financialization and speculation-driven economy, etc.) <br /><br />I would actually like a stronger proposal to propping up the money circulation instead on relaying in just ever increasing money supplies, for example a demourage interest rate on financial capital and top 1-10% (progressive taxes); well, even USA had this sort of socialist taxes not so long ago, but guesss what would happen today if politicians where to place 90% taxes on the rentier class. Good job on the 'austrian' propaganda by and for the rich, and great work neoliberalism on globalization of financial capital so it can't be controlled by political power.<br /><br />But I guess making rich people richer will help us at some point, cleaning up all that malinvestment and stuff, right? A combination of Reaganomics, von Mises and Friedman will fix all our troubles.<br /><br />P.D: Praexology is a joke from an epistemic point of view, you may just call it 'faith'.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76688608752446892612011-06-17T19:02:46.876-04:002011-06-17T19:02:46.876-04:00James,
Ed has a couple of posts on MMT that you ...James,<br /><br /> Ed has a couple of posts on MMT that you should be able to locate at Credit Writedowns. If not, I have the URL's on file.<br /><br />Best regards,<br />tomTom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-87187062143244190602011-06-17T15:15:49.711-04:002011-06-17T15:15:49.711-04:00@Tom
Thanks, I will be sure to check Harrison out...@Tom<br /><br />Thanks, I will be sure to check Harrison out!James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-36590397204125305732011-06-17T14:25:20.792-04:002011-06-17T14:25:20.792-04:00James, MMT is "Keynesian" in that it emp...James, MMT is "Keynesian" in that it emphasizes the role of demand in leading investment, so when the economy is underperforming owing to demand deficiency economic policy should be addressed toward increasing effective demand by injecting net financial assets into nongovernment. Conversely, when demand exceeds the ability of the economy to meet it, then NFA need to be withdrawn by taxation. The difference between MMT and other "Keynesian" approaches is that MMT emphasizes fiscal policy over monetary policy.<br /><br />I have asked MMT professionals about the Austrian malinvestment argument for liquidation and the response I got I stated above — basically, that a crisis not the time to address malinvestment, especially when debt-deflation is a major factor.<br /><br />Ed Harrison of Credit Writedowns is an Austrian economist who accepts the MMT operational description but disagrees with MMT over its treatment of malinvestment.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-18456026953484959062011-06-17T08:55:09.124-04:002011-06-17T08:55:09.124-04:00From that description, MMT seems very Keynesian to...From that description, MMT seems very Keynesian to me. I guess it comes down to Austrians wanting to let the chips fall so that real economic recovery can began as soon as possible (which also serves as an incentive for the government and other actors to not make the same mistakes again) while Keynesian/MMT want to cushion the fall while dragging out the recovery even more. Of course MMT holds that stimulus efforts should be greater but political will seems unable to go along with that.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-38249276056003729482011-06-16T21:23:29.611-04:002011-06-16T21:23:29.611-04:00"but in the end I think an overly abundant mo..."but in the end I think an overly abundant money supply leads to misallocations of resources."<br /><br />MMT professionals generally say that misallocation is more a micro consideration than a macro one. Just as banks can and do make imprudent loans, so too government can make poor decisions in allocation to specific projects and programs. While firms are penalized by markets, government's decisions are subject to the democratic process and there are consequences for poor judgment, both for individual politicians and for parties. For example, the bailout was egregiously mishandled due to Wall Street influence, and there was a political cost.<br /><br />MMT holds that malinvestment is generally cured by the market, since capital seeks the highest return and abandons poor return. At the micro level, this happens all the time, other than in busts, when things implode in the same time frame and then cascade. <br /><br />While some say that the best thing to do in crises is to let the market deal with the malinvestment wholesale during crises, MMT disagrees and holds that this involves too great a cost in terms of foregone opportunity and high unemployment, often taking down the good with the bad. Better to cushion the fall and support employment not only for humane reasons, but also the cost/benefit. Economic crises are hugely costly in ways that can never be recaptured. The cost of the inefficient use of capital that occurs in malinvestment is comparatively less.<br /><br />Moreover, owing to cash flow problems (liquidity) and debt-deflation, many otherwise viable firms are liquidated, as well as a great deal of residential and commercial RE. This can result in a debt-deflation depression that is difficult to recover from.