tag:blogger.com,1999:blog-2761684730989137546.post4308022753849433627..comments2024-03-28T07:50:06.102-04:00Comments on Mike Norman Economics: Mean Squared Errors — The Microfoundations Hoaxmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-2761684730989137546.post-40889982088404788062016-09-21T02:41:39.785-04:002016-09-21T02:41:39.785-04:00Jose Guilherme: Yet there are some statements by K...Jose Guilherme: <i>Yet there are some statements by Keynes that seem to be incompatible with many of the ideas proposed by Lerner, the post-Keynesian school in general and MMT in particular.</i> <br /><br />Yes, sure. But (a) people change their minds (b) Lerner didn't say that Keynes was always right, even eventually right. Pioneering work in any field is often awkward, inconsistent, confused or confusing. So I think the better course is to emphasize what ones predecessors got right (otherwise knows as where they agreed with you) rather than crowing over what they got wrong. If that's "Whig history", good. <br /><br />But also (c) one should be careful about claiming incompatibility, rather than searching for consistent interpretations. It is true that the creditary/financial/banking emphasis of his earlier work "practically disappeared" as Schumpeter said, and "Orthodox Keynesianism reverted to the earlier view." Minsky noted it could safely do so, for a while after the 40s, because of the wide and large holding of government debt, very different from the 20 & 30s. <br /><br />What Keynes seems to be saying in that passage is not "the earlier view" deposits create loans, savings causes investment. One should assume he still holds that loans create deposits, investment (borrowing, government spending) causes savings. SO I think he is noting that unless there are genuine savings desires, this can cause crowding out, inflation etc. That's why he was for targeted spending, once the depths of the depression was over, not "orthodox Keynesianism" demand management, which did cause inflation and stagflation then and later. Keynes and Lerner did understand that in the 40s and 50s - as MMTers noted - but understood that it did NOT contradict the basic Keynes/Kalecki/MMT/FF framework.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-60827294039852706412016-09-19T08:58:11.919-04:002016-09-19T08:58:11.919-04:00Matt, I am not trying to give you a hard time, I&#...Matt, I am not trying to give you a hard time, I'm just trying to clarify what you are a saying. I have no idea what is it. From what I gather from other comments, I suspect it is not just me.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-15218320874573251222016-09-19T08:54:08.466-04:002016-09-19T08:54:08.466-04:00Thats a gross over-statement Tom...
Then you need...<i>Thats a gross over-statement Tom...</i><br /><br />Then you need to specify what you mean by determinism in this context. <br /><br />For example, chaotic systems are deterministic mathematically but owing to measurement issues appear to be random.<br /><br />Are you referring to a chaotic system?<br />Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-34480113198886235422016-09-19T08:31:48.990-04:002016-09-19T08:31:48.990-04:00"Right. No use asserting determinacy without ..."Right. No use asserting determinacy without some equations with measurable variables."<br /><br />Thats a gross over-statement Tom...<br /><br /><br />And btw you guys are starting one of those unqualified "Jacksonville on Saturday!" conversations again with this Keynes stuff...<br /><br />Neil: "The context in which he did – a Gold Standard world – is generally ignored."<br /><br />Keynes has nothing to add to the post 1971 discussion...<br /><br />Here: "It is impossible that the intention of the entrepreneur who has borrowed in order to increase investment can be come effective(except in substitution for investment by other entrepreneurs which would have occurred otherwise) at a faster rate than the public decide to increase their savings:<br /><br /> = "banks lend out the deposits!" = gold standard conditions...Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58230449252456891872016-09-18T23:59:31.176-04:002016-09-18T23:59:31.176-04:00Yet there are some statements by Keynes that seem ...Yet there are some statements by Keynes that seem to be incompatible with many of the ideas proposed by Lerner, the post-keynesian school in general and MMT in particular. Maybe that's what led Bill Mitchell to his positions.<br /><br />Take for instance this passage of the "General Theory" (1936 edition, pp. 82 and ff., as quoted by Richard Werner):<br /><br />“The notion that the creation of credit by the banking system allows investment to take place to which ‘no genuine saving’ corresponds can only be the result of isolating one of the consequences of the increased bank-credit to the exclusion of the others.…It is impossible that the intention of the entrepreneur who has borrowed in order to increase investment can be come effective(except in substitution for investment by other entrepreneurs which would have occurred otherwise) at a faster rate than the public decide to increase their savings. … No one can be compelled to own the additional money corresponding to the new bank-credit,unless he deliberately prefers to hold more money rather than some other form of wealth.…Thus the old-fashioned view that saving always involves investment, though incomplete and misleading, is formally sounder than the new fangled view that there can be saving without investment or investment without ‘genuine’ saving.”