I thought I should share what I found recently about who was to state the sectoral balances identity first – since it comes across as enlightening to say the least. I found the identity in Nicholas Kaldor’s 1944 article Quantitative Aspects Of The Full Employment Problem In Britain.The Case for Concerted Action
Origins Of The Sectoral Balances Identity
Ramanan
Surely the concept of a closed whole being the sum of it's transmutable parts was present before recorded history? Even peasants knew that exercise transferred resources from the fat sector to the muscle sector.
ReplyDeleteThen there were the Alchemists, and they openly admitted borrowing their ideas.
Formally, sectoral balances were well established in thermodynamics & energy transfer, and even before that in the "Hamiltonian" descriptions of state by George Hamilton in 1833.
http://en.wikipedia.org/wiki/Hamiltonian_(quantum_mechanics)
Carnot? http://en.wikipedia.org/wiki/Carnot_cycle
Must be endless other examples.
Economists are such johnny-come-lately's to systems thinking that they claim immunity from plagiarism.
Just watch Krugman in action.
Does it really matter if the pythagorians said it first?
ReplyDeleteThe Kaldor reference is a very useful one. Thanks for that!
tb
"Does it really matter if the pythagorians said it first? "
ReplyDeleteIt does if folks claim that accounting principles supersede system theory and then reject system theory as not applicable. System theory underpins accounting rules, not vice-versa.
Accounting is a reporting tool…nothing more. Accounting must be consistent with system theory or it is being applied improperly.
System theory tells us what can happen or what cannot possibly happen. Accounting tells us what has already occurred.
Quite a big difference.
Did anyone notice this fantastic piece from the ECB's Vice President Vitor Constancio, addressing a Levy Institute in Berlin on 26 November?
ReplyDeleteHere it is:
Building on the post-Keynesian analysis of Minsky’s Financial Instability Hypothesis and Wynne Godley´s theory of sectoral balances and stock-flow consistent models, the work of the Institute´s resident scholars predicted and explained many of the challenges we are facing today.
And it goes on, throughout the speech:
This serves as a reminder of the importance for policy-makers to keep an open mind in continuously refining our economic thinking. It is today clear to us that conventional macroeconomic models were ill-equipped to capture the key role of financial markets.
Who said that PK economics are being ignored my the mainstream?
I think it's about time to recognize that the times are really - and finally - a'changing.
Jose,
ReplyDeleteI've noticed a sea change in the narrative recently. I hope it I real.
Paul,
ReplyDeleteThis is a major development. We now have the VP of the European Central Bank admitting mainstream economics got it wrong and the SFC model of Godley/Lavoie got it right.
I think we can only add: Right on, PK economics and MMT!