<br /><br />Economic policy involves trade-offs. Different groups disagree about what they should be, and also disagree over decision criteria.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-51751094882928595112011-06-16T20:16:35.671-04:002011-06-16T20:16:35.671-04:00I apologize for those words, but I think the Austr...I apologize for those words, but I think the Austrian theory has done very well at disproving the notion that savings on the net are bad for an economy.<br /><br />And you nailed it, we disagree on the fundamentals which means we probably won't convince each other on either of our sides. I see some of the value in MMT in explaining how a fiat economy works, but in the end I think an overly abundant money supply leads to misallocations of resources.<br /><br />I do appreciate the discussion though.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-37731701409017240122011-06-16T19:58:08.069-04:002011-06-16T19:58:08.069-04:00James: "okay, well now you are speaking Keyne...James: "okay, well now you are speaking Keynesian nonsense"<br /><br />Debates generally argue back to fundamentals and people disagree over fundamentals.<br /><br />I generally don't waste time arguing with Austrians because it is just going to end in a disagreement over fundamentals.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-4084130779719987522011-06-16T19:55:23.977-04:002011-06-16T19:55:23.977-04:00Regarding methodological foundations, there is a d...Regarding methodological foundations, there is a difference among extreme methodological individualism, methodological holism, and methodological localism. MMT is more aligned with methodological localism than either methodological individualism or methodological holism. <br /><br />Austrian economics as many see it is based on extreme methodological individualism, which is ground in ontological individualism. Ayn Rand takes this to the far extreme in Objectivism.<br /><br />MMT is basically institutionalist.<br /><br />See Daniel Little on <a href="http://understandingsociety.blogspot.com/2009/11/methodological-localism.html" rel="nofollow">methodological localism</a>methodological localism.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-5527285235048392172011-06-16T19:48:13.520-04:002011-06-16T19:48:13.520-04:00"The Austrian theory is the only one that tak..."The Austrian theory is the only one that takes into account a priori praxeology and individual purposeful action. Micro econ dictates macro econ ultimately, not the other way around."<br /><br />Macro is not micro scaled up. There is a reason that they are considered different branches of economics. Those in the tradition of Keynes generally acknowledge this, while those not partial to Keynes deny it.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-47323405559786422872011-06-16T19:44:06.498-04:002011-06-16T19:44:06.498-04:00"All savings are is a change in time preferen..."All savings are is a change in time preference of the individual, it is putting of current consumption for later consumption. Is it deflationary? Maybe. As long as prices and wages can freely adjust, then I don't see why there would be a problem. Wages are not as "sticky" as Keynes claimed, he just saw the effect of unionization."<br /><br />Saving results in demand leakage in that what is consumed is what is produced. If consumption falls, i.e., aggregate demand falls), then the economy is not producing at full capacity. Since S = I. rising saving results in rising involuntary inventory, which is a signal for business to reduce production or cut prices. Businesses typically choose to cut production instead of reducing prices, and this results in rising unemployment. The Austrian notion of falling prices and falling wages with employment remaining constant is just is not empirically true, even though it may sound good theoretically.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-64523263901710787702011-06-16T19:38:22.886-04:002011-06-16T19:38:22.886-04:00" doesn't it (saving) get lent out to be ..." doesn't it (saving) get lent out to be reinvested?"<br /><br />Not in a nonconvertible floating rate system, where banks do not lend out deposits, nor do they lend against reserves. They lend against capital. They put capital at risk when they extend loans and obtain reserves afterwards.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-47989050607005486912011-06-16T19:08:08.796-04:002011-06-16T19:08:08.796-04:00okay, well now you are speaking Keynesian nonsense...okay, well now you are speaking Keynesian nonsense now. Do you honestly think that when money is saved, it doesn't go anywhere? I mean if it were placed in a mattress, that would be one thing, but if it is placed in a bank, doesn't it get lent out to be reinvested?<br /><br />Savings is necessary for capital accumulation and investment in a hard money economy. Fiat systems may be different (that is the MMT perspective it seems), but I don't see fiat currency systems utilizing resources effectively precisely because money becomes virtually non scarce. MMT seems overly concerned with employment rather thane effective use of scarce resources.