<br /><br />This passage led Schumpeter to comment thus (in his "History of Economic Analysis"): <br /><br />"(The) deposit-creating bank loan and its role in the financing of investment <i>without any previous saving up of the sums thus lent</i> have practically disappeared in the analytic schema of the General Theory, where it is again the saving public that holds the scene. Orthodox Keynesianism has in fact reverted to the old view …. Whether this spells progress or retrogression, every economist must decide for himself”Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-52353081350997641222016-09-18T23:33:21.071-04:002016-09-18T23:33:21.071-04:00Bill Mitchell, Keynes would not support fiscal aus...Bill Mitchell, <a href="http://bilbo.economicoutlook.net/blog/?p=18523" rel="nofollow">Keynes would not support fiscal austerity</a><br /><br /><i>As Keynes’ view unfolded over the bleak 1920s in Britain he did argue that governments should run deficits when private spending declined and reduce those deficits when future growth was strong enough. The intent was that the budget was to be more or less balanced over the business cycle.<br /><br />He never argued that governments should start cutting back deficits now and create surpluses just in case private spending growth is strong in the future. He readily understood how pro-cyclical policy would undermine private confidence.<br /><br />In the context of today, with private spending still weak, notwithstanding some evidence that private investment might strengthen over the next few years, Keynes would worry about the negative consequences of a further weakening of aggregate demand and national income generation arising from a harsh fiscal contraction.<br /><br />Further, in the context of the time, the classical economists (who Keynes’ discredited) advocated balanced budgets each year – the sort of rules that are now being discussed by conservatives.<br /><br />So Keynes was reacting to that and noted that such a rule would be inflexible and damage the chances of the economy achieving full employment. His view was that budgets might be balanced over the business cycle if that was consistent with full employment.<br /><br />He also favoured running balanced budgets on the recurrent (operational) budget – that is, consumption spending and allowing the capital works budget to vary over the cycle. This was consistent with his view that the principle fiscal intervention should come from regionally-targetted public works schemes aimed at maximising the employment dividend from the fiscal outlays.<br /><br />The capital budget would be the vehicle for balancing over the cycle if that was appropriate. If you examine the current Australian government policy and its proposed fiscal retrenchment you will not see that sort of approach being adopted.<br /><br />But Keynes would never has agreed to the blind administration of a fiscal rule of the type the Australian government or other governments are pursuing. He would never have agreed to “forward-looking” pro-cyclical fiscal policy.</i>Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-34971398611760012092016-09-18T22:42:18.237-04:002016-09-18T22:42:18.237-04:00Neil disagrees with that comment above. During the...Neil disagrees with that comment above. During the last go round on this at billyblog, Neil adduced the best evidence for this view - an old paper by Kregel. But it falls short. IIRC, Kregel was arguing as a corrective against simpleminded "hydraulic Keynesianism", which doesn't exist any more, and one must remember this; otherwise Kregel clearly overstates his case, for nobody has an actual Keynes statement that is strong enough. Found another old paper arguing sort of against Kregel's position that I thought got it better. I may try to dig it up.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-14979720762758469942016-09-18T22:14:53.333-04:002016-09-18T22:14:53.333-04:00Peter Cooper, Balancing the Budget Over the Cycle
...Peter Cooper, <a href="http://heteconomist.com/balancing-the-budget-over-the-cycle/" rel="nofollow">Balancing the Budget Over the Cycle</a><br /><br />Neil Wilson comments there:<br /><br /><i>Half the reason there is an obsession with balanced budgets is because Keynes mentioned it at some point.<br /><br />The context in which he did – a Gold Standard world – is generally ignored.</i>Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-79204687682845768212016-09-18T22:00:44.347-04:002016-09-18T22:00:44.347-04:00Lerner repeatedly attributed the main ideas of Fun...Lerner repeatedly attributed the main ideas of Functional Finance to Keynes, even after Keynes's death. So one of Mitchell & Lerner is not reliable on the intellectual history, and I don't pick Lerner. For some reason Mitchell doesn't like Keynes, and even though he calls "Keynes’ offerings" "antithetical to the foundational blocks of MMT" - a remarkably silly statement imho, refuted by the many times that Mitchell quotes Keynes with approval, I think he has moderated somewhat and moved closer to the other MMTers over the years. Of course one shouldn't establish a personality cult of Keynes. But one can err in the other direction too.Calgacushttps://www.blogger.com/profile/06031818010224747000noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56386867874305001152016-09-18T10:09:43.548-04:002016-09-18T10:09:43.548-04:00As far as we know Keynes never said that.
