tag:blogger.com,1999:blog-2761684730989137546.post4393570407070402987..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: The Missing Linkmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2761684730989137546.post-5826241894691328402011-03-28T17:46:35.446-04:002011-03-28T17:46:35.446-04:00The darn thing is that it is so second nature to t...The darn thing is that it is so second nature to the mainstream, that the assumption isn’t mentioned out loud. Hence, non-economists don’t even get a chance to say, “Whoa! What??!” because they never hear it said. Why do they so cavalierly assume full employment (or at least a strong tendency thereto)? I think there are a couple of reasons, one being that the complex mathematical models become indeterminate without it. And there are no tradeoffs. Remember that high-school level definition of the discipline? “The science of scarcity.” That’s a full-employment world.<br /><br />What a perverse world in which those who assume that financial crises and recessions can’t really happen are the ones who get to decide how to fix them.John Harveyhttps://www.blogger.com/profile/03555187626769532267noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-42571804530240902122011-03-28T15:57:24.909-04:002011-03-28T15:57:24.909-04:00Thanks, John. I was thinking in terms of a "C...Thanks, John. I was thinking in terms of a "Copernican revolution" in economics rather than a <i>fait accompli</i>.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84577027182713834972011-03-28T14:51:11.042-04:002011-03-28T14:51:11.042-04:00John,
This is the crux of it for many of us non-e...John,<br /><br />This is the crux of it for many of us non-economists wrt MMT, ie the full employment issue, and how MMT shows us the way to get there.<br /><br />Tom touched on it, and I get this from Prof Wray: When the govt moves in with a coercive spend/tax system in order to provision itself, everyone is immediately unemployed by mathematical definition.<br /><br />This fact is hard for many to "see" or visualize. One needs highly mathematical cognition to see this abstract concept.<br /><br />The problem may be historically that that same govt is the monetary authority. So you have a govt that first and foremost is just trying to provision itself (think of our ancient Roman ancestors moving into Brittania 2,000 years ago, how many denarius did they know to take with them? 4 jars per legion? 5? They didnt know how many people were in Brittania and they didnt care, they just needed their legions provisioned so they took along enough coinage to do so, probably a ratio of denarius to soldiers that they used) and spending enough to do so, but then it doesnt realize that as everyone then wants to start trading/saving in that same unit that govt has to run deficits (ie spend more than it takes in) in order to leave enough units "circulating" in the non-govt sector to allow all desired transactions to settle.<br /><br />From my point of view, govts typically do not recognize this requirement for them to get more than just the amount THEY (govt) need in "circulation". Then it quickly becomes who can screw the next person out of their tax units.... and stay out of jail... etc...<br /><br />This is a good point I hope you stay on it. From my experience many are attracted to MMT solely just for the full employment aspects.<br /><br />Resp,Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-54587673150716283082011-03-28T14:05:35.555-04:002011-03-28T14:05:35.555-04:00Close enough, Tom. I would only add that a) the Ke...Close enough, Tom. I would only add that a) the Keynesian revolution never took place since the mainstream adopted a concept or two of his and superimposed it on their full-employment model and b) deficit spending, per se, has never been the core of Post Keynesian (i.e., economics of Keynes) economic policy. It's the means, but not the end. Keynes called the socialization of investment (large-scale government investment projects), while modern PKers have argued for employer of last resort schemes.<br /><br />But, yes, that was *supposed* to be the core of the Keynesian revolution: involuntary unemployment is the rule, not the exception, in a free-market economy.John Harveyhttps://www.blogger.com/profile/03555187626769532267noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-84013665987039723652011-03-28T13:28:32.609-04:002011-03-28T13:28:32.609-04:00John, I would presume that neoliberal models assum...John, I would presume that neoliberal models assume full employment since full employment is the equilibrium state for them to which the economy return after any shock that might disrupt equilibrium. <br /><br />The Keynesian revolution lies in pointing out that taxation and saving constitute demand leakage, so the natural state of a moden economy is unemployment unless fiscal deficits offset the leakage. Is this view correct?Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76029336372045685082011-03-28T07:49:25.855-04:002011-03-28T07:49:25.855-04:00Precisely. This is one of the many areas affected...Precisely. This is one of the many areas affected by the full-employment assumption. To the mainstream, exporting the jobs that had allowed those with just high-school educations to earn a decent living is no problem at all, they say, because other jobs will replace them. Of course, if you are an international trade theorist, this is merely an assumption of your model and not a result of the analysis. One of the very first things you do while setting up comparative advantage is say, "Let's assume full employment." You have to, of course, because comp. adv. depends on the existence of opportunity costs--which are undefined under less-than-full employment since you can have more of something without giving up anything else.John Harveyhttps://www.blogger.com/profile/03555187626769532267noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-28624021683108994622011-03-28T00:14:23.427-04:002011-03-28T00:14:23.427-04:00It seems in fact that US Mainstream Economics over...It seems in fact that US Mainstream Economics over the last two decades, combined with the process of financialization, actively drives unemployment in developed nations such as the USA by placing all domestic labor that can be performed in other countries in price competition with the cheapest labor on the planet. That this will be compensated by the development of new, more sophisticated domestic employments is more assertion than reality.Anonymoushttps://www.blogger.com/profile/15499967375273050301noreply@blogger.com