<br /><br />And I thought the MMT perspective was that banks are not limited by reserves?<br /><br />All savings are is a change in time preference of the individual, it is putting of current consumption for later consumption. Is it deflationary? Maybe. As long as prices and wages can freely adjust, then I don't see why there would be a problem. Wages are not as "sticky" as Keynes claimed, he just saw the effect of unionization.<br /><br />The Austrian theory is the only one that takes into account a priori praxeology and individual purposeful action. Micro econ dictates macro econ ultimately, not the other way around.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84889808925240446212011-06-16T18:55:10.067-04:002011-06-16T18:55:10.067-04:00The problem with convertibility is money supply be...The problem with convertibility is money supply being fixed to the amount of the numeraire being relatively fixed. What happens is that saving reduces the money supply, making currency harder to obtain, not only cash but reserves. The restriction on reserves limited the amount of debt that can be issued.<br /><br />This is deflationary, lowers aggregate demand, and creates high unemployment because the desire to save resulting in demand leakage cannot be offset with fiscal policy.<br /><br />The reason for a non-convertible floating rate currency is to allow government fiscal space to address rising unemployment. The bugaboo here, which those preferring a fixed rate currency are concerned about, is inflation. MMT is the only macro theory at present that provides a path to full employment with price stability, using the current monetary system.<br /><br />What people advocating a fixed rate system fail to realize is that such a system requires that the currency issuer, here the federal government, to forfeit monetary sovereignty and be ruled by the numeraire and its owners.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-44322084819985898952011-06-16T16:57:51.429-04:002011-06-16T16:57:51.429-04:00Actually, on second thought, if Gresham's law ...Actually, on second thought, if Gresham's law were to be followed and gold and silver would continue to go up in value, wouldn't that then push the dollar out of use? I mean, if silver and gold are able to purchase more than the dollar, one would think that they would be used more than a devaluing currency. I guess it depends on the amount of gold and silver relative to the population in Utah.<br /><br />Would gold and silver be hoarded? Maybe, but it would only be hoarded because it is perceived that it will go up in value later, thereby meaning that people were expecting the dollar to lose value.<br /><br />I may have to think about this a little more, it seems like both possibilities could happen.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-48578010120044844552011-06-16T16:26:31.657-04:002011-06-16T16:26:31.657-04:00@ Tom
You are right, the move is symbolic and mos...@ Tom<br /><br />You are right, the move is symbolic and most likely unworkable if every state doesn't adopt such measures. I was looking at it from the view of Utah accepting gold and silver for payment of taxes, thereby giving it legitimacy and value under the MMT definition of money.<br /><br />But as gold continues to go up in price, Gresham's law will take effect as you say and gold will be held on to.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-29228766887393696142011-06-16T12:15:40.048-04:002011-06-16T12:15:40.048-04:00It won't actually, and Utah has admitted that ...It won't actually, and Utah has admitted that this is symbolic. The coins themselves will not be used in transactions because of the fluctuating value of gold, and the fact that the coins will be denominated as a unit of account. As the value of gold increases against the nominal value of the unit, Greshham's law will drive them out of the market as they are hoarded, being worth more than the nominal value. Of course, prices in Utah could vary with the price of gold, but it is highly unlikely that they would do so, since Utah is linked to the wider US economy. It sounds good on the surface, but it is unworkable practically in a modern economy.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-52591758272529876942011-06-16T11:38:16.032-04:002011-06-16T11:38:16.032-04:00@Tom
