Alex Douglas provides an algebraically detailed critique of Thomas Pally's critique of MMT, along with a deft dismissal of Krugman's critique of MMT as based on a straw man. Stuff that that makes one wonder whether Krugman is an economist or a polemicist?
Origin of Specious
Me and MMTAlexander Douglas | Lecturer in Philosophy at Heythrop College, London
A very good post.
ReplyDeleteAnd also hints at the fundamental problem.
Maths, at least at the level economists use it, really isn't that good at direction. And that is deliberately employed to hide the assumptions.
Classic case:
why:
MV = PY
why never:
PY = MV
or YP = VM
"That is how we get to equation (2), which tells us that the government can only increase the level of aggregate demand by increasing G or reducing T or both."
ReplyDeleteThis is where a lot of the MMTers get "the deficit is too small!"...
a bit comical that he goes on to belabor so many "equations" after deriding Samuelson's fatuous use of an "equation" :)
ReplyDeletehaving just read it, I find the whole thing rather self looping
I repeatedly sense that non biologists/chemists/physicists/etc can be excessively anthropomorphic, and need to get out more often, so they can see things from totally different perspectives.
This paper reminded me of that, except in another way. What do you call it when economists can't see the self-evident until they justify it as either fitting their particular school of economics, or, even better, expressible by rearranging their favored "equations" ?
Econopomorphic? Can't see context except through their habitual lens?
system logic by any other name, would still system logic be (unless you're an economist :( )
economists making system logic fit THEIR habitual equations reminds me of assumptions in regression analysis
ReplyDeletehttps://edge.org/conversation/richard_nisbett-the-crusade-against-multiple-regression-analysis
when you say "it could have been caused by many things" .... it's obvious, peasant logic; & common sense
when you wrap it in a loft of clever mathematical wrapping paper ..... people are easily bamboozled by axiomatic bullshit
that's the basis of all hoodwinks; distraction (even if we distract ourselves ... it's still self-fraud)
regardless of the field, this pattern fits into Shewhart's maxim, that data is meaningless w/o context;
aka, irrelevant bits of information (or context-bound equations), no matter how intriguing ... are still irrelevant
so much for homo sapiens; what should we call us instead?
"This is where a lot of the MMTers get "the deficit is too small!""
ReplyDeleteMatt,
You're going to have to get over that. That line is a retort to those who say "the deficit is too big".
Everybody in MMT understands that the deficit is just the net savings of the non-government sector and therefore is determined by them not the government.
The deficit is what it will be. The job of government is to maintain effective demand knowing that there is a drain to savings that will not be automatically offset by the non-government sector. Alex destroys Palley's assumption that it is.
The job of government is to maintain effective demand knowing that there is a drain to savings ... Neil Wilson
ReplyDeleteThat drain is good, isn't it? Since it allows the monetary sovereign (eg. US Federal Government) to spend more for the same amount of price inflation?
A function maps an input to an output, but functions can take many forms, you can map one parameter input to an output through a transformation via other constants and operations. When you are operating on several variables at the same time, mapping several inputs to an output, you lose sight of what the causality is.
ReplyDeleteThis is not a problem of using maths, is a problem of experimental design. The problem with economics is not that they are using math, is that they don't understand why or how should they write that math. The use of math is fine, but you gotta understand the experimental design.
Economists need to go back to experimental design 101 and learn methodology of science first, then they can go again to write equations, nothing wrong with that intrinsically. But you need to understand, and clearly point out, what's underlying the maths. In general, in science, is bad to have several moving parts w/o control and try to guess causality from that. So what happens then? You end up with a lot of correlations, but you never know what the causality is.
This creates an space for ideological justification to enter the scene, and the ad-hoc construction of hypothesis to explain a phenomena according to a set of preconceived axioms.