Scaling up micro to the macro level risks running into the fallacy of composition since systems operate differently at different scales — as J. M Keynes observed with the paradox of thrift.
Information Transfer Economics
Information Transfer Economics
The replication argument
Jason Smith
Jason Smith
A good example of this sort of effect is seen by what happened after the Supreme court judgement in "Marquette vs Omaha" - The judgement basically gutted the anti-usury laws that had been enacted by various states. IMO, that single judgement led to the rise of the record levels of personal indebtedness seen over the last 40 years. See this tweet thread
ReplyDeleteThis could not have been explained by neoliberal economics. However, it is very well explained by George Akerlof and Bill Black.
The "Marquette vs Omaha" decision was in 1978. The site you link to in the tweet (http://www.eoionline.org/blog/x-marks-the-spot-where-inequality-took-root-dig-here/) puts the X at 1973/74.
ReplyDelete73/74 was post Breton Woods when we went off the gold standard and the external sector started to build USD savings accounts in earnest .... OPEC, Germany, Japan, now China...
ReplyDeleteYour going to see a productivity gain in the import nation during a transition to mercantilism if the product can be imported for less than iit previously was manufactured domestically...
You sell the product for the same price as before but acquire it from external sources for less USDs... productivity goes up...
MMT says "imports are a benefit" so if you transition to importing from a less expensive external source willing to save in USD then it's going to increase productivity as you can throw all of your domestic workforce out of their jobs and still hit your sales target...
ReplyDeleteThe lawsuit has little to do with it ...
"Your going to see a productivity gain in the import nation during a transition to mercantilism if the product can be imported for less than it previously was manufactured domestically..."
ReplyDeleteYou're talking more about "profit productivity" in the importing country not "making productivity" aren't you?
To GDP there is no difference... consumption is consumption...
ReplyDeleteLess work for same consumption is higher productivity... 'imports are a benefit' in this regard...
Unless perhaps you are the one thrown out of your job....
You sell the product for the same price as before but acquire it from external sources for less USDs... productivity goes up...
ReplyDeleteThat’s not productivity. It’s called profit for the owners.
MMT says "imports are a benefit" so if you transition to importing from a less expensive external source willing to save in USD then it's going to increase productivity as you can throw all of your domestic workforce out of their jobs and still hit your sales target...
I don’t know where you got your explanation of MMT’s "imports are a benefit,” Don Quixote, but you’re reading it from an imaginary sky. Your explanation has nothing—zero—to do with Warren Mosler’s explanation of what "imports are a benefit" means, which he described during the Q&A of one of the Columbia Law School MMT seminars two or three years ago.
Throwing your domestic workforce out of their jobs absolutely did not figure in any definition of it.
I don’t have time to explain Warren’s explanation, but "imports are a benefit" are only a benefit if your domestic workforce is 100% employed. Not robbed of their jobs and left bereft.
You seem to forget that MMT is to serve the public purpose not destroy it.
Correction: Warren did not use the term "100% employed." He said "fully employed."
ReplyDelete73-74 starts with the oil crisis - however, response of the Fed to the inflation caused by the oil crisis was to increase the interest rates to above those set by anti usury laws of the states. This was the direct cause of the law suit. The X at 73-74 was about the oil crisis. However, the nation becoming awash in debt was because of the Marquette decision, because suddenly you could charge high interest rates. Ability to charge high interest rates led to lax lending standards a la Bill Black - as well as the explosion in credit cards (credit cards being handed out like candy)
ReplyDeleteAs regards the 73-74 crisis and the wage/productivity gap, the reduction in inflation came about because of increasing energy efficiency, and new technologies that improved productivity. However, the results of the increased productivity went the the financiers who financed the technologies, and not to the workers who became redundant, and forced to bid against each other in order to retain a job.
MRW:
ReplyDeleteIf you want that Lerner book, send me an email at my (actually my wife's) email: "to study" in Chinese (3 letters - the first part of the compound transliterated as 5 letters I get from google) followed by mathematics in japanese ( 6 letters), run together as 9 letters, at gmail. Or give me some cryptic clues for your email. :-) Sorry for falling out of touch as usual.
Was going to post a link from where I got it, but as I expected, it was not available for long.
Calgacus, after I twisted my head around my ankles then went shopping up my ass to understand what you were telling me about decyphering your wife's email handle, I decided to save myself the pain. My name is martin wales. Join 'em together backwards: lastname, first name. I too have a gmail acct.
ReplyDeleteUnknown,
ReplyDeleteI don’t think that was the overriding cause; furthermore, the Marquette decision was not rendered until 1978, so its effects didn’t apply before then.
What did apply were the standard union contracts rewritten in the late 60s, early 70s, that tied union wages to a COLA index. Something new. I’ve spent a day trying to find two critical documents I downloaded explaining all this. No can find. One of the MMT gurus alerted me to them. Black? Hudson? Can’t remember.
The first document was about COLA
COLA was the Cost of Living Adjustment. The first COLA was in June 1975. It was tied to the Consumer Price Index, among other things, which includes the cost of oil. If the price of oil went up, transportation costs rose as well. Ditto the price of food, and any goods transported across the country. That was the least of it.
The oil embargo hit late 1973. The price of oil soared from $3/barrel to $30/barrel in less than seven years.
This affected wages. Automatically. Collective union bargaining in an individual company could not get around these contractual changes. Employers rebelled. Especially employers of smaller companies who could not survive these automatic wages changes. The wage increases were crippling some industries.
The second document was about the companies affected who decided to fight back
I can’t remember much of what was in it other than the conclusions I was left with, which made imminent sense. Companies tried to get the Ford and Carter admins to help them; COLA, after all, was a government administered program. No help was forthcoming. One of the reasons Reagan won.
When Reagan ditched the air traffic controllers and their union, it was the beginning of the end. Workers gave up their collective bargaining power, and unions became a dirty word, EVEN THOUGH in a Labor Day address in 1980, Ronald Reagan said:
These are the values inspiring those brave workers in Poland ... They remind us that where free unions and collective bargaining are forbidden, freedom is lost.
As Senator Sherrod Brown said in 2011 without mentioning Reagan,
History teaches us that unions are a very positive force in society that creates a middle class and that protects our freedom. So don't tell me you're against – don't tell me you support unions internationally but you don't support unions here. Don't tell me you support collective bargaining in Poland but you oppose collective bargaining in Zanesville or Dayton, Ohio, because frankly that's inconsistent and ultimately it's not taking the side of people whom we are supposed to represent.
MRW,
ReplyDeleteYou are right on the wage issue - and the reasons for the flat wages. I digressed to discuss the issue of Marquette on the levels of indebtedness, that the US consumers find themselves in, which leads to the bottom two quintiles having a zero net worth - bottom quintile -$7000, next quintile $7000. (The negative net worth is an issue that relates both to the stagnant wages as well as the levels of indebtedness)
What Is the Average American Net Worth?