I understand the premise of MMT and state de...@Tom<br /><br />I understand the premise of MMT and state determining the value of money, but how would you respond to this:<br /><br />"As of Friday March 25, 2011 the State of Utah becomes the first in the World to make gold and silver coins minted by the United States Mint legal Tender since 1971. Governor Gary Herbert has signed the bill into law.<br />You can see the bill's status here: http://le.utah.gov/~2011/status/hbillsta/hb0317s01.htm"<br /><br />By your definition, doesn't metallic/commodity money now gain the kind of value fiat money does in Utah now? There are bills such as this being considered around the country now, one is in California and I think there may be one in Virginia (not sure though).James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41455034674609802292011-06-15T22:34:39.101-04:002011-06-15T22:34:39.101-04:00James, there are competing theories of "money...James, there are competing theories of "money,: as you know. MMT takes a stance in this controversy that his based on the credit and state theories of money. The credit theory states that all money is someone's financial asset and someone else's financial liability, and this shows up in the double-entry accounting record. State money acquires value because the state only accepts its own liabilities in satisfaction of liabilities to the state, namely, taxes, fees and fines. Modern money is state money that is credit based, that is, a liability of the state.<br /><br />MMT economics do not like the term "money" because it is ambiguous, and they generally avoid it, using specific terms that designate precisely the form of money to which they are referring.<br /><br />Wray uses "money" in his article since it is the statement of a theory of money, the credit-based theory that, combined with the state theory, underlies MMT. It is opposed to the commodity-based theory and metallism.<br /><br />Again, see the summary and references to articles at the MMT Wiki for the theories of money and the MMT approach.<br /><br />I find it difficult to understand how a commodity based theory of money or metallism can be defended at this point in time, when we have a global system based on fiat.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-6893726659541774702011-06-15T21:00:51.340-04:002011-06-15T21:00:51.340-04:00@Tom
You are disproving the Crusoe barter theory ...@Tom<br /><br />You are disproving the Crusoe barter theory by boxing money into a strict definition. I don't think money falls into that definition, but I guess that's where we differ. You are right from an accounting principle point of view but now from a praxeological view, hence why I can't really back MMT.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-89045452248027272232011-06-15T18:44:03.916-04:002011-06-15T18:44:03.916-04:00If all money is someone's financial liability,...If all money is someone's financial liability, as the credit-based theory of money claims, and commodities are real goods, then money is not a commodity. Money is created either as government liabilities (tax credits) or bank liabilities (loans create deposits and deposits are bank liabilities). Similarly, other money-like financial assets are someone else's liability. Only wholly owned real assets are unencumbered.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26733167760631687972011-06-15T17:14:18.879-04:002011-06-15T17:14:18.879-04:00@Tom
I don't have time to look over the artic...@Tom<br /><br />I don't have time to look over the article now, but will later tonight. I still find it hard to believe the Crusoe argument is made up, I mean how else would market transactions necessarily develop? I suppose the article answers that question, but I also find it weird that any paper would present accurate evidence of very ancient economies (I mean pre-aztec, pre-christ, etc.)<br /><br />The Crusoe barter system seems like a logical conclusion to make based on the limited resources people had back then.<br /><br />And what about my question on money as a commodity?James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-71754369194463931572011-06-15T15:46:22.376-04:002011-06-15T15:46:22.376-04:00The Robinson Crusoe barter narrative is a story th...The Robinson Crusoe barter narrative is a story that is made up. Historians of money tell a different story based on historical evidence rather than speculation. "Modern money" is based on debt, and it is at least 4000 years old. See the Innes articles, for example, and Michael Hudson's work. See, for example, <a href="http://michael-hudson.com/2003/03/the-creditarymonetarist-debate-in-historical-perspective/" rel="nofollow">The Creditary/Monetarist Debate in Historical Perspective<br /></a>Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-37644903819021881502011-06-15T14:46:04.003-04:002011-06-15T14:46:04.003-04:00This also seems contradictory:
"Commodities ...This also seems contradictory:<br /><br />"Commodities obtain their value—they become commodities—by exchanging for the<br />universal representation of social value, money. By the same token, obtaining money<br />allows us access to all commodities that are trying to buy money."<br /><br />That passage itself isn't contradictory, but the assertion that money isn't a commodity seems to contradict what this passage says about commodities. So commodities gain value because they are bought by money, yet money is still not a commodity how? Doesn't money have value to that extent as well considering its what is used to purchase commodities in the first place? So if money has value in order to buy commodities, it would seem by the quoted passage above, it would also fall under the purview of a commodity.James E. Millerhttps://www.blogger.com/profile/17915979762298347210noreply@blogger.com