Sunday, May 24, 2015

Roger Farmer — GDP: A Brief But Affectionate Review

It is a premise of the monetarist position, that the real economy is self-stabilizing and that a rule based monetary policy is the most effective way to ensure both low inflation and maximum sustainable employment.

Keynes claimed, in contrast, that the real economy can get stuck in a position of high unemployment and that permanent high involuntary unemployment can persist as an equilibrium phenomenon. See my earlier post on the neo-paleo-keynesian perspective. If Keynes is correct, and I believe he is, a single instrument, monetary policy, is not enough to hit two targets. Fiscal policy in one form or another, is an important second string to the policy maker's bow.
I think we can agree with this much, although Farmer's policy prescription is quite different from MMT. However, he has tuned into some significant points that are in agreement with MMT analysis regarding the relationship of growth, employment and price level. In addition, he agrees that accounting is important in economics. And he has an influential voice in the mainstream.

Roger Farmer's Economic Window
GDP: A Brief But Affectionate Review

Secular stagnation: a neo-paleo-Keynesian perspective
Roger Farmer | Distinguished Professor of Economics, Department of Economics, UCLA


Magpie said...

The Degenerating Discourse of Mainstream Economics

Tom Hickey said...

Yeah, Farmer completely misses effective demand as the central piece of the GT. But then he describes himself as a paleo-New Keynesian. At least he gets that New Keynesians aren't even remotely Keynesian.

There is no basis for dialogue with New Keynesians, but at least Farmer shares some actual Keynesianism with other Keynesians that might be a basis for discussion.

But that is probably wishful thinking because he is unlikely to move off his position.

Netbacker said...

Have you guys seen this post by Farmer -

"Give the Fed the power to buy a value weighted Exchange Traded Fund that contains every publicly traded stock. Commit to support the ETF by buying stocks. Pay for the shares by borrowing, or by trading Social Security Trust Fund."