OK, I e...<i>As far as we know Keynes never said that.</i><br /><br />OK, I exaggerated somewhat in simplifying. I was thinking of Bill's post, <a href="http://bilbo.economicoutlook.net/blog/?p=31681" rel="nofollow">The roots of MMT do not lie in Keynes</a>, which is more nuanced.<br /><br />Bill concludes with this: <br /><br /><i>In this regard, the work of Abba Lerner in the 1940s on Functional Finance is much more seminal to the development of MMT than was Keynes’ offerings, which I believe are antithetical to the foundational blocks of MMT.<br /><br />Progressive narratives should aim to educate the public as to the need in normal times for continuous fiscal deficits. Then we would start getting somewhere.</i>Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-82513945345138992312016-09-18T08:06:09.651-04:002016-09-18T08:06:09.651-04:00"hat the budget needs to be balanced over the..."hat the budget needs to be balanced over the cycle like Keynes did."<br /><br />As far as we know Keynes never said that. <br /><br />Truth by repeated assertion. NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-26880263176131010102016-09-17T11:51:26.601-04:002016-09-17T11:51:26.601-04:00Right. No use asserting determinacy without some e...Right. No use asserting determinacy without some equations with measurable variables.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-67734727806225021092016-09-17T11:44:22.980-04:002016-09-17T11:44:22.980-04:00Working on it...Working on it...Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-70088862929734894162016-09-17T10:28:11.766-04:002016-09-17T10:28:11.766-04:00Tom those old people offer us nothing in this.... ...<i>Tom those old people offer us nothing in this.... nothing... from a deterministic perspective...</i><br /><br />Write up the functions.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-30226271655204936002016-09-17T10:27:34.563-04:002016-09-17T10:27:34.563-04:00Matt, I agree that everything changed in 1971, but...Matt, I agree that everything changed in 1971, but that doesn't mean that all previous ideas about finance and economics became completely irrelevant thereafter.<br /><br />Just as important is the shift in the monetary system post-1971 is the dominance of the global economy and almost no economists are basing economics on the global economy as closed system. Finally, economics is the only field that purports to be scientific that disregards consilience, that is, that scientific knowledge must mesh as a whole and that anomalies among field must be accounted for.<br /><br />Most economists are living in their own imaginary worlds.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-81728036860105945952016-09-17T10:02:43.230-04:002016-09-17T10:02:43.230-04:00Tom those old people offer us nothing in this.... ...Tom those old people offer us nothing in this.... nothing... from a deterministic perspective...Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-32025075461115098492016-09-17T10:00:06.185-04:002016-09-17T10:00:06.185-04:00Tom none of those other people (sans the Greeks) m...Tom none of those other people (sans the Greeks) made those statements when we were not under the metals... this is a differentiation...<br /><br />Even the Eccles guy and the Ruml guy were operating a system under the metals if you look at Eccles complete writings he was monetarist....<br /><br />These MMT people are the first ones to say it post 1971 so they have complete justification to say their thinking is new imo.... <br /><br />F all those other old people... you cant look at how they were approaching this they were operating under metals... we have different conditions now...<br /><br />Youre saying that because a weather forecaster said two days ago that it would rain today they still have to say it is going to rain today even though the updated forecast calls for 100% clear skies today... nobody does this...<br /><br />Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17475234621443636112016-09-17T08:59:49.435-04:002016-09-17T08:59:49.435-04:00It's good to remind that most of the ideas on ...It's good to remind that most of the ideas on which MMT is based are not new but have a long history. Plato and Aristotle got it right about the legal basis of money, for example. Marx and the Institutionalists going back to Veblen also showed how methodological individualism is wrong in that social relations are determinative. Keynes called attention to the difference between a monetary production economy and a barter economy and why modeling contemporary economics based on barter was doomed to failure. Marriner Eccles and Beardsley Ruml called attention to the ridiculousness of the notion that the currency issuer can run out of currency, as Ben Franklin had pointed out long before.<br /><br />If MMT were entirely new, there might be some excuse that economists had overlooked these matters. But when most of them were known already, there is no excuse. It's professional malfeasance and they should all be fired.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-162212271795973902016-09-17T08:16:14.604-04:002016-09-17T08:16:14.604-04:00"standing on the shoulders of Giants"
M..."standing on the shoulders of Giants"<br /><br />More like crushing the pea-brains of these morons going all around saying "we're out of money!"<br /><br />Tom, imo that's a bad thing when these MMT elites go around saying that "we're standing on the shoulders of giants blah blah...."<br /><br />Its weak.<br /><br />They say this in response to morons asserting that they havent got anything new... its absurd... then they weakly reply "oh no!... we are standing on the shoulders of giants! youre right Mr. Academe!... youre right Mr New Keynes! youre right Mr. Post Keynes!... youre right Mr. blah blah!... hey lets invite James Grant to our conferences!"<br /><br />Its pathetic...<br /><br /><br />Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-45743750392700421032016-09-17T08:04:19.149-04:002016-09-17T08:04:19.149-04:00"It's stupidity."
Well I'm not ..."It's stupidity."<br /><br />Well I'm not going to argue with you there....Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-19079010990512917162016-09-16T20:46:04.977-04:002016-09-16T20:46:04.977-04:00"If I have seen further it is by standing on ..."If I have seen further it is by standing on the sholders of Giants."<br />Issac Newton, L<a href="https://en.wikiquote.org/wiki/Isaac_Newton" rel="nofollow">etter to Robert Hooke</a> (15 February 1676)<br /><br />Previous contributions need to be recognized and they should be represented for what they were rather than misrepresented either out of ignorance or sophistry. People like Darwin, Marx and Keynes made significant contributions that need to be acknowledged but they should not be worshipped as ultimate authorities when the world has moved on.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-49679957629676776342016-09-16T20:05:12.601-04:002016-09-16T20:05:12.601-04:00that the budget needs to be balanced over the cycl...<i> that the budget needs to be balanced over the cycle </i><br /><br />That this claim is the height of absurdity can be concluded by just looking at the data.<br /><br />What's the total outstanding public debt in the US.? $18 trillion? Well, that's the balance of two centuries of deficits minus surpluses. Clearly the budget never balanced (far from it) over the several cycles. Deficits won by a gigantic margin. And the U.S. Economy didn't collapse: it just became the largest in the world (perhaps to be superseded by China, another country that does not care about "balancing budgets over the cycle").<br /><br />New Keynesian economists who constantly make such claims of about "balancing over the cycle" are simply clueless. Throw them out and take MMT in, as soon as possible.Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-42923881133654227342016-09-16T19:53:38.906-04:002016-09-16T19:53:38.906-04:00"As Michael Hudson and others have pointed ou..."As Michael Hudson and others have pointed out, neoclassical economics was a step basked from classical economics" should be back instead of basked.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-889607130589191932016-09-16T19:50:16.521-04:002016-09-16T19:50:16.521-04:00Why are we still talking about Keynes?
Who is ta...<i>Why are we still talking about Keynes?</i><br /><br /><br />Who is talking about Keynes in a Post Keynesian setting? Oh right, the deficit doves who think that the budget needs to be balanced over the cycle like Keynes did.<br /><br />The MMT position is that this is flat out wrong.<br /><br />Bill Mitchell actually ignores Keynes and traces his own intellectual development from Marx through Kalecki rather than Keynes, whom he criticizes as a deficit dove.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-29346956555365068632016-09-16T19:45:31.364-04:002016-09-16T19:45:31.364-04:00Why are we still talking about Marx?
Because cont...<i>Why are we still talking about Marx?</i><br /><br />Because contemporary economists have not yet caught up with some of the significant things he brought out. Although they are dated and need to be updated, as contemporary Marxists and Marxians have, contemporary economists have ignored them as irrelevant.<br /><br />BTW, sociologists do use ideas derived from Marx applied to historical and contemporary data.<br /><br />As Michael Hudson and others have pointed out, neoclassical economics was a step basked from classical economics in important respects that contradict the contemporary ideology of economic liberalism.<br /><br />Biology moved froward from Darwin with genetics and molecular biology, while neoclassical economics moved backwards with methodological individualism and marginalism based on it..Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.com